An analytical point of view of emerging issues of e-commerce for the multilateral trading system

D. Choi, S. Ghernaouti-Hélie

An analytical point of view ofAn analytical point of view ofemerging issues of e-commerceemerging issues of e-commercefor the multilateral trading systemfor the multilateral trading system

Daewon ChoiSpecial Assistant to the Executive Secretary

and Secretary of the Commission

UNESCAP E-mail: [email protected]

Pr. Solange Ghernaouti-HélieVice-Dean - Ecole des HEC

University of LausanneE-mail:[email protected]

Prof. S. Ghernaouti-Hélie 2

Purpose of the presentation

• Examine the relationship between the digital trading system and the multilateral trading system in the context of the WTO agreements – Explore to what extent the incompatibility and interoperability can be

manifested in the global trading system – It takes up the case of trade in services by examining the relationship

between the GATS / WTO and e-commerce.

• It emphasizes that the key to understanding this relationship is to compare two main variables: the "GATT legal parallel" contained in the GATS as a backward legacy, and the "Cyberspace-related aspects" of e-commerce as a forward linkage


How the Internet-related technology is affecting the existing multilateral trade agreements?• Multilateral Trade Agreements such as:

• General Agreement on Tariffs and Trade (GATT) 1994 • General Agreement on Trade in Services (GATS) • Trade-Related Aspects of Intellectual Property Rights (TRIPS) • quasi-nascent multilateral agreement on investment (MAl)

– The interactions between Multilateral trading System and Digital Trading System will determine the course and direction of the global trading system

– The process leading towards interoperability and convergence

between these two variables will entail the extent of coherence and governance of the global trading system


Main hypothesis

• Global Trading System is increasingly consisting of:

– Multilateral Trading System (MTS)

– Digital Trading System (DTS)

• Two systems have distinct operating architectures:

– Most Favored Nation

– Most favored Network


Explanation 1.

• New Technology Development has engendered new elements of trading system unforeseen at the time of Uruguay Round for WTO agreements

– WTO agreements have taken on conventional classification approach:

- GATT (goods)

- GATS (services)

- TRIPS (Intellectual Property Rights)


Explanation 2.

• Goods are becoming digital:

– CD-ROM via Internet is a mere data

– Customs checkpoint does not correspond to cyber-border

– Thus, taxation is difficult


Explanation 3.

• GATS uses classification of services (modes of supply) reflecting the physical world:

– Cross-border

– Consumption abroad

– Commercial presence

– Movement of natural persons

• In cyberspace, these modes are blurred, thus inappropriate to classify the digital services


Explanation 4.

• TRIPS has been conceived prior to the Internet data protection and management

• In cyberspace, enforcement of intellectual property rights requires network surveillance, in addition to TRIPS enforcement mechanism


Explanation 5.

• Dispute settlement mechanism in MTS is well developed and enforceable

– WTO Dispute Settlement Body

• In DTS, dispute settlement can not be purely based on a court system, and requires an out-of-court mechanism or Alternative Dispute Resolution

– Online Dispute Resolution


Explanation 6.

• WTO premise of Most Favored Nation can not be applied to DTS

• DTS requires Most Favored NETWORK, thus departs from MTS premise


Explanation 7.

• MTS has clear jurisdiction and choice of law

• In cyberspace, jurisdiction and applicable law are not straightforward


Explanation 8.

• MTS (WTO) deals with reducing tariff and non-tariff barriers

• DTS should deal with establishment of data management, digital pricing mechanism, and harmonization of operating system


Explanation 9.

• MTS converts data into price

• DTS converts price into data


Explanation 10.

• In sum, Global Trading System needs to manage convergence of:

– Multilateral Trading System

– Digital Trading System


The Global Trading System:

Architecture and Coordination


E-coordination at the meta level

• Transaction Process LayersInternational Trade (eg. Multilateral Trading System)

– E-Commerce (eg. Intermediary)– Cyber Business (eg. Digital Trading System)

• Component Layers– Information Exchange– Secure Transactions– Dispute Settlement


Global Trading System (GTS) = f(MTS, DTS)

MTS: Multilateral Trading System (WTO)MTS: Multilateral Trading System (WTO)

DTS: Digital Trading System (Virtual)DTS: Digital Trading System (Virtual)

