Feb 23, 1998

WHO WILL BENEFIT FROM INTERNET FREE TRADE?

Geneva, 19 Feb (Chakravarthi Raghavan) -- The efforts of the United States to get an early accord towards 'Free Trade on Internet' has been received cooly by the WTO members who Thursday welcomed the move to discuss it at the WTO - but with many reservations over the call that the membership commit themselves not to levy any duties in the future.

The issue was brought up before the WTO General Council Thursday by United States Ambassador Rita Derrick Hayes who suggested that WTO members should agree to "continue the current practice" of not levying customs duty treatment for electronic transmissions and this practice should be 'codified'.  

While the US sought to present its view as "very straight-forward, very simple," -- giving the example of fax and telephones not being subject to customs duty -- the discussions showed that for others, particularly developing countries, it was neither simple nor straight-forward, but much more complex. 

The US view that no country was now levying a customs duty, and thus agreeing to keep it that way is no concession, was challenged by India which noted that in the WTO even binding an existing rate of duty was viewed as a concession, since by binding an element of irreversibility was introduced.  

US President Bill Clinton raised the idea of internet free trade last July and US officials have been hoping that some agreement could be reached in time for the WTO Ministerial meeting in May.  

While several members at the General Council agreed that the issue should be addressed at the WTO, they also underlined the complexities of the issue and the need for the membership to better understand its intricacies, and they could not act in a hurry.  

Some of the comments from developing countries, including Egypt and india, also suggested they have concerns that the move might provide an advantage for the advanced industrialized countries who were dominant in this sector, and that 'free trade via internet' would not really be a level-playing field as is sought to be made out by the United States.

Some outside observers suggest that even the issues of 'governance of internet', like allotment of domain names (now virtually controlled by US-based institutions) were involved.  

The European Communities for its part said a number of complex issues were involved including the questions of intellectual property rights, financial services, telecommunications issues etc. The EC said it was in the process of preparing a paper of its own for presentation at the WTO.  

Rita Hayes earlier argued that the US proposal did not address tax policies of any country or how tax authorities of countries should treat electronic transmissions nor did it relate to reduction of tariffs on goods (whether tennis rackets, cut-flowers or something else) imported through normal commercial channels, but ordered by electronic means. But she spoke of the possibilities of soft-ware or music etc being made available or delivered through internet.  

The US representative did not also want any discussions about how 'electronic transmission' is to be defined - as a good, service or something in between or both. Defining it may make a simple situation more complicated, she argued, in pushing for 'codification' of an existing situation and thus freezing the current practice and advantages for the US.

While work on some aspects could be undertaken in the future, she wanted the WTO members to "maintain current practices". The US representative cited as examples that no member is now charging customs duties on telephone calls or fax messages nor when computers access data bases, and this practice should be maintained.  

In the discussions that ensued while almost every member was 'grateful' to the US for having brought up the issue, they stressed that much more needs to be explored and understood. Egypt's Amb. Mounir Zahran, in making this point, noted that various countries were at various levels of development, and the industrialized countries were much more advanced on internet and electronic transmissions. "There was an assumption (in the US proposal) of a level playing field from which everyone would benefit. But this was something not so clear or certain."

India's ambassador S. Narayanan supported Zahran's view and said the US proposal was based on a number of assumptions that need to be looked into. There was no particular hurry to reach any conclusion. There was an assumption that this was a simple matter and that no customs duty was now being levied. But in many systems duties may be leviable, and binding the current practice of non-levy would be a WTO/GATT concession and an irreversible one.

Later, in response Hayes sought to imply that as a leading producer of soft-ware, India would be at an advantage in ensuring duty-free treatment on this.