HAYES OUTLINES U.S. ELECTRONIC COMMERCE PROPOSAL TO WTO
(U.S. seeks to keep transmissions duty free)

Geneva -- The United States has proposed that the World Trade Organization (WTO) codify the existing international practice of keeping electronic transmissions free of customs duties.

In a February 19 statement to the WTO General Council meeting, Deputy U.S. Trade Representative Rita Hayes said the proposal would require no concession from any member.

Ambassador Hayes said the proposal does not concern taxes aside from customs duties, does not concern duties paid on products sold through electronic transmissions and does not attempt to define electronic transmissions as a good or a service.

She said also the proposal does not preclude other regulation of electronic transmissions but does signal to the business community that the WTO favors expansion of electronic commerce.

Following is the text of Hayes statement:

(begin text)

Thank you Mr. Chairman.

I take the floor today to discuss with my colleagues in the WTO the idea that the Information Age is upon us and that electronic commerce will continue to dramatically affect the way we all live and conduct business. My delegation is proposing that we respond to the Information Age by agreeing in the WTO to continue the current practice of each WTO Member concerning customs duty treatment of electronic transmissions.

Today, no Member considers that electronic transmissions are importations for customs purposes and, thus, no Member imposes customs duties on electronic transmissions. Our proposal is to codify this practice in the WTO.

I ask that each delegation take a careful look at the written U.S. text circulated by the Secretariat (document WT/GC/W/78 of February 9). A careful look at the proposal reveals that it is very straightforward, it is very simple and it is very direct. The WTO can welcome and be a part of these events. We should discuss how electronic commerce should relate to the WTO system.

Let me try, Mr. Chairman, to clarify even further the idea so that we all understand what I am not talking about. Clearly, electronic commerce covers a wide range of issues.

First, I am not discussing tax policies of any country. I am not suggesting that we discuss or take decisions on any measure that would affect the way in which our tax authorities treat electronic transmissions. My discussion today is solely focused on customs duties.

Second, I am not discussing reducing tariffs on goods imported through normal commercial channels. Let me be clear: I am not talking about the circumstance in which, for example, a tennis racket, a bouquet of flowers, or a refrigerator are ordered through electronic means -- let's say over the Internet -- but delivered through normal commercial channels.

Third, I am not discussing how we define what is an electronic transmission, that is, whether it is a good, a service, or something in between. While it may prove to be fascinating theoretically, I am not proposing that we debate at this time the nature of electronic transmissions.

There should be WTO work in this area and we want to work with others on ideas.

I am proposing that we send a message that WTO Members intend to maintain current practices. Today, no country considers that electronic transmissions are importations for customs duty purposes. Such transmissions cannot even be given a tariff classification in the Harmonized Tariff Schedule.

Not a single Member imposes customs duties on electronic transmissions. There are no customs duties on telephone calls across borders; there are no customs duties on fax messages; and there are no customs duties when computers access data bases. Telephone calls, faxes and computers share a common element: They rely on electronic transmissions that may travel across borders.

The growth of this environment has brought us into the Information Age. And part of this environment has been that these electronic transmissions are not considered as importations for customs duty purposes.

The idea is simple: It is to declare a continuation of our current practices. That is, to declare that we will maintain our current practices not to impose duties on electronic transmissions.

Mr. Chairman, I have often been asked about the way in which the WTO can take this decision.

How we record the consensus is a matter that can be discussed. We are not asking this body to decide anything today. Rather, we are asking the General Council to begin exploring the issue and to focus first on the concept. Then we can focus on how to formalize our agreement.

Some say that it is premature to discuss the U.S. idea of codifying existing practice for electronic transmissions because too little is known about the intersection between the WTO and global electronic commerce. They have said that there are too many bigger issues related to electronic commerce and the WTO including its impact on the General Agreement on Trade in Services (GATS).

As many of our trading partners, the United States is studying those issues, but I do not agree that the approach we suggest is premature in the context of the WTO. It is important and timely for us to discuss this proposal now.

-- First, electronic commerce will only increase in importance in the next few years and certainly in the next century. We can start agreeing on points that do not require any particular concession by any country. Preserving current practice is the best place to begin. Agreeing on this under the WTO would send the right message to the business community -- that the WTO wants to promote the expansion of electronic commerce.

-- Second, an agreement regarding our customs duty practices does not set a precedent for our practices in other areas in this sector, such as taxes or regulation.

-- Third, this is but a first and important step of what will be a journey for the WTO. An agreement on duty-free electronic transmissions does not prevent us from studying, analyzing, and reviewing all of the other aspects of electronic commerce. Indeed, the WTO Research Division will be issuing a report in the next weeks that all of us will want to study carefully.

Mr. Chairman, I conclude my remarks by reminding delegations that the idea being proposed is quite simple: that is, to agree to maintain our current practices whereby no country considers electronic transmissions as importations for customs duty purposes. Our proposal does not require a sacrifice or concession from any Member country. Agreement on this narrow approach would allow us to place the WTO boldly in the forefront of work on global electronic commerce and squarely facing the demands of the next century.

I will make copies of my statement available and a list of questions we have typically received including our responses. Thank you.

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