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International Trade & E-Commerce

ITRN 603, International Trade Relations

November 25, 2002

Adil CherkaouiJohn Hawes

Bassem HoussamiChristine Kurowski

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Pssst – Hey Buddy, want to buy the DVD for 3 bucks?

Debut for pirated Harry Potter DVD

Mon Nov 18, 2:43 AM ETKUALA LUMPUR (Reuters) - Available on

the street at just $3 (1.9 pounds), pirated DVD versions of "Harry Potter (news - web sites) and the Chamber of Secrets" went on sale in Malaysia the same weekend the movie made its worldwide debut.

Pirated copies of latest Harry Potter film appear online

Wed Nov 13, 1:16 AM ET LOS ANGELES (AP) - Days before the

premiere of "Harry Potter and the Chamber of Secrets," the film's producer said it fears pirated copies are showing up on the Internet.

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Amazon.com Example

Amazon.com opened its virtual doors in July 1995. Today, millions of people in more than 220 countries have made Amazon.com the leading online shopping site.Amazon ships to virtually any address in the world with some restrictions.When placing an order, Amazon estimates the shipping and delivery dates and cost, based on the availability of the items and the shipping options.Shipment rates are weight-based.

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Shipping Rates

International Shipment - to the Middle East: Per Shipment Per ItemStandard international Shipping --- 17 to 29 Business DaysCDs, DVDs, Videotapes, Cassettes $4.99 $3.49

Books $8.99 $6.99 Expedited International Shipping --- 11 to 15 Business Days

CDs, DVDs, Vinyl Books, Cassettes $8.99 $3.49 Books $10.99 $7.99

Priority International Courier --- 3 to 7 Business Days CDs, DVDs, Vinyl Books, Cassettes $31.99 $4.49Books $31.99$9.99

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How Tax is Calculated:

The amount of tax charged depends upon many factors:

identity of the sellertype of item purchaseddestination of the shipmenttax collection obligations of other merchants selling via the Amazon site

Under Amazon “Participation Agreement” :(http://www.amazon.com/exec/obidos/tg/browse/-/1161302/qid=1037842228/sr=1-7/10)

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Effect of the Internet Tax Freedom Act (ITFA)

Primarily intended to prevent state and local governments from imposing new or discriminatory taxes on Internet transactions and on Internet access.Companies selling over the Internet are subject to the same sales tax collection requirements as any other retailers. (http://www.amazon.com/exec/obidos/tg/browse/-/468512/qid=1037842228/sr=1-1/10...).

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Customs:

Purchasers buying from Amazon may be subject to import duties and taxes, including value added taxes (VAT), which are levied once a shipment reaches the country.Customs policies:

Vary widely from country to country.Charges for customs clearance borne by the buyersAmazon has no control over these charges and can’t predict what they may be.Buyers are considered the importers of record .

Amazon Around the World

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E-book

An e-book is a digital book that you can download and read on a computer screen, or electronic device such as Palm or hand held computer.For sales tax purposes, electronically delivered products (e-books, e-documents, electronically delivered software) are considered to be shipped to the credit card billing address.Most publishers have restricted the publishing of e-books. E-books are non-returnable.There is no shipping and handling charges for e-books. No sales tax required. (http://www.amazon.com/exec/obidos/tg/browse/-/516492/ref=br_bx_c_2_103-6641. 7.)(http://www.amazon.com/exec/obidos/tg/browse/-/468512/qid=1037842228/sr=1-1/104)

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WTO E-Commerce Definition

Work Programme on Electronic Commerce, Sept.1998:“electronic commerce is understood to mean the production, distribution, marketing, sale or delivery of goods and services by electronic means”

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WTO E-Commerce Declarations

Geneva Ministerial Conference, 1998Establish work programme on e-commerceReport at 3rd SessionContinue NOT imposing customs duties on electronic transmissions

Doha Ministerial Conference, 2001Endorses work to dateConsider the most appropriate institutional arrangementsReport on progress at 5th SessionContinue NOT imposing customs duties on electronic transmissions

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United States Position

From the 2002 Trade Policy Agenda, in reference to the Doha e-commerce declaration – “This work program will provide an opportunity for the United States to continue its efforts to press other countries to avoid unnecessary measures that would impede the growth of electronic commerce.”

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WTO Councils

Council for Trade in ServicesCouncil for Trade in GoodsCouncil for TRIPSCommittee for Trade and Development

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Council for Trade in ServicesCouncil for Trade in

Services examines and reports on the treatment of electronic commerce in the GATS legal framework. The issues examined include: transparency increasing participation of developing countries domestic regulation, standards, and recognition competition

protection of privacy and public morals and the prevention of fraud market-access commitments on electronic supply of services national treatment access to and use of public telecommunications transport networks and services customs duties & classification issues.

