SPECIALSTUDIES2MarcBacchetta,PatrickLow,AadityaMattoo,LudgerSchuknecht,HannuWagerandMadelonWehrens*ELECTRONICCOMMERCEANDTHEROLEOFTHEWTO*TheauthorsaremembersoftheWTOSecretariat.Theopinionsexpressedinthisstudyarethoseoftheauthors.TheauthorswouldliketothankJean-GuyCarrier,DavidDunkley,K.MichaelFinger,DavidHartridge,MarkusJelitto,MasamichiKono,VesileKulacoglu,PierreLatrille,PatrickLydon,DenbyMisurelli,HeinzOpelz,MaikaOshikawa,AdrianOttenandLeeTuthillforhelpfulcomments.TheywouldalsoliketothankLidiaCarlos,AnneHughesandAishahColauttiforsecretarialsupport.ThisreportisalsoavailableinFrenchandSpanish-Price:Sfr30.-.Toorder,pleasecontact:WTOPublications154ruedeLausanneCH-1211GenevaTel:(4122)7395208or5308Fax:(4122)7395792ISBN92-870-1198-2PrintedinSwitzerlandIII-1998-3,200©WorldTradeOrganization1998I.SummaryandIntroduction1II.TheMainInstrumentsofElectronicCommerce5III.TheEconomicsofElectronicCommerceandtheInternet15A.Conditionsforthedevelopmentofelectroniccommerce:infrastructureandaccess15B.Theeconomiceffectsofelectroniccommerceonuserindustries19IV.TheGrowingImportanceofElectronicCommerce23A.Electroniccommerceinnumbers23B.Electroniccommerceandthetelecommunicationandinformationtechnologysectors27C.Electroniccommerceanditsimpactonuserindustries29D.Internationaltradeandelectroniccommerce32V.PolicyChallengesinElectronicCommerce35A.Accesstotheinfrastructure35B.ThelegalandregulatoryframeworkforInternettransactions37C.Securityandprivacyoftransactions38D.Issuesintaxation40E.Electronicmoney41F.Enhancedopportunityindevelopingandindustrializedcountries42VI.ElectronicCommerceandtheWTO45A.AccesstotheInternet46B.Marketaccessissues50C.TradeliberalizationunderGATS52D.Tradefacilitation57E.Electroniccommerceandpublicprocurement58F.IntellectualpropertyrightsandtheTRIPSAgreement59G.RegulatoryissuesintheWTO64VII.Conclusion69Bibliography71iTableofContentsiiiListofTablesTable1:ElectronicCommerce:FeaturesofMainInstruments6Table2:AccesstotheTelecommunicationInfrastructure,SelectedCountries,19967Table3:GrowingNetworksforElectronicCommerce8Table4:TheNeedforBandwidth8Table5:AutomaticTellerMachines,SelectedCountries9Table6:SpeedandCostsofDifferentWaysofDocumentTransmission13Table7:PricingofConventionalTelephonyComparedtoInternetTelephony,199613Table8:UnitedStatesInternetCommerceRevenue,bySector,Projectionfor200225Table9:Internet-GeneratedRevenuesintheUnitedStates,bySector,1996andProjectionfor200028Table10:CostsofShippingwithintheUnitedStatesandfromtheUnitedStatestoEurope33Table11:GATSCommitmentsonMode1and2TradeforVariousServiceSectors53ListofChartsChart1:ThePrevalenceofMicroprocessorCardsandSmartcards,1995andProjectionfor20019Chart2:PurposesforMaintainingaWebsite,1993-199612Chart3:CostofBuyingSoftwareovertheInternetComparedto“Traditional”Channels14Chart4:PeakRateInternetAccessCharges,August199614Chart5:TheRelativeImportanceofCommercialChannelsforCompaniesAlreadyTradingontheInternet,1997andProjectionfor200024Chart6:ValueofWeb-GeneratedSalesWorldwide,bySelectedResearchCompanies,1996andProjectionfor200124Chart7:GrowthofInternetHosts,byRegion,1993-199626Chart8:InternetUserPopulation,byRegion,1997andProjectionfor200026Chart9:AveragePerCapitaSpendingonEntertainmentServicesintheUnitedStates,bySector,199631Chart10:InternetChargesandHostDensity,WithandWithoutInfrastructureCompetition,199536Chart11:ITATariffs,1996AppliedRates,SelectedCountries48ListofBoxesBoxI:TheHistoryoftheInternet10Box2:ElectronicCommerceasaMeansofTradeFacilitation32Box3:TowardsSecureElectronicTransactions:TheSETStandard39Box4:SevenCriteriatoJudgeProposalstoTaxtheInternet40Box5:FourKeyConsiderationsonElectronicMoney41Box6:ArtandtheInternet43Box7:TheInternetandMedicalServicesinBangladesh43Box8:TheInternetinDevelopingCountries44Box9:TheGeneralAgreementonTradeinServices(GATS)45Box10:ProductCoverageundertheInformationTechnologyAgreement47Box11:TheTRIPSAgreement60Box12:OnlineCommunicationsandtheNewWIPOTreaties62vRecentadvancesinthreeareas—computertech-nology,telecommunicationstechnology,andsoftwareandinformationtechnology—arechanginglivesinwaysscarcelyimaginedlessthantwodecadesago.Newmeansofexchanginginformationandtransactingbusi-nessaretransformingmanyaspectsofsocialandeco-nomicorganization.Thesemoderntechnologiesarebe-ingcombined,especiallythroughtheInternet,tolinkmil-lionsofpeopleineverycorneroftheworld.Com-municationsareincreasinglyunburdenedfromthecon-straintsofgeographyandtime.Informationspreadsmorewidelyandmorerapidlythaneverbefore.Dealsarestruck,transactionscompleted,anddecisionstakeninatime-framethatwouldhaveseemedsimplyinconceiv-ableafewyearsago.Thistechnologicalrevolutionwillincreasinglytoucheveryareaofactivitywherethedigi-taltransmissionofinformationservesapurpose,whetheritbeintheoffice,inbusiness,orintheworldsofshopping,leisureandentertainment.Therewereonlysome4.5millionInternetusersin1991,andestimatessuggestthattherewillbeasmanyas300millionormorebytheturnofthecentury.ThetechnologyuponwhichtheInternetisbasedoffersmuchgreaterversatilityasamediumforconveyinginformationthandoletters,t