Policy
Considerations
for Electronic Commerce
Discussion Paper
World Telecommunication Day 1999
1.1 Information and Communication Technology (ICT) infrastructure
Survey Questions
1.2 Telecommunications market and pricing regulation
Survey Questions
1.3 Banking and financial services
Survey Questions
2.1. Security of data transmissions
Survey Questions
2.2 Privacy protection
Survey Questions
2.3 Digital signatures and electronic contracts
Survey Questions
2.4 Certification and Certification Authorities
Survey Questions
III. ESTABLISHING GROUND RULES
3.1 Intellectual property rights and domain names
Survey Questions
4.1 Development of market access and business opportunities
Survey Questions
4.2 Impact on the workforce
Survey Questions
I Consumer Protection, Cyberfraud
Issues for policy consideration
II Jurisdiction
Issues for policy consideration
III Taxation and duties
Issues for policy consideration
This Discussion Paper has been prepared to serve as a springboard for stimulating national policy deliberations among ITU Member States on a broad range of topics involving Electronic Commerce.Its purpose is to introduce these topics in a succinct fashion, to identify the most prominent areas of concern, and to raise key questions that are likely to become the focus of policy debates at national and international levels.
In general, the emphasis of the paper is on public policy issues, principally from the perspective of developing countries. The public officials who might address these issues could be in Communications, Trade, or Finance Ministries, Legislatures, or other Government offices and consumer protection agencies. The discussions and questions below are framed in such a way that they can be considered by a wide spectrum of officials, ideally in the context of developing an integrated national policy framework for electronic commerce.
The document is divided into two parts: Part I deals with telecommunications-related issues and Part II covers other issues. The questions surrounding each issue of Part I are framed in a survey format, to help explore the current status of policy and development concerning each group of issues, as well as the views and intentions of ITU Member States, in a brief, summary fashion. Most questions are seeking broad views and perspectives, with a further opportunity for further comments, if the respondent desires. In Part II, each issue is introduced, followed by a number of statements aimed at stimulating reflection.
Electronic Commerce is a new term for existing activities being done in new ways. As long as communications networks have been available, they have always been used to their fullest capability by entrepreneurs to create business opportunities. As advanced telecommunications and computer technologies have taken hold in recent years, they have moved to the centre of the international economic infrastructure. Most prominently, the meteoric rise of the Internet and the World Wide Web has accelerated the transformation of global commerce, allowing for instantaneous, inexpensive contacts among sellers, buyers, investors, advertisers and financiers throughout the world. The rapid integration of the Internet and other telecommunications-based functions into nearly every sphere of business is what has given rise to the recent international focus on the new world of electronic commerce.
Among the principal media that can be identified as contributing to global electronic commerce are:
Electronic commerce activity can be classified into five broad activities:
Among the services which are likely to benefit from the application of electronic commerce techniques include:
Tangible products that are likely to be increasingly traded through electronic means include:
It is worth noting that trade in services is likely to be a more significant share of electronic commerce activity than that of digitalized products.
The vast majority of this activity to date has been taking place in countries with advanced economies and infrastructure. For developing countries, electronic commerce presents important new opportunities to achieve a more level playing field vis-à-vis larger, more developed economies, as it diminishes in-place advantages of cost, communication, and information, and creates huge new markets for indigenous products and services. While many developing countries are beginning to take advantage of the potential of e-commerce, critical challenges remain to be overcome before the vision of a truly integrated and equitable world economy can be realized.
The sections that follow present a brief discussion and related survey questions on the main areas of policy debate on electronic commerce, roughly classified according to the categories defined by the Organization for Economic Co-operation and Development (OECD) at its recent series of international conferences on electronic commerce (see the website at: http://www.oecd.org/dsti/sti/it/ec/index.htm). These categories identify potential barriers to e-commerce development and strategies for its promotion. They include:
Electronic commerce is entirely a phenomenon of the technology revolutions of the late 20th century: in computers and information systems, in telecommunications, and also in banking systems and even postal and delivery services. It is the advancement and the integration of the essential infrastructure of these technologies that has fuelled e-commerce growth worldwide. At the same time, the comparative lack of such infrastructure throughout many parts of the developing world is what most impedes the opportunities for e-commerce to flourish in those countries, and to accelerate their economic and social development.
