WTO Meeting Has Important Implications for E-Commerce

The nascent state of global e-commerce makes it more important than ever not to impose protectionist barriers.
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Why should investors care about the protests at the Seattle meeting of the

World Trade Organization

, other than the inherent entertainment of watching puppet shows and street theater? The future of global electronic commerce, that's why.

A key item on the agenda for the Seattle meeting is the continuation of a moratorium on tariffs on global electronic commerce, and discussion of the issue as part of the round of global trade negotiations that will begin after the conference. While that outcome is still likely, no one should take it for granted. If the e-commerce moratorium becomes a victim of the antitrade protests, it would be a great mistake.

Readers of Trade Winds may recall that a couple of weeks ago I had the temerity to

suggest electronic commerce in this country should be treated no differently than other forms of commerce. For that reason, I argued, e-commerce should, at some point, be subject to the same sales taxes that other forms of commerce are. The response was loud, irate and almost universally opposed to my point of view.

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message boards.

No, I was not so bruised by all of the criticism that I have backtracked. I still believe that the issue of neutrality should be central to decisions about taxes. In fact, that is the same principle at play with global e-commerce.

Just as taxes should be the same for online sales as for purchases made at a bricks-and-mortar store, the rules governing international e-commerce should be the same as those for other forms of trade. In the short term, a moratorium should be placed on global tariffs on e-commerce to support its development. Even in industrialized countries -- other than the U.S. -- e-commerce is relatively rare. In developing countries, it is practically nonexistent.

Nevertheless, the potential benefits of global e-commerce are huge. By 2005 it has been estimated that 1 billion people around the globe will have access to the Internet. Global e-commerce will bring vast opportunities for consumers, create numerous investment opportunities (especially as Internet firms start up in or enter developing countries), and create economic advantages from competition. Over the long term, then, the WTO should write rules that ensure e-commerce is treated the same as other forms of commerce and that e-commerce is not burdened by protectionist measures.

Already there are reasons to be concerned that protectionism will seep into e-commerce. The

European Union

and the U.S. have been squabbling over whether e-commerce should be treated as a "service," which the EU favors, or a "good," which the U.S. favors. This may sound like an arcane battle, but if the EU has its way, the stage is set for greater limits on e-commerce because the WTO allows member countries to protect their services markets to a greater degree.

Obviously, the atmosphere right now is not conducive for positive cooperation on these issues. While the WTO members argue, antitrade protestors are having a field day. As

TheStreet.com's

Heather Bourbeau

has

reported, the anti-WTO protestors have not exactly succeeded in presenting a cogent vision of a world without the WTO. However, they have disrupted the conference, causing the cancellation of opening ceremonies yesterday.

The protests have triggered a sense of weariness among pro-trade advocates, best demonstrated by the article in

The Washington Post

this week by economist

Robert J. Samuelson

. He called the meeting "pointless" and wrote that "world trade doesn't need a new agreement."

Samuelson is pro-trade. He may have a point when it comes to some other items on the WTO agenda. The world won't end if agricultural subsidies are not phased out right now, or if further trade liberalization in services is delayed a few years, although it would be a mistake. But e-commerce, because it is still in its infancy -- in some parts of the world it has not even been born -- is not yet burdened by high trade restrictions. The WTO has an opportunity to write rules for e-commerce now, before special interests try to defend industries protected by trade barriers.

Delaying the WTO's negotiations on e-commerce just sows the seeds for more difficulties in the future. Let's hope the tear gas clears for a few minutes so that the WTO can reach agreement.

David Kurapka wrote speeches for Treasury Secretary Robert Rubin from 1996 until 1999. Before that, he was U.S. Trade Representative Mickey Kantor's speechwriter from 1993 to 1996. Kurapka writes from Oakland, Calif.