This is a presentation I gave at Georgetown University Law Center in May 2012. It discusses restrictions on the internet and how they constrain the commercial activities of some very big companies worldwide. It then discusses international trade rules and how these may be used to challenge the abuse of such restrictions now and/or constrain the impact of such restrictions in the future.

1. The Lacey Lectures on International Trade
Restrictions on
Internet
Commerce:
The use of trade rules and
their limits
"The Internet has transformed traditional commerce,
creating an astounding array of new economic
opportunities and expanding international trade"
Google
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2. Overview
 The Importance of the Internet to International Commerce
 Regulating the Internet and Restrictions of Internet
Commerce
 Existing Trade Rules on Restrictions of Internet
Commerce
 The Next Generation of Trade Rules on Internet
Commerce
 Some Preliminary Findings and Conclusions
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3. The Internet and Global Commerce
 2 billion Internet users worldwide
 Almost $18 trillion exchange hands
every year through e-commerce
 In some developed-country markets,
about 2/3 of all businesses have some
kind of web presence
 More than 75% of the value added
created by the Internet is in traditional
industries
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4. The Internet and Global Commerce
 Internet add-supported industry
credited with creating more than 3
million jobs, contributing at least $300
billion to US GDP.
 Annual Internet-based commerce
worldwide set to reach $ 1 trillion
 Internet has empowered businesses in
more traditional sectors to reach
international markets
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5. The Internet and Global Commerce
Looking at some of the Global 500, many of them are either Internet
business per se, or they rely heavily on the Internet and the cross-
border flow of information for a sizeable part of their business, either
for marketing, sales or supply-chain management.
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6. The Internet and Global Commerce
Then there are companies that we are all familiar with which are
first and foremost Internet companies, or are companies who
wouldn't exist today as we know them without the Internet
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7. The Internet and Global Commerce
Those industries or sectors where the Internet’s impact has been
greatest would have to include
 Sales and distribution of goods directly to
customers - online retail industry
 Sales and distribution of music and films - first
through pirated services like Napster and BitTorrent but
which now includes legitimate services such as iTunes and
Netflix
 Print media and newspaper publishing – Kindle and
iBooks, Huffington Post etc.
 Retail Banking – most customers just bank online
 Telephony– especially through the rise of VoIP
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8. Regulating the Internet
The Internet is subject to all kinds of legitimate regulation by
national governments:
 Copyright piracy
 Child pornography
 Protection of privacy
 Hacking and spreading of malicious software
 Fraudulent activities and dissemination of hate speech
 Consumer protection
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9. Restrictions of Internet Commerce
A number of policies adopted by some governments are more
ominous, especially for consumers and those who rely on the
Internet in order to operate commercially:
 Technical blocking of access to an entire Internet
service – such as a search engine, online store, platform
for hosted content
 Licensing requirements or other means to force
companies to remove search results
 Take-down requirements demanding the removal of
certain websites
 Encouragement of self-censorship through various
means
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10. Restrictions of Internet Commerce
A number of other government practices also make business for
companies that rely on the Internet very difficult:
 Opaque and changing regulatory environment
 Wholesale blocking of services
 Favoring domestic companies over foreign competitors
 Arbitrary and capricious behavior
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11. Restrictions of Internet Commerce
Which countries are the biggest offenders?
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12. Restrictions of Internet Commerce
China
 Restrictions on VOIP
 “the world’s most comprehensive Internet
filtering regime”
 “Internet regulation regime is exceedingly
complex”
 restricting audio and video distribution services
over the Internet to SOEs
Canada
 Restrictions on broadcasting (Netflix and other
digital download services complaining)
EU
 Data protection legislation that acts as a
restriction on transferring customer information
across borders
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13. USTR’s Oct 2011 Response re China
 On Oct 19, 2011 USTR announced that the US would be
seeking detailed information on the trade impact of
Chinese policies that may block US companies’ websites
in China.
 The commercial/business case for this very public
response was formulated as follows:
An Internet website that can be accessed in China is
increasingly a critical element for service suppliers
aiming to reach Chinese consumers, and a number of
U.S. businesses, especially small- and medium-sized
enterprises, have expressed concerns regarding the
adverse business impacts from periodic disruptions to
the availability of their websites in China.
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14. USTR’s Oct 2011 Response re China
USTR used Art. III.4 of the GATS to request information on China’s
Internet regime:
“Each Member shall respond promptly to all requests by any
other Member for specific information on any of its measures of
general application or international agreements within the
meaning of paragraph 1”
Para 1 reads”
“Each Member shall publish promptly and except in emergency
situations, at the latest by the time of their entry into force, all
relevant measures of general application which pertain to or
affect the operation of this Agreement. International agreements
pertaining to or affecting trade in services to which a Member is a
signatory shall also be published.”
