The changing points in the world of technology cannot be easily observed. And, one cannot fully realize the effects of technological developments until after a period of time has elapsed. At the turn of this century, a company from New York changed its product from carriages that were drawn by horses to the manufacture of automobiles. The significance of this step wasn’t immediately clear, especially considering that the people of New York purchased 350 carriages, yet only 125 automobiles.
Today, we are witnessing something similar when it comes to electronic trade. The large nations (in particular the USA and the countries of the European Union) have moved toward dealing with the tremendous effects of electronic trade growth. Due to the importance of this subject, numerous initiatives have been taken and this topic has been placed on the agenda of the World Trade Organization (WTO). Therefore, all involved nations are now researching the consequences of joining the WTO, the importance of the growth of electronic trade, and what Intellectual Property Rights (IPRs) issues may follow. I will divide the topics I’m addressing in this lecture into 3 sections which are:
1- Joining the WTO:
The integration of Jordan (and developing countries in general) with the international trade system, is one of the most important ways to benefit from liberalization and globalization processes. This is because by joining the WTO, the state is granted the opportunity to work on putting its growth strategies and trade policies in place, through a clear framework and in a stable trade environment. Therefore, I say that joining the WTO isn’t an objective in and of itself, but rather an important step towards fulfilling and applying a growth policy at the national level, by following through with specific goals. The country should have clear and defined growth objectives prior to starting the process of joining, because joining the WTO imposes on the nation certain commitments and compromises. Therefore, it is necessary prior to joining, that we understand the consequences of a number of items, especially those related to commitments in permitting other nations to access the markets of the state that is seeking WTO membership. Other commitments that need to be considered are those related to governmental support of agricultural, industrial and national products, and intellectual property (IP) issues. In order for the membership process to take place in a balanced manner, there must be a set of defined goals, otherwise the process will become tedious, time consuming and difficult. Therefore, this necessitates high-level planning, coordination between the different governmental bodies of the same state and a comprehensive economic policy at the national level that serves the general public. Further, acquiring membership requires complex negotiations with the current members of the WTO.
Here, we should note that creating the WTO increased the stability of the international trade system, and allowed the WTO members to reap the benefits of this stability. Therefore, non-members have been missing out on considerable privileges, since a state begins benefit from this membership, while simultaneously abiding by its commitments as well. Some examples of the privileges and advantages that a nation enjoys when joining the WTO are as follows:
- Applying the WTO agreements increases a nation’s trade opportunities
- Multilateral conventions ensure a stable framework for trade transactions
- The rights mentioned by the organization’s agreements are only granted to member states
- Member states benefit from the conflict resolution mechanisms within the organization’s framework, in an organized and systematic manner that protects its trade interests
I mentioned that joining the Organization is difficult and complicated. However, this is in the interest of the involved country. This is because acquiring membership imposes on the country to put in place specific plans to address defined issues. For example, there are questions that must be answered clearly in certain areas, such as pricing, the tax system, support given to certain economic sectors, the system to encourage foreign investment, the payments budget, tariffs and accompanying duties systems such as the customs exemption system, rules and regulations on import and export, systems to protect IP, foreign exchange processes and statistics and statements/bulletins related to external trade. All these are complicated issues that require detailed research which provides specific answers for every point raised.
There is another item that should be addressed now. While it is true that the nation which wishes to join the WTO must abide by certain commitments as a prerequisite for acquiring membership, once it does indeed become a member, it has the right to participate equally in the Organization’s negotiations along with other member-nations. This means that any compromises it puts forward to become a member, will be in a sense returned back to it in the form of compromises by other nations requesting membership or by other member-states.
A nation desiring to join the WTO must work seriously for this. As I mentioned earlier, there are questions that need to be answered. Let us address the services sector, which is one of the sectors that is undergoing enormous growth these days, and there are important matters in this regard.
For the services sector, a comprehensive evaluation must be prepared that focuses on three aspects: The first is related to the sectors of sensitive services that a state does not wish to list in its commitments. The second is has to do with sectors that enable the state to compete in, because these sectors will not be negatively affected by foreign competition as is the case with other sectors. And the third is related to the special exceptions of the Most Favored Nation Principle.
