International trade is vital to the software industry. Over half of the U.S. industry’s global revenues are derived from foreign sales. Exports as a percentage of American software companies’ total sales have increased dramatically over the past decade. They now account for over $50 billion each year.
Enforcing the Trade-Related Intellectual Property Rights (TRIPs) Agreement
Widespread piracy is the software industry’s single most significant trade barrier. The most effective means of reducing piracy internationally is to enforce TRIPs, the agreement by which all members of the World Trade Organization (WTO) commit to abide by laws that protect intellectual property. TRIPs-compliant nations must have in place adequate civil and criminal laws protecting intellectual property and must, in practice, effectively enforce those laws.
Unfortunately, many countries fail to criminalize or adequately protect copyright holders against “end-user” piracy, as required by the TRIPs Agreement. Other nations lack critical enforcement tools, such as the right to conduct surprise (“ex parte”) civil searches, also required by the TRIPs Agreement.
The deadline for developing nations to comply with the TRIPs Agreement was January 1, 2000. However, today, many countries still remain in noncompliance and in violation of their international commitments.
Facilitating Importation and Production of Information E-Commerce Technology Equipment
A decade ago, in addition to rampant software piracy, the U.S. software industry faced another major problem in foreign markets: unreasonably high tariffs on computers and related devices. Significant progress has been made in this area. The WTO “Uruguay Round” agreements and the subsequent Information Technology Agreement (ITA), substantially reduced many tariffs for e-commerce technology devices.
Still, many economies, mostly in the developing world, impose high duties or excise taxes on foreign e-commerce technology equipment. These barriers can range from 20 percent to as much as 100 percent of a product or system’s price. In some cases, a government might justify such a barrier by claiming that these products are “luxury goods.” Or, a government might argue that such actions are necessary to protect an “emerging” domestic industry or “sensitive” sector of its economy.
But, in all cases, such policies simply stifle the development of a vibrant base of e-commerce technology consumers and service providers. It is essential for governments to adopt policies that encourage the use of e-commerce technology—not policies that effectively prohibit or punish it.
The preceding is true whether considering a computer and software in the home, or routers and wires in the workplace. The refusal to compete against high-quality, imported products will do nothing to enable domestic manufacturers to produce quality products at affordable prices.
For a nation’s e-commerce technology development to flourish, countries should also open up their domestic markets to foreign investment. Foreign companies willing to invest in e-commerce technology overseas are affirming that particular country’s development and manufacturing capabilities and consumption potential. An infusion of capital and expertise also serves as a catalyst for the further development of the domestic industry.
Pursuing New Trade Agreements that Respect E-Commerce
As trade moves increasingly from the import and export of tangible goods to Internet-based commerce, it is vital to ensure that traditional free-trade principles apply equally in the realm of electronic commerce. Nations that have sought to rid themselves of burdensome trade barriers must ensure they do not stifle e-commerce with those same barriers. Because trade liberalization is crucial to the worldwide growth of the software industry, the following agreements and negotiations are very important:
The pursuit of a new round of multilateral trade negotiations under the auspices of the WTO
The conclusion of regional free trade agreements, such as the Free Trade Area of the Americas (FTAA)
New, bilateral trade agreements, including the U.S.-Singapore Free Trade Area (FTA)
Thus, the preceding bilateral and multilateral talks provide opportunities to further strengthen international trade law, provide a predictable business environment for e-commerce, and develop a progrowth e-commerce agenda.
Keeping E-Commerce Barrier-Free
Any new trade negotiations should focus on barring new measures whose effect would be to restrict or inhibit the growth of global e-commerce. Countries should also ensure that they apply current WTO standards to online transactions. Specifically, countries should:
- Sign the Information Technology Agreement (ITA) and eliminate e-commerce technology tariffs.
- Make the 1998 Moratorium on Customs Duties on Electronic Commerce permanent and binding.
- Refrain from trade classifications that penalize software and other products acquired through downloading from a computer network, compared to those purchased in tangible form.
- Affirm that current WTO obligations and commitments, namely the General Agreement on Tariffs and Trade (GATT; trade in goods), General Agreement on Trade in Services (GATS; trade in services), and TRIPs (intellectual property) rules are technology-neutral and apply to e-commerce. Countries should refrain from enacting trade-related measures that could impede, actually or potentially, international e-commerce. Such rules should be enacted only where a legitimate policy objective necessitates doing so and where the least trade-restrictive measure is chosen.
- Support a NAFTA-type approach to e-commerce services issues in future trade negotiations. NAFTA’s services obligations apply to all services, including new services that have developed since the conclusion of NAFTA (this approach is sometimes referred to as “top-down”). Because it is impossible to anticipate what specific e-commerce services will develop over time, any “bottom-up” approach, as embodied in the current GATS, almost certainly will be out-of-date from its inception. There is a need to set the stage for an agreement that is more flexible with respect to future e-commerce and computer industry developments.
- Adopt a horizontal work program in the WTO for all e-commerce issues. This is necessary in order to ensure that WTO rules and disciplines reflect the horizontal (cross-disciplinary) nature of e-commerce