Accordingly, the need to enhance (or indeed introduce) national infrastructure to support e-commerce is the paramount concern of developing countries – far more so, perhaps, than in the developed world. With basic telephone service penetration below 15% for numerous countries, and access to computers and data services even lower, even the possibility of participating in the global electronic marketplace is remote for much of the world's population. The same is true of access to banking and financial services, which are equally necessary for consumers and small businesses to conduct commerce in a digital environment. The topics in this section address the need for enhancing infrastructure in these areas, and the potential means for developing countries to pursue these objectives in the new marketplace.
1.1 Information and Communication Technology (ICT) infrastructure
Access to ICTs (as they're coming to be called) is the most basic pre-requisite for electronic commerce. In the developed world, telecommunications infrastructure and computer facilities are widely available (albeit not universally), at costs that are within reach of the majority of the population. In developing countries, by contrast, these facilities are accessible only to a fraction of citizens, and even small and medium sized businesses are often not connected, especially to advanced technologies.
There is no debate about the general goal of expanding access to computer and communications technologies, but there are major questions about the most effective means to achieve this goal. As technological and economic conditions are changing, however, international policies have focused increasingly on a transformation to open market options to promote investment, efficiency, and innovation in telecommunications.
With the dramatic changes represented by electronic commerce, the economics of telecommunications and information access may be changing, even for relatively remote rural and lower income populations, as incentives to connect these users to the global marketplace increase. Meanwhile, the definition of "basic" telecommunications service itself has come into question; it may be that traditional two-way voice telephony will be less essential in a networked world than access to data transmission, the Internet, electronic mail, and the like. Governments also see the value of information technologies as efficient means to deliver public services, such as education and health care, to the broader population.
One option that has begun to gain interest, for developing and developed countries alike, as a means to take full advantage of these developments, is the establishment of Multipurpose Community Telecentres (MCTs), in which a combination of telecommunications and information services are available to the general public at affordable prices. The idea of MCTs is to promote universal access to technologies that would be unaffordable and unavailable to most citizens and even many businesses, beyond the highest income and most developed urban regions. The policy of encouraging MCTs also seeks to support local economic development, integrated public and private services, and broad education and training, in addition to the traditional goals of communication, information, and inclusion in the national economy.
Please express your country's views on the following propositions concerning ICT infrastructure:
| q Strongly agree | q Agree somewhat | q Disagree somewhat |
| q Strongly disagree | q Don't know |
| q Strongly agree | q Agree somewhat | q Disagree somewhat |
| q Strongly disagree | q Don't know |
| q Strongly agree | q Agree somewhat | q Disagree somewhat |
| q Strongly disagree | q Don't know |
q Active development and operation of telecentres underway q Some telecentres already established, others in development q Exploring options for telecentre development q No significant initiatives at this time
Discussion: Please discuss some of the main policy and industry initiatives in your country to enhance ICT infrastructure, and the successes and pitfalls that have been encountered.
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1.2 Telecommunications market and pricing regulation
Even where open competition in telecommunications has become relatively widespread, regulation of the industry remains an important public responsibility, both to support fair competition and to oversee appropriate pricing and service responsibilities in those market segments where competition is not fully developed. For most developing countries, such economic regulation is even more crucial, as market forces are not likely to emerge strongly enough to constrain dominant operator actions in the near future.
With regard to the services that contribute most to electronic commerce, the prices charged by telecom operators for access to those services can become a major determinant of the effectiveness and affordability of e-commerce opportunities on the whole. These services include both high-speed data transmission links between local companies and the Internet backbone (typically via international circuits), as well as end user connections to Internet Service Providers (ISPs) and other data and information services.
Traditional pricing policies, for example, have led to charges for high-end data links in many developing countries that are vastly greater than similar charges in places like the U.S. and Europe, making it extremely burdensome for smaller entrepreneurs, ISPs, and public operations such as Telecentres to afford to connect to the global backbone.
Regulators may wish to re-examine these pricing principles, ideally in the context of overall review and revision to the market structure for telecommunications in general, with the understanding that the costs of data communications, even when provided to large businesses, will inevitably be passed on to end users, and can form a barrier to e-commerce development.
A significant difference which differentiates the Internet from the telephone network is the way in which wholesale pricing arrangements are handled, especially for international calls. Whereas the settlements system can be said to work in favour of developing countries, the peering arrangements of the Internet appear to work against their interests. In the telephone world, wholesale pricing is based on a dual-price system, known as the accounting rate system, in which each call has one price charged to the caller originating the call (the collection charge) and a second, usually lower price charged to the PTO originating the call (the accounting rate). Developing countries have benefited from this system in the form of net settlement payments. By contrast, on the Internet, there is almost no metering of calls and insofar as agreements between operators to exchange traffic exist, they are based on total volumes of traffic, not minutes. These arrangements to exchange traffic are termed "peering and transit" agreements.
