Internet Regulation and the International Trade Regime

Sun Nanxiang

• Publisher: Routledge
• Year: 2022
• ISBN:
  9781000599220
• Edition: 1
• Topic: Law
• Subtopic: International Law
• Index: Law

In the age of information, an open Internet is a key component for modern economic development. This book analyses the World Trade Organization Agreement for virtual society and explores key questions regarding internet regulation and trade barriers.

Information and communication technology has introduced a transformational element to international trade, in the shape of e-commerce. Although internet technology is conceptually neutral, it can be used as a medium that poses severe threats to individual rights, public morals, public order, and national security. World Trade Organization law and jurisprudence, which are the basis of global economic and trade rules, can be applied in cyberspace but internet regulatory measures can also pose a threat to free trade. This book thus explores the following questions: whether internet regulation constitutes a trade barrier; if so, what form does that take; and whether WTO members can invoke exception clauses to justify their internet regulatory measures? The research provides deep interpretations on treaty law and case law, and draws on additional interdisciplinary approaches to answer these questions.

This book will be of great interest to Scholars and Students of law, with a focus on international trade and internet regulation, as well as anyone interested in Chinese cyber law.

1 Internet Regulation and International Trade Law

DOI: 10.4324/b22932-2

A famous report of Economic Cooperation and Development (OECD) said that almost all economic and social activities can be performed in cyberspace.¹ Economic growth is driven by many factors, including product, process, and organizational innovations based on technological change.² The impact of Internet, to some extent, is comparable with the creation of fuel machines, steam engines, to the economic growth. In a word, the cyberspace, which created by the human being, is a virtual informational society to promote cross-border trade and investment significantly. Thus, this chapter will analyze the relationship between Internet regulation and international trade law.

I Does Internet Regulation Affect Free Trade?

1 The Rise of E-commerce and the Development of International Trade Law

As Robert Uerpmann-Wittzack said that the freedom of Internet communication, which is firmly rooted in international human rights law, is at the core of Internet freedom, and Internet freedom may comprise commercial Internet freedoms.³ The Internet affects productivity growth.⁴ e-commerce has even become the main current form of transnational trade activities, particularly during the COVID-19 pandemic. Cross-border trade activities shall use information technology to share business messages; modern banking and financial institution are deeply dependent on electronic communication system; even investors request foreign law and regulation via government websites. In general, the positive impact of the Internet on trade can at least be reflected thus: the first is e-commerce technology smooths the supply of services between producers, suppliers, and consumers, and makes the supply cheaper; the second is information transmission and data exchange are faster and more convenient, which does benefit for trade around the globe. Doubtless, the creation of the Internet reduces cross-border transaction costs substantially, enhancing the development of international trade.

Correspondingly, whether international trade law can govern the e-commerce activities, becomes a question in academia. As Sascha Wunsch-Vincent states, the WTO has taken several steps to define how the multilateral, rules-based trading system should be applied in the online world, but its work is really just beginning.⁵ Particularly, WTO members implemented the Uruguay Round agreements, which liberalized trade in value-added telecommunications and computer and related services and guaranteed non-discriminatory access to telecommunications networks in 1995. In 1996, WTO members completed negotiations on the Reference Paper for Basic Telecommunications Services. In 1997, WTO members completed negotiations on the Information Technology Agreement (ITA) to eliminate tariffs on a number of information technology products. In 1998, WTO members agreed to continue their practice of not imposing customs duties on electronic transmissions and established a work program to examine comprehensively all trade-related issues relating to e-commerce. WTO members also launched the Doha Development Agenda, which includes negotiations that may help to define how the rules-based trading system is applied to e-commerce in 2001, though a slow progress in the last 20 years.⁶ But it shall be admitted that with the rise of e-commerce, the pace to formulate multilateral trade rules on virtual society is accelerating.

2 Commercial Internet Freedoms and the Necessity of Internet Regulation

Since the 21st century, as the Internet penetrates each national society, e-commerce has gradually become the main form of international trade activities. According to Aunpam Chander, the electronic Silk Road winds its way through undersea fiber optic cables and satellite links, ferrying electrons brimming with information. This modern “Silk Road” makes possible trade in services previously impossible in human history.⁷ As the study of classical economics, a free and open trade system enables more goods and services to reach domestic consumers at lower prices, thereby substantially increasing their standard of living. Therefore, e-commerce will contribute to the economic growth.

However, a free and open trade system in the online world sometimes poses a threat to national security and public interests. For instance, online criminals may hack e-commerce technology or information infrastructures as a way of stealing or extorting money. Thus, nearly all governments promulgate Internet regulation to safeguard their public interests, but to a certain extent, the kind of regulation may harm commercial Internet freedoms simultaneously.

1 Rethinking Technology Neutrality

As a decision-making matter, network neutrality emerged as one of the most controversial issues in Internet regulation. Tim Wu is the most famous legal scholar who support the concept of “network neutrality” in telecommunications policy.⁸ However, even though it is admitted that emerging technology may be neutral in its design, the result of the adoption of the technology is arguably non-neutral. In 2013, Edward Snowden revealed that the US National Security Agency has been secretly intercepting the main communication links carrying Google and Yahoo users’ data around the world, and could collect information “at will” from among hundreds of millions of user accounts.⁹

In short, neutral information and communication technologies can pose a serious threat to national security and public order.¹⁰ As discussed above, emerging technology can be used by terrorist groups and hacker organizations, as well as Big Power, thus any government would like to safeguard its national security and social stability by implementing strict Internet regulations.