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15. USTR’s Oct 2011 Response re China
Some of the questions that USTR specifically asked China to address:
Who or what ministry is responsible for determining if and when a
foreign website should be blocked in China?
What are the guidelines and criteria for blocking access to foreign
websites?
What is the process for implementing a restriction on a website?
Is the blocking implemented directly by the government, or indirectly
by Internet service providers (ISPs) and/or telecommunications
companies?
If blocking is carried out by ISPs or telecommunications companies,
are these actions typically implemented through written governmental
orders? If so, which governmental organs are authorized to issue such
orders?
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16. Existing Trade Rules and Restrictions of
Internet Commerce
 We saw GATS Art. III before on transparency
 But other articles also exist that could provide a hook for bringing a case at
the WTO, particularly:
GATS Art. VI Domestic Regulation, para. 1 provides:
In sectors where specific commitments are undertaken, each Member shall
ensure that all measures of general application affecting trade in services
are administered in a reasonable, objective and impartial manner.
GATS Art. XVI Specific Commitments – which sets out very clearly
the kind of measures Members may take in those sectors where market
access commitments have been taken
GATS Art. XVII National Treatment – sets out very clearly that
Members must provide NT subject to any conditions and qualifications
inscribed in their respective schedules.
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17. China’s Schedule of Specific Commitments
 China like most countries, tended to inscribe the word “none”
on most mode 1 and 2 commitments across a wide range of
service sectors
 This essentially leaves it wide open to a challenge for a
breach of its WTO commitments if it impedes foreign service
suppliers from operating in China by blocking, filtering or
censoring their website.
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18. The Possible GATS Exceptions
• GATS Art. XIV lays out the possible exceptions, and reads
much like its counterpart in the GATT (Art. XX).
• GATS Art. XIVbis lays out the security exceptions, in much
the same language as the corresponding GATT Article
(XXI).
• Both Articles would inevitably be interpreted very narrowly.
Particularly the General Exceptions defense would falter if
there is a Chinese service provider providing the same
services as a foreign competitor.
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19. The Next Generation of Trade Rules on Internet
Commerce
 The EU and the US seem to be coalescing around a common
position on cross-border data flows under both the auspices of
the Transatlantic Economic Council (TEC) and the WTO Work
Programme on E-Commerce.
 In the TEC framework, the EU and the US have developed a
set of Trade Principles for Information and Communication
Technology Services (http://www.ustr.gov/webfm_send/2780)
 At the WTO, the EU and the US put forward a common
position calling for the adoption of a set of principles (largely
identical to the TEC principles).
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20. WTO Work Program on E-Commerce
US-EU proposal on trade-related principles to support the
expansion of information and communication:
 Transparency
 Open Networks, Network Access and Use
 Cross-Border Information Flows
 Local Infrastructure
 Foreign Ownership
 Use of Spectrum
 Regulatory Authorities
 Authorizations and Licenses
 Interconnection
 International Cooperation (to increase level of digital literacy and
breach the digital divide)
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21. Calls from US Business
In Nov 2011, very much in the context of the ongoing TPP negotiations
and in the wake of the USTR’s open letter to China, the NFTC released a
set of U.S. business community policy priorities for modernizing the
international trade rules and practices governing cross-border flows of
data and information technologies, calling for the US government to seek
commitments on inter alia:
 Expressly prohibit restrictions on legitimate cross‐border information
flows
 Prohibit local infrastructure or investment mandates
 Promote international standards, dialogues and best practices
 Improve transparency and predictability
 Address emerging legal and policy issues involving the digital
economy
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22. Trans Pacific Partnership
In the context of TPP negotiations, USTR has submitted two proposals
on the issue of the free flow of data over the Internet
 The first proposal (tabled in June during the seventh round of
TPP talks) would commit TPP countries to refrain from blocking
cross-border transfers of data
 The seconds proposal (tabled during the ninth round of TPP
negotiations in Peru in October) would bar countries from putting
in place requirements that a company store all of its data for
local use on a server located in-country.
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23. Some Preliminary Findings and Conclusions
 E-commerce and the Internet eco-system are very much areas of
commercial activity that the US has a very strong comparative
competitive edge at present, followed closely by Europe and some
advanced Asian economies (Korea and Singapore)
 This issue would probably not gained much traction internationally
and on the US policy stage if one of the biggest offenders had not
been China
 You can expect the EU-US framework to be adopted in one way or
another
 But this is also an area where different (US) trade policy interests
conflict with one another (e.g. secondary liability over copyright)
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24. The Lacey Lectures on International Trade
Restrictions on
Internet
Commerce:
The use of trade rules and
their limits
"The Internet has transformed traditional commerce,
creating an astounding array of new economic
opportunities and expanding international trade"
Google
| www.simonlacey.net