Whereas the settlements system on the PSTN normally involves payments from developed countries (which generate more traffic than they receive) to developing ones; on the Internet, cash flows in the reverse direction. Foreign countries, especially developing ones, need to pay to connect to the Internet backbone which invariably means paying to connect to the United States where the 40 or so major backbone providers are located. Furthermore, whereas the settlements system is based on a "half-circuit" regime, where the operator in the country at either end of the link is responsible for providing and paying for a half-circuit, in the Internet peering model, the operator in the foreign country must normally pay for both half-circuits (i.e., the whole circuit) to the United States. Thus developing country operators end up paying twice – first for the circuit, then for the traffic – even though traffic flows in both directions once the circuit is established. These costs can be recouped from the customers of the ISP in the developing country, but the net result is still that Internet service is more expensive for consumers in developing countries.
Please express your country's views on the following propositions concerning regulation and pricing of e-commerce related telecommunications services:
| q Strongly agree | q Agree somewhat | q Disagree somewhat |
| q Strongly disagree | q Don't know |
| q Strongly agree | q Agree somewhat | q Disagree somewhat |
| q Strongly disagree | q Don't know |
56 Kbps or equivalent local data circuit: 56 Kbps or equivalent international circuit to U.S.: Internet access subscription, individual user:
1.3 Banking and financial services
The financial services sector cannot be overlooked as a critical "middle man" element of the infrastructure necessary for electronic commerce to succeed. By definition, transactions that occur electronically do not involve cash payments, or typically any direct transfers of funds between buyer and seller. Instead, e-commerce transactions rely upon the intermediary role of banks, credit card companies, and other financial institutions, which must therefore be thoroughly interconnected to the communications and data processing web underlying virtually every deal.
This requirement raises further challenges for developing countries in particular, where banking services and technology are often not extensive. The needed infrastructure extends in two directions: (1) to link local and national businesses with global banking networks to allow for efficient domestic and international business-to-business transactions; and (2) to give consumers, small businesses, and local communities access to financial resources and services that will allow them to participate effectively in electronic commerce.
The first of these needs, sophisticated business-oriented financial services, depends upon the most state-of-the-art banking systems, as well as data processing and communications technologies of the same nature required for on-line connectivity in general. Although most large, national banks are likely capable of procuring the equipment, software, and human resources needed to upgrade to global quality services, this may be less true of regional and local banks and branches. For domestic businesses to compete in the global market, they must be able to effect seamless, reliable transactions, with a minimum of faults, delay, complication, and cost.
The banking infrastructure needed at the local, consumer side of electronic commerce may be considerably more difficult to achieve. Just as the majority of the population of developing countries does not have access to telecommunications services, they also typically lack access to even basic banking services: savings and checking accounts, credit cards and loans, even simple cash currency in many places. It will require creative and cooperative efforts on the part of banks, governments, businesses, and community leaders to develop innovative means for reaching these unserved groups with services that are both appropriate and affordable.
An important, related issue in this area is the general technical question of electronic payment systems. Even if the use of traditional credit cards and similar mechanisms can be made secure and effective for most on-line transactions, these may not be the most efficient schemes for transferring funds around the world over the Internet. Other alternatives are actively under consideration within the industry, such as "digital cash" and prepaid accounts. Some of these ideas might also be applied directly to the problem of serving customers without access to full banking services.
Please identify initiatives and policies that your country's government and financial institutions are pursuing or considering with respect to banking and financial services infrastructure and services for electronic commerce:
| q Already achieved | q Actively underway for ____% of the banks |
| q In planning stages for ____% of the banks | q Not a priority |
| q Don't know |
| q Already achieved | q Actively underway | q In planning stages |
| q Not a priority | q Don't know |
Discussion: Please describe any particular initiatives, ideas, or concerns relating to your country's development of financial services infrastructure for e-commerce.