These aspects give us an idea on the complexity of the negotiation process and its consequences. We are aware of 2 important facts however: The first is that once a nation becomes a member, things will not go back to the way they were during the pre-membership era, and secondly, that WTO will be beneficial in the long run if not in the short-term.
The officials in charge of whatever country that wishes to join, should naturally be aware of all angles related to the process. A clear and defined stance must be established to deal with the complicated issues under consideration during negotiating. You may have noticed that these talks require those involved in them to be mindful of many important matters. So, the nation’s representatives for example need to be cognizant of the best conditions that should be available during the first phases of the negotiation process while being aware of the problems that need to be solved at internal and external levels. Also, the negotiator should be knowledgeable with multilateral transactions system and its effects on the local economy. So overall, joining is not an easy process; it is complex, but worth it. It goes without say that joining the organization is one of the urgent matters that every nation must face, in accordance with its interests and general developmental objectives.
2- Intellectual Property (IP) Issues:
One of the more notable topics that arise from joining the WTO, is the creation of a strong system to protect IPRs. We know that this topic is misunderstood frequently. Therefore, we need to discuss this with extreme clarity. Those entitled to IP rights can no longer stay silent in the face of the violation of these rights due to extreme technological advancements. In addition to this, a strong protective system of IP rights is one of the basic methods to encourage innovation and creativity. The vast progress enjoyed by the industrial nations goes back in large part to an effective IP protective system. On the other hand, technological developments have become expensive, and the existence of a legitimate system to transfer technology makes a great atmosphere for development and creativity; much better than merely taking over ideas and transferring them in what may end up being a distorted fashion.
The significance of an IP system is clearly highlighted by it being listed in the WTO conventions. No nation can become a WTO member without abiding by the famous IP agreement known as TRIPS, which is now widely known as it regulates the trade aspects related to IPRs.
When discussing the TRIPS agreement, especially in relation to Jordan and the developing countries, there are 3 main axes that should be focused on. The first is that the convention itself imposes the creation of an effective system to protect IP rights, and apply it (i.e. the system) gradually at the beginning until reaching the final stage which includes complete application. It is expected that the creation of this effective system, will lead to positive results in the economy, such as encouraging innovation and creativity, in addition to direct foreign investment and technology transfer. It is almost certain that there will be negative consequences in the short-term, such as the inflation in price of numerous important technologies and relevant products that are protected within this framework. Additionally, there will be limited capability of proliferation related to imitating commodities and copying products (such as copying books, video cassettes, and computer programs). The second axis is that when a country abides by the TRIPS agreement, it needs to balance 2 parts of a difficult equation: the first part is related to the needs of developed companies to protect their products from imitation and cheap copies, and the other part is considering the legitimate needs of competing companies and consumers as far as keeping track of these innovations themselves. In other words, there is a need to encourage creativity and innovation and then the need to distribute useful knowledge in different economic aspects. The third axis is that the application of the agreement will create different consequences for the economy of each country, since each country has a unique formulation of an IP system prior to abiding by the TRIPS agreement.
Applying the TRIPS agreement creates a new reality altogether. Therefore, caution must be exerted when this agreement is to be applied, or when certain aspects are to be applied without looking at the whole agreement.
In order for this to be applied in a balanced manner such that it benefits the national economy, an atmosphere must be created which promotes the creative and innovative growth of individuals and companies’ abilities. This requires a number of elements, of which I’ll mention a few here:
- Formulating a law for IPRs that is consistent with the TRIPS agreement, but without being detrimental to inventors and innovators, and their ability to develop original ideas. This is an important point, because the mere existence of great idea alone is not enough for us to protect it. Rather, it should be encouraged to be developed and pushed forward. This means that protection should not be rigid, and should not lead to limiting or confining creative and intellectual freedoms. The law should be flexible so that it protects the creative idea while at the same time helps increases its potential for development and growth.
