U.S. Officials Ready Stance for Nearing Trade Talks

U.S. Officials Ready Stance for Nearing Trade Talks

George Vradenburg, senior vice president of strategic and global public policy at America Online Inc., said he thinks the World Trade Organization should go further in protecting e-commerce in a market-driven environment.

By Anne Gallagher Contributing Writer

U.S. trade officials and members of the information technology industry will push their European counterparts in a few weeks to expand the globalization of e-commerce and halt moves to impose regulatory trade duties.

During World Trade Organization talks next month in Seattle, U.S. officials will push to extend the moratorium on imposing customs duties on electronic transmissions.

Deputy U.S. Trade Representative Susan Esserman told lawmakers the U.S. goal going into the talks is to keep cyberspace duty free and ensure the products delivered electronically are treated the same and enjoy the benefits of WTO trade principles.

The U.S. position also emphasizes protection of intellectual property rights and adoption of trade disciplines that support widespread, inexpensive availability of infrastructure for e-commerce, Esserman told the Senate Foreign Relations European Affairs subcommittee at an Oct. 13 hearing.

"Our overarching mission is to ensure that the WTO promotes the most trade-liberalizing approach to electronic commerce, thereby reducing the cost of goods to consumers, improving the efficiency of our economies and speeding trade-related growth in developing regions," Esserman said.

The most immediate initiative on the U.S. agenda is to prevent imposition of tariffs on electronic transmissions.

"We secured a temporary standstill on application of tariffs in this area at the WTO last year," she said. "We are working toward consensus on extension of it as the WTO Ministerial Conference approaches, and have made significant progress."

Also, more work needs to be done before deciding on a final classification under WTO rules of all products delivered over the Internet, Esserman said.

"Given the very rapid change and development of electronic commerce, we believe classification of certain digital products delivered over the Internet is premature," she said.

However, this may not be the view of the European Union, according to information technology industry officials who are concerned about the upcoming talks. The Europeans have different understanding of how electronic delivery would be classified as a good or a service.

This area of the WTO debate is troublesome for the software industry, said Eric Koenig, senior federal government affairs manager and senior corporate attorney for Microsoft Corp. The software industry is concerned that much of the discussion thus far has been focused on whether e-commerce should be classified as simply a service or whether it implicates goods.

Ninety-four percent of the world's exports in software is from the United States, and reclassifying software as a service could alter the tax regime for these products and dramatically affect the sales of one of the United States' most competitive exports, Koenig said.

"If e-commerce is treated as just a service, it could have serious implications for the software industry," Koenig said. "Such an approach would have immediate and negative implications for software companies as well as other industries."

The reclassification of software from goods to a service could deny software basic market access and national treatment benefits. Perhaps more importantly, in most countries, subject to a 1984 WTO-General Agreement on Trade and Tariffs pact, duty on software is now assessed on the basis of the carrier medium, or value of the diskette, and not the value of its content or the intellectual property contained in the medium.

"The issue or reclassification could open the door to applying duties on the value of the software itself, rather than its physical medium," Koenig said. "The consequences for traded software would be horrendous, as they would make the value of the product subject to a duty, in stark contrast to the situation in many, if not most, countries today. "

George Vradenburg, senior vice president, strategic and global public policy of America Online Inc., said he thinks WTO officials should go a step further in protecting e-commerce in a market-driven environment.

"Ministers should also be willing to agree to some type of 'forbearance' commitment, under which their countries would not introduce new and unnecessary regulations on e-commerce, except for legitimate public policy reasons and in a transparent manner that minimizes trade distortions," Vradenburg said.

He also promoted accession of non-members, including China, into the WTO to ensure the future success of e-commerce on a global level. "The strength of the global trading system depends upon its inclusiveness," he said. "The growth of electronic commerce will be enhanced by bringing China, Taiwan and other non-WTO members into the WTO."

Steering clear of commenting on WTO new membership, Esserman said major international meetings like WTO's Symposium on Electronic Commerce have built awareness of e-commerce among developing country governments.

A number of agencies, under the President's Internet for Economic Development (IED) initiative, are working to empower developing countries in Africa, the Middle East and Eastern Europe to use the Internet, Esserman said. Some IED countries also participate in a five-year, $15 million program to extend Internet connectivity to more than 20 sub-Saharan African countries, she added.

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