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Among the main differences between electronic commerce and traditional commerce is the fact that electronic transactions are far more impersonal, anonymous, and automated than transactions made between flesh-and-blood persons in a store, at a bank, or even over the telephone. This dehumanization of business relations is accompanied by a quantum increase in the technical means and opportunity for fraud and abuse of both individual consumers and large corporations alike. For all these reasons, a healthy sense of caution, if not outright distrust, has prevailed in the evolution of many aspects of e-commerce.
Consequently, for these new, globally impersonal technologies to advance to a more universal level of acceptance, business and government institutions must develop policies that build greater trust in these new forms of doing business. Trust implies confidence that electronically-based purchases, funds transfers, and business deals will be as valid as traditional activities; that personal information and finances will be secure; that consumers will be protected from fraud and mistreatment; and that the world of on-line information and communication will be at least as accountable for the quality, reliability, and legality of products and services as is the in-person world.
The topics in this category are closely linked to one another. Security and cryptography issues tie in with both privacy protection and certification, as well as with the technical options for creating and validating digital signatures. All of these concerns relate to consumer protection, as well as to ensuring the integrity of business and government on-line activities.
2.1 Security of data transmissions
Complex security problems confront global information networks. Governments and businesses are grappling with the need to secure geographically disbursed networks, a myriad of access points, and business-critical applications against theft, fraud, abuse, and even electronic terrorism. The need to maximize the benefits of universal connectivity, while protecting network resources from unauthorized access or interference, has fuelled a heightened demand for global network data security solutions. Recent experience with e-mail based viruses has only reinforced these concerns.
A number of countermeasures are already being taken to ensure that e-commerce is as robust as traditional forms of transactions. Encryption is an essential tool in providing security in this highly-networked environment. Secure encryption can be deployed rather cheaply, and it is expected that encryption will be broadly adopted and embedded in most electronic communication products and applications for handling valuable data. Applications include protecting files from theft or unauthorized access, keeping communications secure from interception, and enabling secure transactions. Cryptography can also be used to guarantee that the contents of a file or message have not been altered (integrity), to establish the identity of a party, or to make legal commitments.
The widespread use of cryptography raises a number of issues, particularly for governments. These include protection of privacy of their citizens, encouraging economic well-being, maintaining public safety, raising revenues to finance their activities, and enabling the enforcement of laws and the protection of national security. Although there are legitimate commercial and individual needs and uses for cryptography, it also may be used for illegal activities detrimental to public safety, law enforcement, business and consumer interests, and privacy.
Among the main questions for public policy are the complexity of cryptographic codes, the right of private code developers to export this technology, and especially access by governments to "public keys": the secret decoding mechanisms that could permit police and security agencies to decrypt coded messages of suspected criminals and terrorists.
Please identify your country's policies or general views on the following issues of debate concerning data security:
No restrictionsq
Any law enforcementq
| q Already part | q Considering | q Opposed | q Don't know |
Discussion: Please describe the general state of your country's current laws on data security, and any policy initiatives that may be underway.
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2.2 Privacy protection
As distinct from concerns about data protection and security for commercial purposes (e.g., to prevent theft), there is a larger area of concern regarding individuals' rights to privacy in the electronic age, which many in developed countries consider as the main barrier for e-commerce. As technology increasingly facilitates obtaining detailed, personal information without the knowledge or consent of the consumer, there are strong sentiments in favour of establishing new, clear rights and laws to protect unauthorized use and dissemination of such data, and otherwise to assure some degree of control over access to private information, and invasions of privacy generally.
Legislation and self-regulatory measures, requiring government and private sector organizations that maintain systems of name-linked records to observe "fair personal information principles and practices," have been adopted in some 50 countries. (A number of private sector initiatives are also seeking to tackle the problem of privacy.)
The Internet has raised new issues concerning confidentiality of records in terms of restricting access to personal details, into what jurisdictions data are stored and used, as well as protection of financial information disclosed in electronic transactions. The degree of mandatory versus voluntary regulation of personal data is one issue of contention, as well as the practical enforceability of privacy standards. These concerns apply not only to transmission media, but also to computer software, which recent experience has shown can incorporate revealing information about users without their knowledge.
Some countries may have privacy laws and policies in place, others may be considering them. These questions seek to obtain a snapshot of your country's present or anticipated views.
Strong privacy protection laws in placeq
Notify users of policy on personal data useq
2.3 Digital signatures and electronic contracts
Many aspects of building trust involve the overlap of legal and technological issues. This is especially the case with the transformation of contractual relations between businesses. Most contract law has been designed to govern traditional economic relations, consummated using traditional media: i.e., paper documents. The nature of electronic deals adds a degree of complexity to these relations, by raising questions about how precisely electronic, "virtual" documents are covered by these laws.