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Council for Trade in Goods

The Council for Trade in Goods examines and reports on aspects of electronic commerce relevant to the provisions of GATT 1994. The issues examined include: market access for and access to products related to electronic commerce; valuation issues arising from the application of the Agreement on Implementation of Article VII of the GATT 1994;

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Council for Trade in Goods

issues arising from the application of the Agreement on Import Licensing Procedures; customs duties and other duties and charges as defined under Article II of GATT 1994; standards in relation to electronic commerce; rules of origin issues; classification issues.

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Council for TRIPs

The Council for TRIPS examines and reports on the intellectual property issues arising in connection with electronic commerce. The issues to examined include: protection and enforcement of copyright and related rights; protection and enforcement of trademarks; new technologies and access to technology.

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Committee for Trade and Development

The Committee on Trade and Development examines and reports on the development implications of electronic commerce, taking into account the economic, financial and development needs of developing countries. The issues to examined include:Effects of electronic commerce on the trade and economic prospects of developing countries, notably of their small- and medium-sized enterprises and means of maximizing possible benefits accruing to them; Challenges to and ways of enhancing the participation of developing countries in electronic commerce, in particular as exporters of electronically delivered products: role of improved access to infrastructure and transfer of technology, and of movement of natural persons;

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Committee for Trade and Development

use of information technology in the integration of developing countries in the multilateral trading system; implications for developing countries of the possible impact of electronic commerce on the traditional means of distribution of physical goods; financial implications of electronic commerce for developing countries

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E-Commerce In Developing Countries

500 Million People are Internet Users in 2001World wide(UNCTAD).A Growing Share Of New Internet Users In Developing Countries.

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Internet Users (Thousands)(ITU 2000-UNCTAD)

100.0200400Morocco

150.0200500Kenya

33.3450600Egypt

46.446016738Africa

% Change20002001

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Internet Users (Thousands) (ITU 2000-UNCTAD)

36.89501300Venezuela

34.027123636Mexico

60.050008000Brazil

36.21933126320Latin America

% Change20002001

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E-Commerce In Developing Countries

In developing countries, the proportion of Internet users who are also e-commerce practitioners is low:

Cost (Low Per Capita Income)Inadequate Payment SystemsLow Credit Card UsageLack of Relevant Products or ServicesPoor Logistics and Fulfillment ServicesBasic Infrastructure for E-CommerceLow Speed of Connections

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Share Of World Internet Users

US28%

Western Europe

29%

Japan14%

Asia/Pacific18%

Rest Of The World

11%

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Share Of E-Commerce Revenue

US45%

W/ Europe26%

Japan16%

Asia/ Pacific5%

Rest of the World

8%

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EU Position on Harry Potter & the “Chamber of Secrets”

Classification: The “Chamber of Secrets” is a “service,” not a “good”, if any Harry Potter fan in the EU wants to buy and download a copy over the internet.

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Why is a download of Harry Potter a “Service”

in EU View?A download is not a physical “product”, delivered by traditional means – which are handled by GATT rules for trade in goods. The mere fact that Harry’s film has a physical counterpart is irrelevant; the internet is virtualIt’s an electronic delivery, & all electronic deliveries are services – just like other on-line activities, such as of information, financial, or consultation services

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Technology & Protectionism?

Earlier technology, e.g a phonographic record, was classified a good, but the content was not. EU argues that with the internet, there is no carrier/good, only a service. EU says labeling downloads as “goods” would circumvent and undermine EU protection and control on service markets, including professional services, since trade in goods is far more open.

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EU Regulation of Harry Potter and the “Chamber of Secrets”

EU wants common WTO standards for consumer protection, product liability, protection of personal data of purchasers, and transaction security. EU wants a level playing field on regulations, since companies in the EU will be subject to strict regulations in these areas. EU fears other countries (US, developing nations) will have lower standards.

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EU, ISPs, and Harry Potter

To ensure competition & market access, EU wants companies marketing services like the “Chamber of Secrets” to have access to all ISPs.EU rejects argument that ISPs are private networksIn EU view, all ISPs should come under the telecoms annex of the GATS, because services they offer are “required, explicitly or in effect, by a Member to be offered to the public generally”

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Questions about the Chamber of Secrets?

WTO witchcraft?

US spells?

Amazon mantras?

EU magic?

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“Doha by Night: The Uncut Expose of the WTO”

Sexy E-Commerce Scandal !!

Banned by 84 countries !!

Now available on the Internet !!