- To achieve this, a system of motivators that encourage and support innovative activities at the local level, must be created. The innovator must realize the vitality of his/her efforts, and it is not enough to merely thank the innovator, as he or she must be confident that the efforts will be preserved and protected. Even if his/her idea is improved upon, he/she must be confident that the credit of the original idea will go back to him/her. A system of motivators such as this, will definitely help encourage innovation, and then help invest in innovations and inventions in a profitable manner. This in turn will move the economy forward, and will assist in technology transfer in a healthy atmosphere that is ensured by the state and before the world.
- Further, it is necessary to benefit further from the available scientific and technological information, via the information infrastructure. This wealth of information and data requires a system to protect IP rights. In this situation, the ability to develop and deepen ideas in a certain field will be enhanced at both the individual and company levels, and everyone will be able to operate freely and confidently in a positive and healthy surrounding.
- On the other hand, sound and consistent policies must be applied in relation to the issue of competition, in order to minimize the negative consequences that may inadvertently appear as a result of utilizing IPRs.
- Also, programs must be created such that skills can be attained at a broad level. This will encourage innovation and creativity. This means spending on training and special-skill acquisition programs, and programs that help absorb technical developments in areas of concern to the national economy.
Let me now address in detail some of the points that I raised, to clarify their importance in relation to the evolution of the economy and growth in general, in light of an effective system that protects IP rights.
One of the effects of applying the TRIPS agreement for example, will be that patents will be available in all fields, including medicines. Patents must be granted protection for at least 20 years, and there can be no discrimination on the basis of the innovation’s location or technological field, or on the basis that the products are imported or produced domestically. There are transitional provisions that are of concern to us in this area: Countries that exclude some products from having their patents protected (particularly agricultural and pharmaceutical products), will have to award protection for these patents starting from January 2005, even though they must accept the direct special requests to ensure that protection. Also, protection must be granted for computer programs, databases and audio tapes. Trademarks give a protection period of 7 years that is subject to renewal.
All these questions must be considered as consequences of applying the TRIPS agreement, so what is the ideal situation?
In the short term, there will be challenges of varying degrees, which will result from adherence to the convention. One of these challenges is for national laws, procedures and institutions to be compatible with the TRIPS agreement. This is a difficulty that cannot be underestimated when it comes to certain countries. This is because exercising this agreement requires incurring fundamental changes in the legal, administrative and legislative structures, and the methods of law application. This in turn, may require the spending of exorbitant amounts of money, and would have far-reaching social impacts. Accordingly, there will be specific administrative changes such as:
- Improving the legal framework in accordance with the commitments imposed by the agreement
- Strengthening and/or Establishing the necessary administrative bodies for this purpose
- Enhancing the capabilities for implementation and pursuing the execution of laws
- Ensuring adequate training for needed cadres
- Enhancing the capability to monitor new developments in the field of technology transfer between companies, while ensuring relevant parties understand the consequences related to IPRs.
The most important step in this area is enhancing competitive ability and opening the door to technology transfer processes in a clear and responsible format that serves the public interest. This requires the collaboration of efforts for all those who work in this field. There are difficulties that must be faced, but movement must happen sooner or later, although I think that it should be sooner rather than later. Every step we take in this regard will be in the end in the public’s interest and will move the wheels of progress and growth forward.
There is no doubt that creating a healthy competitive environment will be more worthwhile than getting second-rate copies of any product. Slowly but surely, the world’s awareness will increase and so will productive capability. The law of survival of the fittest in this context will serve the citizen. Also, market economies and the flexibility of demand will help in the proliferation of quality products at inexpensive prices. It is no secret that companies price their products according to the market they’re selling in.
And so I propose that we move to place the topics specific to protecting IPRs under investigation, as being apprehensive about this will not make these topics go away. The urgent issues will remain urgent, and we cannot look away or get rid of them. In other words: “You gotta do what you gotta do.”
Now, the question is a matter of time. Even if it is tight, it is still available to us, so let’s act. There are many studies on this subject, and there are international bodies involved that can provide backing and required technical support. In the end, the resulting benefit will be for us and our economy. All we need to do is act wisely and be patient. But we have to work, and then we have to work some more.
3- Requirements of Electronic Trade:
The enormous developments in the field of communications and the knowledge revolution have tipped all scales. The momentum of data and information transfer via computers, telephones and television has multiplied over a million times.