Similarly, for centuries, handwritten signatures have been universally accepted as binding evidence of commitments – an essential pillar of business dealings. The notion of "digital signatures", in which a commitment is sealed via an imprint of electronic bits rather than pen and ink, involves more than just a shift in habits. It requires commonly recognized protocols, means for detecting digital forgery, and standards for verifying the timing of correspondence and the integrity of data files that can be readily manipulated, changed, and deleted, without leaving a "paper trail".
The United Nations Commission on International Trade Law (UNCITRAL) has attempted to tackle the many questions that arise in the context of electronic contracts and digital signatures, by drafting and extensive Model Law on Electronic Commerce. UNCITRAL has offered this Model Law to the world's governments as a proposed framework for considering these issues, and for helping to harmonize their legal treatment worldwide. The objectives of the Model Law are to enable the use of such communications techniques as Electronic Data Interchange (EDI) and electronic mail, and to provide equal treatment to users of paper-based documentation and users of computer-based information, which is essential for fostering economy and efficiency in international trade.
Korea, Singapore and Illinois have enforced a law that closely follows the UNCITRAL Model Law on Electronic Commerce. A number of other countries, such as Colombia, Mexico, Philippines and Australia, are very advanced in the process of drafting a new law that follows the UNCITRAL framework. (Canada, New Zealand, Belgium are less advanced in drafting, and the United States is in the process of working on the Electronic Transactions Act within the US Uniform Commercial Code.)
Please identify your country's policies or general views on the legal treatment of contractual issues in electronic commerce:
New legislation draftedq
Closely follows the UNICITRAL Model Lawq
Discussion: Please discuss any major legal questions concerning contracts, digital signatures, and electronic commerce that your country is encountering, which may benefit from further international review
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2.4 Certification and Certification Authorities
The Internet is comprised of millions of web sites, and countless options for buying and selling every kind of product or service, from sources that may be familiar or unknown, local or half-way around the world. Even if users come to trust the integrity of the system and technologies in general, there is little ready assurance that individual merchants will always be reliable or scrupulous. Protection of consumer rights through legal and technical means is one concern (see below), but a more basic threshold concern is to provide some fundamental measure of confidence in companies doing business on-line, and some means to distinguish the good from the bad, or the unknown.
One widely publicized approach is the practice of certification of companies, services, and business practices that meet a clear set of standards for performance, reliability, quality, and integrity. The value of certification depends upon the scope of awareness and acceptance, and especially objectivity, of the certification process itself. If a certificate carries a reputation for rigid oversight and enforcement of high standards within and industry or market, customers will be confident that companies bearing that certification can be trusted. There can be, however, less meaningful forms of certification, such as broad, generalized membership in self-defined associations that do not verify or even impose strong policies for their members.
The need for uniform and reliable certification of businesses involved with electronic commerce thus raises questions about the most effective institutional mechanisms for defining and issuing certificates in various industries. Some argue that only industry-based organizations can accurately and effectively understand and police the activities of those in the industry, while others feel that a neutral, government-based or NGO type of Certification Authority (CA) would have most credibility to enforce and monitor standards. These concerns cut across national boundaries, as well, since certification in one country may not carry the same meaning as in another. Whatever form CAs take, they will need to follow clearly defined procedures, and their actions will need to be well publicized and widely accepted for the certification process to be effective in building user confidence.
Please identify your country's current or anticipated policy views on Certification Authorities in relation to electronic commerce:
Government established and operated Certification Authoritiesq
National authoritiesq
Existing government agency or offices with certification responsibilityq
III. ESTABLISHING GROUND RULES
In most respects, users of electronic commerce should expect to follow the same laws, rules, and regulations as everyone else. The sense that there need to be new rules to deal with unprecedented types of relationships and transactions doesn't mean that the old rules are irrelevant or need to be abolished. In fact, one of the stronger sentiments concerning the ground rules for electronic commerce is that there perhaps shouldn't be major new policies to apply to on-line transactions, such as "bit taxes" or new import duties on data transmissions.
