EU Releases Proposal on New WTO Rules for Electronic Commerce and Puts Privacy at its Core
By Nikolaos Theodorakis
On 3 May 2019, the European Union (EU) published its proposal on future rules and obligations related to e-commerce (Proposal). This Proposal forms part of the ongoing World Trade Organization (WTO) negotiations on e-commerce that kicked off in January 2019 and is aimed at achieving transparency in developing the future digital trade policy and creating consistency regarding cross-border data flows and privacy regulations across the globe. The Proposal takes to heart the role of privacy, data protection and internet neutrality in advancing e-commerce and eliminating barriers to digital market access across countries.
The Proposal recognizes that the rapid growth of e-commerce and the digitalization of the economy are having a tremendous impact on businesses and consumers globally. It aims to strengthen consumer confidence in online transactions, keep internet access open, and shield traders from attempts to restrict data flows or seize data and source code.
The Proposal addresses the dated WTO rules on the provision of services that are found in the General Agreement for Trade in Services (GATS). GATS entered into force in 1995, long before the internet revolution, the use of e-commerce globally and the wide-ranging data protection regulations. Further, there are currently no other multilateral rules that regulate digital trade. This means that both businesses and consumers have to rely on disparate rules that certain countries agree in their bilateral or regional trade agreements.
To this end, the EU is proposing a broad set of rules and commitments regarding digital trade in three main areas: e-commerce, telecommunications services, and market access requests.
The Proposal provides that WTO members should, inter alia:
- Enable cross-border data flows to facilitate digital trade and cross-border sales. As such, WTO members should not: (i) force the use of specific, pre-approved or pre-certified, computing facilities or network elements; (ii) require data localization for storage or processing; or (iii) block the storage or processing in the territory of another country;
- Protect personal data by adopting and maintaining safeguards, for instance through the adoption and application of rules for cross-border data transfers.
- Guarantee the validity of e-contracts and e-signatures, save for certain exceptions;
- Strengthen consumer’s trust in the online environment, particularly through enacting measures that protect them from fraudulent and deceptive commercial practices;
- Adopt measures to effectively combat spam messages (unsolicited commercial electronic messages), by requiring the recipients’ explicit consent and facilitating the ability to opt-out from any future communication;
- Prohibit that WTO members require the transfer of, or access to, the source code of software owned by a company or an individual in another country;
- Permanently ban customs duties on electronic transmissions; and,
- Adhere to the principle of open internet access, namely allow for non-discriminatory network access and device connectivity.
The Proposal recommends that the existing telecommunication services regulations be upgraded to ensure that they are fit to support today’s vibrant internet ecosystem, which is the main enabler of e-commerce. This includes provisions that prevent anti-competitive practices (e.g. illegal subsidies), interconnection of telecommunication services without discrimination, and licensing criteria for these services.
The market access suggestions are geared towards allowing seamless access to computer and telecommunication services. For that purpose, the EU suggests that other WTO members join the Information Technology Agreement, which aims to completely eliminate tariffs on IT products, and the Understanding on computer and related services, which aims to bring down barriers in computer services. The same goes for telecommunication services, where the EU is pushing for zero market access limitations (e.g. no requirement to use networks of specific suppliers, no requirement of commercial presence, and no requirement for commercial arrangements).
Of the WTO’s 164 members, 77 have agreed to try to bring the e-commerce rules up to speed with current developments, including the EU, the US and China (which joined with the caveat that rules on data flows must be subject to the precondition of security). Overall, the Proposal touches on aspects like data localization, cross-border data flows, geo-blocking, net neutrality and data protection standards and aims to create a liberalized and secure environment where digital trade and e-commerce can thrive.