In 1960, the cable that traversed the Atlantic Ocean had the ability to facilitate 138 phone conversations at the same time. Today, however, one fiber optic cable can transmit over three million phone calls simultaneously.
About 25 years ago, there were approximately 50 thousand computers in the world. Today, the numbers exceeds 140 million. If the same was true for cars, then we’d have a situation where a bulldozer was worth 200 thousand dollars, and would now be worth 25 dollars only.
So what can we deduce from all this?
We are standing before a complete revolution, in every sense of the word. A revolution that affects every aspect of modern life. The horizons that are opened by electronic trade cannot be easily surmised. An example that’s been mentioned was comparing the electronic trade revolution with the invention of the automobile at the turn of this century. When the automobile was invented, there was of course a normal set of expectations, such as an increase in the significance of petrol, steel, glass and rubber, since they are essentials for the car manufacturing industry. However, we never expected that the car would lead to the phenomena of suburbs, and increase in environmental pollution and an increase in the strategic importance of the Middle East.
Firstly, we should note that electronic trade is basically a method for business management and simplification. The great interest it enjoys in the media, public decision-making bodies and executive administrations of companies, is derived from its tremendous potential and not from its current effects on the economy. Whoever observes electronic trade and from whatever viewpoint, would concur that it has the ability to induce fundamental changes in numerous economic activities and their accompanying social environments. From here, we see that interest in electronic trade is quite understandable, even though this interest should be more focused on the critical issues and not necessarily only those highlighted by the media.
People started hearing about electronic trade only a few short years ago. We do know however, that the early forms of electronic trade have existed for decades now. For example, it existed between banks to conduct certain transactions, and also amongst airline companies to coordinate different tourist and flight procedures. These initial forms of electronic trade though, were limited and complex, in addition to being expensive. This is why these forms were only prevalent among the major corporations.
The developments that have taken place in technology, and in particular the early stage of the internet in the late sixties, and the creation of the World Wide Web in the late eighties, in addition to the proliferation of computer software that allow users to surf the internet, have all led to making electronic trade easy and not requiring much technical know-how to be used. In addition to this, all members of the community can use it as well.
These technological developments were accompanied by developments in the global economy that led to globalization which in turn led to the creation of the WTO, which we are discussing joining right now. Naturally, one of the results of globalization was the liberalization of the telecommunications sector, and the appearance of numerous innovations that expanded telecommunications, such as fiber optics. This set of developments has been characterized by the usage of technical standards in the communications infrastructure. These developments also are available for anyone to utilize (and not just the innovators who came up with these developments), and this has both created an environment where obstacles that prevent buyers and sellers from getting into electronic trade have been minimized, in addition to contributing the growth of electronic trade.
Today, for only a few thousand dollars, anyone can become a trader and reach millions of customers worldwide. As a result, electronic trade has expanded from being a system of transferring electronic data between companies, to a complex network of trade activities that many people can participate in and who might never even meet each other.
In this sense, we can make an analogy between what the internet did for electronic trade, to what Henry Ford did for the automotive world. Ford transformed the automobile from a luxury vehicle that only few could afford, to a simple and inexpensive device within reach of large numbers of people.
Electronic trade presents a very novel method in conducting trade transactions. Therefore, it carries long-term economic and social effects in different areas, such as the environment and the nature of governmental work and roles. The exact definition of the nature of these changes, at a time when electronic trade is still in its infancy at 3-4 years old, is almost impossible. There are indications, however, that we can fall back on and analyze, to give us a roughly good idea on what future developments will look like.
At a minimum, there are about 100 million people exchanging information or conducting trade as a result of the spread of the internet, whose users are about 150 million globally. It took the radio about 30 years to proliferate globally, but the internet has spread like wildfire. It’s an amazing technological phenomenon in its strength. Now, transactions can be conducted in the blink of an eye. There are about 400 thousand companies trading on the internet throughout the globe. These companies use the internet to directly communicate with importers, factories, distributors and agents, and they get transactions done at lightning speed.
