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    INTERNET COMMERCE & TRADE POLICY:

    International Initiatives for E-Trade

    Stuart S. Malawer

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    The Internet in the U.S.

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    Web & E-Commerce in the News .

    Global Transactions in a Multijurisdictional World.

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    [E]lectronic commerce creates new challenges and opportunities for trade for

    members at all stages of development, and we recognize the importance of creating

    and maintaining an environment which is favourable to the future development of

    electronic commerce..WTO / DOHA Declaration (Nov. 2001).

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    Electronic commerce (business transactions on the Web) and the

    information technology (IT) industries that make e-commerce

    possible are growing and changing at breathtaking speed,

    fundamentally altering the way Americans produce, consume,

    communicate and play.

    . The Emerging Digital Economy II(1999)

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    (T)he Internet will make trade and international business far easier than

    ever before . In trade policy we are developing broad principles through

    specific objectives at the WTO .

    . E-Commerce in American Trade Policy, (June 1999)

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    The pace of technological development and the borderless environment created

    by the Internet drives a new paradigm for government and private sector

    responsibilities. Creating the optimal conditions for the new digital economy to

    flourish requires a new, much less restrictive approach to the setting of rules.

    .Emerging Digital Economy (1998)

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    Todays global economic landscape is defined by two main features

    -- the vast impact of the information technology revolution and the

    dramatic expansion of international trade. The Internet is redefining

    business models worldwide and creating new paradigms and economic

    transactions.

    . Former Governor James S. Gilmore, III, Governor of Virginia and

    Chairman, Federal Commission on Internet Taxation (1999).

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    Aspects of the Internet & Global Trade

    One transaction subject to multiple jurisdictions.

    Uncertainty in national legal & tax systems.

    Global & transborder.

    Decentralized.

    Inability of one state to regulate.

    Network of Networks.

    Helps to communicate & conduct business.

    Revamping domain name process & resolving trademark conflict.

    States, nations, regional and international institutions are now only beginning to assess

    and reevaluate the state of governance.

    State budget crisis in the United States is driving states to tax the expanding online

    sales as a means of alleviating budgetary deficits.

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    Private sector favors a market-led, market-driven & self-regulatory environment.

    General consensus emerging that need some global governance to avoid chaotic &

    divergent national regulation. No consensus as to application of trade rules or WTO disciplines to Internet trade &

    commerce. (Internet-trade specific or technologicallyneutral.)

    Basic Problems for the WTO:

    Definition of Internet trade -- Trade in Goods or Trade in Services?

    Revise the existing agreements or a new unique one (Trade Related to EconomicCommerce / TREC)?

    Newer IssueWhere states are enforcing national policies at odds with the policies of

    the home states of Internet companies. E-Gambling (new 2006 U.S. legislation & EUs threat to bring WTO claim.

    Continuing Issue-- Regarding the backbone of the InternetGlobaltelecommunications still primarily American (ICANN)but have growing interest inchanging this through international institutions (ITC).

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    U.S.

    Case #1 -- Place of Contract (Contract).

    Case #2 -- Place of Publication (Tort).

    Case # 3Place of Sale (Tax).

    Location of Server & Company in U.S.

    EU

    Case #1Consumer accesses websites.

    Case #2 -- Individual claims libel action.

    Case # 3Requires payment of sales tax.

    Transnational Transactions &

    Multijurisdictional Legal Issues

    Private Transactions & Litigation.

    Suit filed in EU

    Online sale

    Publication of article

    Server Located in Third Country?

    ISSUES:

    Jurisdictional Issue.

    Choice of Law.

    Judgment Enforcement.

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    Newer Internet Issue.

    Global Web Transactions & Foreign Law Compliance.

    (A Growing Foreign Policy Issue.)

    U.S. France

    U.S.

    AustraliaU.S.

    China

    Advertising Sale of Good

    News Articles

    News Articles

    Foreign criminal law

    restricts sales specified of

    specified goods.

    Foreign civil law subjects

    news coverage to jurisdiction

    & liability.

    Foreign criminal law restricts

    certain coverage (censorship).

    Yahoo Case

    WSJ Case

    Pending

    Problem.

    Issues: The impact of national law on global Internet transactions? What is

    the role of domestic law in restricting such transactions? This is a growing & major foreign

    policy issue. Clash of local & global interests. Problem of a

    decentralized legal system in dealing with global actionsno final arbiter.

    Newer 2007 Case: YouTube & Copyright of clips

    (Belgium court case).