Nevertheless, just as technology is changing consumer and business relationships, it is changing the nature of governments' oversight of and intervention in those relationships. The most profound manifestation of this change is in the globalization of commerce, which places national governments and international institutions in a quandary as to which jurisdiction, and hence which set of rules, should apply to which activities, by whom. The success of worldwide e-commerce thus greatly depends upon a worldwide harmonization of certain basic policies, in areas such as taxation and duties, as well as treatment of intellectual property rights and other trans-jurisdictional concerns.
3.1 Intellectual property rights and domain names
The future development of electronic commerce rests heavily on two major intellectual property rights (IPR) issues: (1) the protection of copyrights and related rights and (2) the protection and equitable allocation of trademarks and domain names. These concerns have been a primary focus of international deliberations in recent years, for example through the World Trade Organization (WTO), which has negotiated an Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), making intellectual property an integral part of the multilateral trading system.
Because so much of the consumer and business trade that occurs over the Internet involves selling or licensing of information, cultural products and technology protected by intellectual property right-holders, this medium is especially susceptible to risks of theft or misuse of protected works. The TRIPS Agreement covers copyright and related rights (performers, producers of sound recordings, and broadcasting organizations), trademarks including service marks, geographical indicators, industrial designs, layout designs of integrated circuits, and undisclosed information such as trade secrets and test data. It aims to ensure the adequate protection and effective enforcement of intellectual property rights and the impartial resolution of disputes between WTO members.
Both the TRIPS Agreement and Copyright Treaties of the World Intellectual Property Organization (WIPO) recognize that copyright protection covers compilations of data or other material the contents of which constitute intellectual creations. It has been informally agreed that the impact of digital technology on copyright and related rights has to a large extent been to enable production and distribution of pirated sound recordings, films, software, CD-ROMs, etc. Despite the legal protections offered by these international agreements, the use of trademarks on the Internet continues to raise important questions, for example with regard to jurisdictional authority.
The relationship between trademarks and Internet domain names is also receiving considerable attention. Some of the problems stem from the fact that under each top-level domain (.com, .org, .net, etc.), there can be only one of each particular second-level domain name (per country), and these have typically been allocated on a first-come, first-served basis within each top-level domain. However, some trademarks may co-exist in different categories of products and services, and in different territories.
Another controversial question is under which jurisdiction(s) the use of a domain name that is identical or similar to a trademark may constitute a trademark infringement, and what remedies should be available for the trademark holder? How best to develop the governance of the domain name system remains undecided, and there is a pressing need for a widely acceptable resolution. Conflicts over principles exist between the United States and several other countries. For developing countries, this issue may have added significance, if the domain naming system by default tends to favour websites in the United States, where the system originated and the majority of sites are still hosted.
Laws not well established or enforcedq
Yes, government responsibilityq
Most of the policy debates and proposals surrounding electronic commerce are geared toward removing barriers and promoting opportunities for these new types of commercial activity to expand even more rapidly than they already are. A final category of issues can be seen as focusing more directly upon the direct benefits that can be gained from electronic commerce, particularly the benefits that developing countries might achieve with successful strategies.
It is apparent that most of the main developments in this field have sprung from the private sector, and will continue to do so in the future, with governments' roles primarily oriented toward facilitating market access and business opportunities, especially for small, medium, and micro-enterprises (SMMEs). In the developing world, the advantages of electronic commerce might not always be in the form of entry into competition on a global scale, or international distribution of products and services; domestic markets may themselves stand to gain tremendously from the efficiencies and expanded reach of information technologies.
At the same time as we are concentrating on promoting the greatest possible gains from e-commerce, it is important to recognize that there could be downsides as well. One key area that has gained attention is the impact of the shifting dynamics of the marketplace upon the labour force, and the possibility that many jobs could be lost, either to foreign competition, or to changing means of doing business that simply eliminate many existing labour-intensive activities. While these types of impacts may be unavoidable, and more than compensated in the aggregate by job creation due to economic growth, there may be responses that government and industry can pursue to minimize such adverse impacts, and help ease the transition for workers and communities.
4.1 Development of market access and business opportunities
The essence of Internet-based commerce is that it expands the size of any business's potential market from its immediate geographic locale to a potential worldwide scale. This unparalleled expansion of market access and opportunities for existing and new start-up businesses has created some of the most widely publicized opportunities for accelerating economic growth in developing countries, including in relatively poor and rural areas. The process of discovering how to tap these global markets, and how countries, communities, and entrepreneurs can leverage their unique skills and knowledge, is only just beginning in most countries. In some cases, indigenous craftspeople have been able to sell their products to a global customer base. For others, increased tourism may be a strong opportunity. In many cases, where a workforce skilled in information technologies is available, the Internet can provide direct employment opportunities in software development, data processing, and many other forms of information-intensive jobs.