All this means the breakdown of barriers related to time and place between companies. Time-consumption has been reduced significantly in numerous areas such as advertising the product, order and delivery of the assembly’s components, tracking the products on an hourly basis, obtaining required information from consumers instantaneously. All this takes place while maintaining the ability to keep the inventory down as much as possible. This is what electronic trade promises, eliminating massive amounts of paperwork to conduct business trade. With a few simple keystrokes on the computer, a deal can be completed in seconds, a deal which would regularly take two weeks of correspondence and piles of paper. The lightning speed at which all this now takes place is quite amazing, but this speed also coincides with extreme efficiency. From here, we see that the importance of electronic trade is not limited to saving time and expenditures, but also results in creating new fortunes. This is because the breakdown in geographical obstacles opens the door for new types of businesses of unimaginable potential, not the least of which is tapping into new markets that were impossible to reach before. The wisdom of electronic trade was summarized by the head of a company with the phrase “instantaneous sales with no costs”.
It is no wonder that we see governments take the initiative to protect electronic trade from any factors that may prohibit its growth such as imposing customs on electronic transactions. As an example, in July 1997, President Clinton issued what is known as the “information infrastructure”, where he asked governments not to interfere in different aspects of electronic trade until the picture becomes clearer. Now, everyone is working towards establishing the proper framework for electronic trade legislation: How shall we define a commodity? How about the definition of a service? A business transaction? How do we determine the source of a commodity? How do we define the exporting and importing countries? What is the tax situation on all this?
These are all complicated questions. But most nations have agreed to let things take their natural course. There is no doubt that the public and private sectors, will both be active to solve any problems related to electronic trade. Companies are more capable than governments to define security and trust in trade transactions. It is in the companies’ interest to devise accurate methods where electronic trade processes can be conducted in a legitimate and safe way, without being tampered with by any malicious parties.
Related to our current topic, is the role that the WTO will play in the field of electronic trade. On September 25, 1998, the WTO issued an “action plan” specific to the Ministerial Statement on Electronic Trade (this statement was issued in May 1998). At that time, the statement called for the preparation of a comprehensive program related to business transactions in electronic trade. On September 25, 1998, and after a series of intense expert meetings, the attendees reached an agreement on a special WTO action plan, which is expected to conclude its activities by mid-summer of 1999.
The action plan can be summarized by reviewing and studying the effects of electronic trade on the work of The General Council, The Council for Trade in Goods, The Council for Trade in Services, the TRIPS Agreement and the Committee for Trade and Growth. Due to the importance of the private sector’s role in this field, the action plan includes obtaining information from relevant NGOs and numerous international parties. It was mentioned that the WTO’s General Council will be in charge of coordinating the work, and the work of other bodies, particularly those that deal with the issues of governmental procurement. Numerous interrelated topics will also be discussed, such as the ministerial decision taken in May, 1998 to not impose customs/duties on electronic transactions or transfers.
The Council for Trade in Services will research the impact of electronic trade on the major provisions of the General Agreement on Trade in Services (GATS), the most important of which is Article 1 that deals with methods of import.
The Council for Trade in Goods will research how electronic trade will affect how IT products reach the markets, in addition to studying a number of items related to valuation, granting licenses, customs and so on.
What I’d like to focus on is something that cannot be postponed any further. Anyone can stand still and not take action, but this does not mean that other things will stay still as well. What happens in this case –as we all know- is that the ship will sail and pass those who stay inactive. In other words: Anyone who ignores the matter of electronic trade, does so at his/her own risk. The whole world will move forward, and that person will remain in the same place.
It is true that these issues are still in their infancy, but they are moving at the speed of light. There is no way that the world will wait 15 years as has happened with the spreading of television. I also have no doubt that the technical aspects related to electronic trade will be resolved satisfactorily sooner or later. Everybody is working diligently on these topics right now, and as mentioned earlier, technological developments are taking place at a breathtaking speed. Telecommunications companies are in the process of manufacturing fiber-optic cables that can transmit 40 million telephone calls at the same time. Telecommunications experts are stating that when this cable hits the market, a typical monthly phone bill –including international calls- would only amount to three cents. Stated differently, your phone calls all over the world will amount to only one dollar every two years.
Everything will change, and change will be towards things that are better, more improved and more complete.
So where will we be in relation to all this?