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    Past Present Future

    Technical

    Commercial

    Legal

    Scope of

    ServicesIncreasing

    Demand

    Critical Issues Confronting Global Internet Trade.

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    Government Debate & Discussion.

    Global trade institutions are only now beginning to address the dramatic challenges of

    Internet trade and electronic commerce.

    Framing policy issues and contending principles by various international institutions

    are now only in its infancy.

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    U.S. Government

    Some Early Documents:

    A Framework for Global Electronic Commerce (July 1997). First Annual Report of the U.S. Government Working Group on Electronic Commerce

    (November 1998).

    The Emerging Digital Economy (1998, 1999, 2000).

    States have been active in considering a broad range of legislation impacting Internet

    transactions, such as the Uniform Computer Information Technology Act (UCITA) that

    concerns licensing of software. Virginia is one of the few states to have adopted it. (2000).

    Some recent federal legislation:

    E-signatures (digital signatures) now authorized. Electronic Signatures in Global and

    National Commerce Act.(2000).

    The 1998 Digital Millennium Copyright Actimposes new restrictions on violating

    digital copyrights extraterritorially.

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    Current U.S. Law on Taxation of Online Sales.

    The federal commission on Internet taxation was unable to reach a consensus on federal or

    state taxation of Internet transactions. (Suggested extending moratorium on new taxes on theInternet.)

    Federal moratorium on new taxation of the Internet (for example, access charges). (InternetTax Freedom Act,1998), and extended to Nov. 2003). In November 2004 this was extended toNovember 2007.

    Issue of extension was caught up with considering VoIP as part of Internet.

    U.S. Supreme Court (Quill Case, 1992) refuses to obligate firms to collect sales taxes for otherjurisdictions unless the sellers has a presence in that jurisdictions.

    Buyers may still be required to pay their own states the sales taxes for online purchases.(Never happens.)

    Granholm v. Heald(S. Ct. 2005) The Wine Case held that states cannot restrictforeign shippers if they did not so restrict state sellers of wine for selling directly toconsumers. Big win for Internet sales.

    States are attempting to change this in light of gigantic budget deficits since the demise of theNew Economy & the Internet / Telecom bubble.

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    Multijurisdictional Tax Issue (U.S.).

    N.Y. Virginia

    BuyerSeller

    Seller has no

    physical presence

    in N.Y.

    Online Sale.

    Problem: Collection of Sales Tax.

    [States need the money. Budget

    crisis.]

    S. Ct. does not require out-

    of-state collection of another

    states sales tax.

    Consumer is to pay own state.

    States proposing sales tax

    simplification & congressional

    change of law.

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    Six Emerging Principles as to Global Governance.

    Private sector should lead.

    No undue market restrictions.

    Simple legal environment.

    Recognize uniqueness of Internet.

    The Internet changes everything, business models and government.

    Facilitate globalization of E-Commerce and E-Trade via Internet, for

    example, greater liberalization of markets (telecommunications).

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    Nine General Issues.

    Customs & taxation.

    UCC for electronic commerce.

    Electronic payment systems.

    Intellectual property protection.

    Privacy (data transfers).

    Cyber Security.

    Content.

    Technical standards.

    Newer Trade (& Foreign Policy).--Telecommunications Infrastructure,Information Technology & Internet.

    Telephone access, connection charges & other restrictions as trade issues(U.S. complaints concerning Japan & Mexico to the WTO / DSU).

    FDI into domestic telecom & Internet industries. (Many foreign telecoms arestill state owned.)

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    European Union.

    Some early documents:

    Then Need for Strengthened International Cooperation(1998).

    E-Commerce -- 1st Communication(1999).

    Lisbon Conference --Internet(2000).

    Major points:

    Issues concerning the Internet have progressed from technical to commercial to legal.

    Consumer jurisdiction.

    The electronic marketplace requires an appropriate framework.

    Global uncertainty (with different subnational, national and regional responses) willhamper the electronic marketplace.

    Want the WTO to give this comprehensive consideration:

    Electronic transmissions across borders.

    Data protection systems.

    Competition.

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    Some Recent Developments:

    The U.S. & the EU have agreed upon an accord as to electronic data privacySafe

    Harbor . EU commences taxing some Internet transactions.

    Lisbon Summit (2000) set reforms to counter U.S. domination of Internet Revolution.Internet Management, 1998-2000,(Commission Communication)

    Provisions for consumer jurisdiction in Internet litigation.