2 Negative Economic Externalities

A network is a kind of public goods medium which contains the non-competitive and non-exclusive characteristics. A non-competitive network indicates anyone could use the resources on the Internet without a negative impact to others, due to its unlimited capacity; non-excludable network means it is difficult to prevent anyone from using the resources in cyberspace, or the preventing measure will cost an unaffordable burden. As a result, a collective action problem or social dilemma exists in the protection of global commons. For instance, the European Union has to unilaterally promulgate General Data Protection Regulation to safeguard the legal right of data owners, but it will also influence those activities outside the European Union.

Furthermore, the Internet can become a medium for the transmission of fraudulent or pornographic information. Though the Internet increases business opportunities, there are new sophisticated techniques being developed by fraudsters. Almost all information can be transmitted easily via the Internet, and the protection of a fundamental right in personal data, such as personality and property rights, is far from adequate, particularly in developing countries. In reality, as a free medium of information transmission, there are many illegal acts such as fraud, online gambling, and pornographic transactions in the instant, interactive, anonymous cyberspace.¹¹

Nearly all contemporary economists agree that appropriate government regulation is an inseparable complement to ensure the smooth function of free markets. It is necessary to cure economic externalities, provide public goods, and protect important values in human society.¹² From the new classic economics angle, the role of regulation is supported by different considerations, such as the need to address market failures, amongst which information asymmetry, monopolies (including natural monopolies) and externalities.¹³ Behind domestic regulations lie important social values: human health and safety, environment protection, consumer welfare, or even national security, just to name a few among an open-ended list.¹⁴

Recently, economists gave explicit attention on network externalities. Network externalities mean that the interests of general public are served by having everyone linked to a single, interconnected telecommunications system.¹⁵ Take the US telecommunications system as an instance, the system ran for a long time as a regulated, vertically-integrated monopoly, with numerous constraints on pricing particular services that doubtless generated cross-subsidies across a variety of service offerings and customer types.¹⁶ An additional challenge is to assess the service’s price in a network industry with a two-sided market or even multi-sided market, due to the zero-price strategy has exploded in popularity in digital market. It should be noted that many “free” products are not truly free. Customers often transfer something of value, typically personal information, to access zero-price products.¹⁷ In short, under certain circumstances in cyberspace, the value of the market cannot reflect the real costs and benefits of transactions. Therefore, the government is requested to address the problems of an imperfect market.

In addition to economic goals, Internet regulation also involves non-economic objectives, such as safeguarding of the distributive justice, equality, sustainable development, and national identity. Inherently, the protection of legitimate objectives is why the government shall actively intervene in Internet freedoms. Currently, cyberspace is considered a pseudo (or “imperfect”) medium, comprised of “Internet infrastructures” that is controlled mainly by public entities under the jurisdiction of national territory around the globe. Doubtless, all the behaviors in cyberspace are subject to national and international regulations.

3 National Sovereignty and Public Interest

According to the Lotus Principle established by the Permanent Court of International Justice in 1927, international law governs the relationship between independent states. The rules of law binding states therefore emanate from their own free will as expressed in conventions or by usages generally accepted as expressing principles of law and established in order to regulate the relations between these co-existing independent communities or with a view to the achievement of common aims. Therefore, theoretically, restrictions upon the independence of states cannot be presumed.¹⁸ From this point, national sovereignty is independent, the power to regulate Internet is independent, and the right to govern the jurisdiction in cyberspace is also equal. In a word, cyberspace generally is subject to the principles of sovereignty and jurisdiction.

As the Appellate Body stated clearly in China-rare earths, the member shall undertake the obligations arising from the treaty, but the WTO agreement does not deny the member’s economic sovereignty.¹⁹ Taking Internet information regulation as an example, sovereign states have the full power to manage, supervise, and control illegal activities and fake information within their territories. Traditionally, information is embodied in tangible physical objects such as books, newspapers, and periodicals, which are subject to strict territorial jurisdiction. In online world, Internet communication begins from a fixed location and ends at a fixed location. Currently, filtering technologies can be placed within the information infrastructure to create e-borders.²⁰ Based on this, the government retains the capability to claim national sovereignty and jurisdiction in cyberspace, though the supervision on the flow o...

Table of contents

• Cover Page
• Half Title page
• Series Page
• Title Page
• Copyright Page
• Contents
• List of illustrations
• List of abbreviations
• Preface
• Introduction
• 1 Internet Regulation and International Trade Law
• 2 Internet Regulation under the WTO Agreements
• 3 Reconsidering the Legitimacy of Internet Regulation: A Perspective from the General Exceptions
• 4 Reconsidering the Legitimacy of Internet Regulation: A Perspective from the Security Exceptions
• 5 Internet Regulation and the Application of TBT Agreement
• 6 Internet Regulation and International Law: A Chinese Perspective
• Bibliography
• Index