Meta-Level Interface

MTSMTS

DTSDTS


The Internet Today

FTP Server

Web ServerDocuments

Database

Database

Application

Application

Web ServerDocuments

Web ServerDocuments


Step 1: Metadata

FTP Server

Web ServerDocuments

Database

Database

Application

Application

Web ServerDocuments

Web ServerDocuments


Step 2: DTS Components

FTP Server

Database

Database

Application

Application

Web ServerDocuments

Web ServerDocuments

Web ServerDocuments


Step 3: DTS Development

Repository

Registry

Repository

Registry

FTP Server

Web ServerDocuments

Database

Database

Application

Application

Web ServerDocuments

Web ServerDocuments


Step 4: Digital Trading Agents

FTP Server

Web ServerDocuments

Database

Database

Application

Application

Web ServerDocuments

Web ServerDocuments

Registry

Registry

Registry

Registry

Agent

Agent

Agent


Step 5: Digital Trading System

FTP Server

Web ServerDocuments

Database

Database

Application

Application

Web ServerDocuments

Web ServerDocuments

Registry

Registry

Registry

Registry

Agent

Digital Dispute Settlement

Agent

E-Trust Intermediaries

E-Payment Process Services


Public DomainBusiness Citizens

ERP/ Transaction

ERP/ Transaction

JobShop

System

JobShop

System

VANVAN HTTPHTTPPublic ServicesProcess

Applications

Public ServicesProcess

ApplicationsUN/EDIFACT

UN/EDIFACTBrowser

Browser

Dispute Settlement Mechanism

E-Public Goods and E-Government

Public ServicesCollaboration Hub

Public ServicesCollaboration Hub

XMLXMLXMLXML

XML Message Service

XML Message Service

AdapterAdapter

XML Message Service

XML Message Service

AdapterAdapter

ProcessIntegration

ProcessIntegration

FinancialServices

InformationServicesXMLXML XMLXML


Dispute Resolution

Secure Transaction

Data Exchange

MTS ETS DTS

International Trade

E-Commerce Cyber Business

Components of Global Trading System


Dispute Resolution

Secure Transaction

Data Exchange

Global Trading System

International Trade


Doc.EDI

Sig. VAN

CDR. WTO

EDI.Web

E-sig.PKI

ADR

(ICC, OECD)

XML, XSL

CA. DRM

DDR


Financial Services

Dispute Resolution

Secure Transaction

Data Exchange

WTO E-Commerce Programme

International Trade


ITA

Basci Telcom Services

Competition Policy

E-Commerce

Trade Facilitation


Proposed Dir VAT 7/2000

Dispute Resolution

Secure Transaction

Data Exchange

EU E-Commerce Framework

International Trade


Database Protection Dir 96/9

Personal Data Protec Dir 95/46

E-Monex Dir

E-Sig Dir 99/93

ADR. Art 17, E-C Dir 2000/31


Patent Coop Treaty

Dispute Resolution

Secure Transaction

Data Exchange

WIPO Digital Agenda

International Trade


Madrid Marks

Hague Ind. Design

WCopyR.Treaty

WPerfor.Phono Tr

gTLDs

Artit.Media Centre

E-Rights

Global Licensing of Digital Assests(study)


Dispute Resolution

Secure Transaction

Data Exchange

BIS Payment and Settlement Systems

International Trade


Basel Accord

Pay & Settlement

Intl Accounting Stdd

Risk Manag .for E-Banking & E-Money

Real Time Gross Settl Systems


Prospects of E-Coordination

• Status Quo: – No change to WTO Agreements– Likely but Not desirable

• Revision: – Partial review of WTO Agreements– Likely but Difficult

• New Cyber Legal Framework– WTO + ?– Unlikely but Desirable


Proposition

• Needs for Functional Equivalence– Technical neutrality – Legal neutrality

• Policy Instruments• National Coordination• International Cooperation• Digital Collaboration


Study summary 1.

• The first part focus on the setting of an analytical framework for an interplay of multilateral trading system and digital trading system

• The second part deals with the implications of this interaction in the context of WTO, more specifically the GATS


Study summary 2.

• Possible scenarios of a legal framework on e-commerce, are proposed, which might fall into one of the following outcomes with an eventual overlapping:

– (i) qualified extension of the existing multilateral trading system to digital trading system

– (ii) substantial revision of the multilateral trading system to accommodate digital trading system

– (iii) the establishment of a new agreement on Trade-Related Aspects of Electronic Commerce


Study conclusion 1.

• The technological advance will pose significant challenges to legal and regulatory framework of the WTO agreements

• Its progress will largely depend on the relationship between technical neutrality and legal neutrality

• The extent of legal neutrality could be measured by the degree of:– Legal disparity– Rigidity– Regulatory overshooting

at the national, regional and global levels


Study conclusion 2.

• The relationship between development of the digital economy legal rigidity and regulatory overshooting, the parity between technical neutrality and legal neutrality, and the interoperability between digital trading system and multilateral trading system will be critical factors for understanding future framework of a global trading system


Thank you for your attention