    *EU Web site for E-Commerce:http://europa.eu.int/information_society/topics/ebusiness/ecommerce/index_en.htm

    *E.U. Web site on Legal Aspects of E-Commerce:http://europa.eu.int/information_society/topics/ebusiness/ecommerce/8epolicy_elaw/law_ecommerce/index_en.htm

    European Union:http://europa.eu.int/index_en.htm

    http://europa.eu.int/information_society/topics/ebusiness/ecommerce/index_en.htmhttp://europa.eu.int/information_society/topics/ebusiness/ecommerce/8epolicy_elaw/law_ecommerce/index_en.htmhttp://europa.eu.int/information_society/topics/ebusiness/ecommerce/8epolicy_elaw/law_ecommerce/index_en.htmhttp://europa.eu.int/index_en.htmhttp://europa.eu.int/index_en.htmhttp://europa.eu.int/information_society/topics/ebusiness/ecommerce/8epolicy_elaw/law_ecommerce/index_en.htmhttp://europa.eu.int/information_society/topics/ebusiness/ecommerce/8epolicy_elaw/law_ecommerce/index_en.htmhttp://europa.eu.int/information_society/topics/ebusiness/ecommerce/index_en.htm
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    World Trade Organization.

    Important Documents:

    DOHA Agenda concerning E-Commerce (Ministerial Declaration of Nov. 2001).

    WTO General Council & E-Commerce Program, (Dec. 2000) Electronic Commerce & The Role of the WTO,(March 1998).

    Declaration on Global Electronic Commerce,(May 1998).

    Important Issues:

    Is E-commerce trade in goods or trade in services or a new specific agreement?

    U.S. positionTechnology Neutral.

    Major problems as to data transfer and taxation and privacy.

    (data transfers, sales tax, customs, byte )

    Telecom has followed a highlyregulatedmodel. The Internet has developed in anunregulatedenvironment.

    How to increase global governance of the Internet by not imposing unnecessarygovernmental restrictions & disincentives at all levels.

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    E-commerce link on the WTO Website:

    http://www.wto.org/english/tratop_e/ecom_e/ecom_e.htm

    Declaration on Global Electronic Commerce (May 1998) requests work program (&moratorium / standstill on customs tax on electronic transmissions.

    http://www.wto.org/english/tratop_e/ecom_e/mindec1_e.htm

    General Council established work program (Sept. 1998).

    Issues not resolved at Seattle Ministerial (Nov. 1999) or DOHA Ministerial (Nov. 2001). E-

    Commerce is part of DOHA agenda.

    http://www.wto.org/english/thewto_e/minist_e/min01_e/mindecl_e.htm#electronic

    EU believes that e-commerce can be enhanced if WTO members makedeeper market

    opening commitments on commercial services generally (greater liberalization).

    WTO held a seminar in 2002 on the revenue aspects of global e-commerce and impact on

    development for LDCs.

    http://www.wto.org/english/tratop_e/ecom_e/ecom_e.htmhttp://www.wto.org/english/tratop_e/ecom_e/mindec1_e.htmhttp://www.wto.org/english/thewto_e/minist_e/min01_e/mindecl_e.htmhttp://www.wto.org/english/thewto_e/minist_e/min01_e/mindecl_e.htmhttp://www.wto.org/english/tratop_e/ecom_e/mindec1_e.htmhttp://www.wto.org/english/tratop_e/ecom_e/ecom_e.htm
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    ITU / WIPO / UNCTAD.

    International Telecommunications Union (ITU) -- responsible for the infrastructure (radiospectrum) & telecom standardization.

    World Intellectual Property Organization (WIPO)concerned with intellectual property rights.Issued its final report concerningdomain names and resolving disputes (April 1999) and now hasan active arbitration system.

    WIPO and ITU are coordinating efforts concerning dispute resolution (WIPO Arbitration& Mediation Center).

    Intellectual property has become a central element in economic and cultural policy in aworld in which markets are distributed across the globe. (Domain Name Process, April1999).

    WIPO is one of the arbitrators under the ICANN Rules (UDRP) for resolving domainname & trademark disputes.

    ICANNInternet Corporation for Assigned Names & Numbers possible model forgreater global governance (private / public cooperation in one entity). But ran intogovernance trouble recently.

    See:Primer on E-Commerce & IP Issues(May 2000).