Serving a global market also requires providing world-class quality service, as well as being flexible enough to meet very differing needs. These requirements place a heavy responsibility on new electronic merchants to employ state-of-the-art web design, interactive media, multilingual services, and many other features that will be familiar and useful to a diverse clientele. Achieving this degree of sophistication may be quite challenging for newcomers to the digital market, which implies that programs of business development support and education and training in e-commerce applications will be widely needed.
There is also a vital need for sharing of information and experience among web-based businesses, particularly those from developing countries that may uncover market opportunities, strategic advantages, and unique approaches to this infant industry which could be of value to their counterparts in other countries and other markets. Many networks are beginning to sprout up that seek to connect Internet-based businesses for this type of intelligence sharing, and also for joint marketing initiatives. These activities are being sponsored on a global level – for example the Global Trade Point Network of the United Nations Conference on Trade and Development (UNCTAD) – as well as by national Ministries of Trade and Tourism, and by many private industry associations.
Please identify programs or initiatives in your country that are supporting market development through e-commerce.
National training and support programs for electronic tradeq
| q Tourism | q Information/entertainment | q software/IT |
| q Indigenous art/crafts/products | q Financial services | q Legal/professional services |
| q Other |
| q Education | q Health care | q Public welfare |
| q Electoral/political | q Trade facilitation | q Other |
One of the areas where the impact of the economic transformation being brought about by electronic commerce may be most profound is in the job market. The scope and magnitude of that impact is a very open question, subject to debate along many dimensions. On the one hand, if e-commerce generates significant economic growth in general, this should lead to improved employment opportunities across the board. However, the exact nature of job creation, and of the skills and experience required to benefit directly from e-commerce, could be significantly different in some industries than the traditional employment mix, meaning that many workers could become displaced, temporarily or permanently, as a direct result of this transformation.
Concerns about the short-term impact of the changing economic and technical mix of the job market have led some labour leaders to question the true value of these developments. At a minimum, these impacts need to be anticipated and studied as the economic trends begin to take hold, and policymakers should consider the options for upgrading the skills of the workforce, and for retraining workers who do lose jobs due to shifting market needs.
Please consider your country's views on the potentialshort and medium term impacts of electronic commerce on the workforce, in terms of both job losses and job creation, and the policy responses that should be considered:
Affect only a small proportion of skilled workers one way or anotherq
Direct support or subsidy to sustain traditional industries and jobsq
I Consumer Protection, Cyberfraud
If the measures discussed above for building trust in the integrity and security of electronic transactions are effectively implemented, these will go a long way toward ensuring that the digital environment is a safe and reliable medium for consumer purchases and other activities. However, many real and potential threats to consumer welfare remain in the emerging realm of electronic commerce, and more threats are likely to surface in the future.
In brief, where there is commerce, there will always be those who seek to defraud the unsuspecting, or otherwise misuse the technologies of the market for unwarranted or illegal gain. In the case of electronic commerce, these technologies can be used in quite sophisticated ways, and there have already been many examples of very damaging and disturbing scams and abuse on the Internet. These can include false investment promises, so-called "Spam" e-mail advertising that jams mailboxes and servers, various pyramid and get-rich-quick schemes, or merely the problem of goods and services not being delivered as agreed. Other problems that have been previously discussed, such as the security of financial transactions and protection of privacy, also fall into the province of consumer protection.
Many developing countries do not even have in place standard consumer protection laws or enforcement agencies, so the job of establishing such rules with respect to this new technological environment may be quite difficult. It is entirely impossible to police all communication that travels over the Internet, even within a relatively small community. At a minimum, law enforcement authorities probably need to upgrade the training and skills of their own personnel, to allow them to understand, and ultimately track down and prosecute the most egregious violators of consumer trust and welfare.
Another aspect of consumer protection involves the question of liability for fraudulent, illegal, or abusive transmissions over electronic networks. Internet service providers (ISPs), for example, enter into service contracts with both end users and on-line merchants, and make at least minimal assurances for the quality and cost of these connectivity services. However, they seldom have direct responsibility for, or even knowledge of, the specific content of the websites that may be hosted on their facilities. Website owners and authors may also often merely retransmit information and commercial promotions that originate elsewhere. Laws assigning liability for improper or fraudulent business practices in this environment need to be clear about the roles of each participant along the chain of on-line services and transactions.