    UNCTAD issues annual reports on E-commerce and developing countries. E-Commerce &Development Report (UNCTAD, annual report).

    http://www.unctad.org/Templates/StartPage.asp?intItemID=2629&lang=1http://www.unctad.org/Templates/StartPage.asp?intItemID=2629&lang=1http://www.unctad.org/Templates/StartPage.asp?intItemID=2629&lang=1http://www.unctad.org/Templates/StartPage.asp?intItemID=2629&lang=1http://www.unctad.org/Templates/StartPage.asp?intItemID=2629&lang=1http://www.unctad.org/Templates/StartPage.asp?intItemID=2629&lang=1
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    Emerging Transnational Lobbying.

    Private sector (computer and telecommunication firms) beginning to organize

    transnationally to influenceglobal institutions -- as toglobal governance initiatives

    concerning E-commerce & trade.

    The GBDe (Global Business Dialogue on Electronic Commerce), one of the first such

    transnational alliances, was formed in early 1999. It consists of the worlds leading

    computer and telecommunication firms.

    Attempting to reach a joint approach on behalf of U.S., European and Asian firms

    concerningself-regulation of all aspects ofonline commerce.

    Attempting to overcome national and cultural differences.

    Website for GBDe (specifically for E-commerce):http://www.gbd.org/

    Website for Global Economic Forum (general): http://www.weforum.org

    http://www.gbd.org/http://www.weforum.org/http://www.weforum.org/http://www.gbd.org/
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    It embodies the spirit and dynamic features of the digital age. Today, the

    GBDe is increasingly recognized as one of the world's leading privatesector voices on e-commerce policy.

    Within an extremely short period of time the GBDe has created a process

    which is truly global in scope; demonstrated the willingness of the private

    sector to engage seriously in the policy development process; and issued

    detailed, consensus-based recommendations on crucial e-commerce

    issues.

    [ From GBDe website. ]

    http://www.gbd.org/

    http://www.gbd.org/http://www.gbd.org/
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    Concluding Suggestions.

    Global governance via the WTO & other global institutions.

    Need cooperation of sovereign governments.

    Need to ensure that global action fostersharmonization in order to ensure a restriction-free

    system.

    WTO to consider sufficient agreements that addresses the service / goods issue.

    Private sector toorganize transnationally to engage the various international institutions.

    Governments and global institutions to be an enabler of a market-driven system.

    International institutions other than the WTO such as WIPO, ITU, UNCITRAL, OECD,

    UNCTAD & ISO need to play complementary roles.

    The role of ICANN is still undecided as to global governance (and not unilateral U.S.

    governance) as relating to the Internet backbone and domain names. [World Summit on

    Information Society -- ITU.]

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    Several Articles.

    Malawer, "The Digital Global Economy." (NYSBA 1998).

    Malawer, "Internet Commerce & Trade Policy," 48 Virginia Lawyer 46 (June /July 1999). (Click here)

    Malawer, "Domain Names & Global Trade." (May 2000). (Click here)

    Malawer, "Global Governance of E-Commerce & Internet Trade: Recent

    Developments," 50 Virginia Lawyer 14 (June / July 2001). (Click here.) "Who Controls the Internet? Foreign Affairs (Nov. / Dec. 2005).

    http://www.global-trade-law.com/Malawer,%20Digital%20Global%20Economy%20(Int'l%20Practicum%201998)..htmhttp://www.global-trade-law.com/Malawer,%20Digital%20Global%20Economy%20(Int'l%20Practicum%201998)..htmhttp://www.vsb.org/images/feature2.pdfhttp://www.global-trade-law.com/Domain%20Names%20(Article.Dr.%20Malawer).dochttp://www.vsb.org/publications/valawyer/june_july01/malawer.pdfhttp://www.global-trade-law.com/Article.Who%20Controls%20the%20Internet%20(FA%20Nov.-Dec.%202005).htmhttp://www.global-trade-law.com/Article.Who%20Controls%20the%20Internet%20(FA%20Nov.-Dec.%202005).htmhttp://www.vsb.org/publications/valawyer/june_july01/malawer.pdfhttp://www.global-trade-law.com/Domain%20Names%20(Article.Dr.%20Malawer).dochttp://www.vsb.org/images/feature2.pdfhttp://www.global-trade-law.com/Malawer,%20Digital%20Global%20Economy%20(Int'l%20Practicum%201998)..htmhttp://www.global-trade-law.com/Malawer,%20Digital%20Global%20Economy%20(Int'l%20Practicum%201998)..htm
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    In conclusion, the inherently transnational nature ofglobal computer networks and the Internet must lead to

    greater and more creative international cooperation .

    (A)s Internet trade enters a more legalistic era, newer rules

    need to be clearly enunciated. Those rules should followand reflect market forces.

    .. Malawer, Internet Commerce & Trade Policy,(July 1999)