Issues for policy consideration
What types of international agreements need to be pursued to ensure that cyberfraud and similar practices can be policed on a worldwide basis, through cooperative investigation and prosecution?
II Jurisdiction
Jurisdictional questions cut across nearly all issues in electronic commerce policy, because electronic commerce is inherently indifferent to national boundaries. As discussed under several of the other topics in this paper, differences between laws and policies of different countries can greatly affect the viability and credibility of e-commerce globally. At the same time, it is unrealistic to expect that all national laws worldwide could be sufficiently harmonized to avoid any serious conflicts. The main challenges that will arise in these areas will occur when laws differ, and the consequences of those differences are great, both in economic and sovereignty terms.
Issues for policy consideration
III Taxation and duties
Questions of taxation of electronic transactions, and of import duties on such transactions when they cross international boundaries, may be the most difficult and potentially troubling issues that governments must confront as electronic commerce grows.
Tax issues take several forms. First, there is the question of "bit taxes": specific new taxes that might be applied to digital transmissions, separate from ordinary taxes that might already exist for products or services that happen to be purchased electronically. Some countries, such as the U.S., have taken the approach of issuing a moratorium on any new taxes or duties of this nature, for the purpose of encouraging as rapid development of this new form of business as possible. Others, however, may find it difficult to resist an apparent new source of public revenues.
Overall, the principle of "tax neutrality" seems to be emerging as the more widely accepted way of handling the tax challenges posed by electronic commerce. Under this principle there should be no difference or discrimination in the taxation of physical or electronic products (be they digital goods or services). Far more complicated are issues of jurisdiction and institutional roles relating to tax collection under electronic commerce. Operating in cyberspace implies that the physical location of a business is almost irrelevant, and possibly undetectable, as data files and related hardware can be easily moved from one location to another. This means that tax laws based upon the "place of business" of a seller can become increasingly difficult to enforce, and countries with more lenient laws can quickly become tax havens for many types of businesses. It may be that new types of taxation, as well as new means for monitoring and reporting business transactions, need to be considered, and that greater international coordination of tax policies will be required.
Similarly, import duties and tariffs that differ significantly from one country to the next can create significant incentives or disincentives for companies to locate their virtual business operations in a given location.
The question of import duties and tariffs has triggered several approaches. For the time being a number of countries have decided to hold a moratorium on duties to be applied to items that are traded and delivered over electronic networks—like the Internet. At the 1998 Ministerial Meeting of the World Trade Organisation (WTO), held in Geneva, Switzerland, 132 Member nations agreed, until the end of 1999, not to impose any custom duties, or 'import taxes' on electronically delivered products or services.
Initially, some developing countries opposed the moratorium and proposed that the issue be treated as a case of tariff negotiations. Some developing nations suggested that a zero duty commitment on digital goods could be exchanged for much lower tariffs for their main export items, i.e. physically delivered commodities. Initial resistance prompted the acceptance of a moratorium of 18 months only as it was agreed that developing country concerns would be closely examined.
Governments interested in fostering greater international trade by means of electronic commerce may be inclined to minimize duties that apply to transborder data flows, and efforts to identify foreign information based business transactions. Others may see a risk of erosion in existing public revenue streams by a shift of business activity toward on-line technologies. Again, harmonization of practices in these areas across jurisdictions will help foster a more equitable trade regime.
A major issue for international trade in digitized products and services—such as software, travel or banking—is not related to tariff barriers, but to other barriers to international market access. The World Trade Organization (WTO) is the multilateral entity that is concerned with market access issues. Based on WTO principles products bought and paid for over the Internet but delivered physically would be subject to existing WTO rules on trade in goods. But the situation is more complicated for digitised products that are delivered over the Internet, as a variety of issues arise relating to the appropriate policy regime.
Some believe that in principle services delivered over the Internet fall under the General Agreement on Trade in Services (GATS). This would imply that there is no need to draft new rules on electronic supply of services. In spite of this there is still a need to clarify exactly how the GATS apply to electronic commerce and come up with policy decisions regarding the issues that are unclear or definitively not resolved by the GATS. One especially challenging area concerns items that can be delivered both electronically and physically, such as computer software. It also remains unclear which policy issues related to electronic commerce should be tackled by the WTO, and which by other entities.
Issues for policy consideration