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Executive Summary

As more people get connected to the Internet, the fundamentally cross-border nature of the technology is leading to a revolution in international trade. Consumers have the ability to conduct a transaction directly with a foreign seller without traveling to the seller's country. This creates opportunities for both consumers and small enterprises that must not be squandered, because of the immense implications for economic development, globalization, and cultural exchange.

But for all the potential of global e-commerce, there are countless vexing policy questions to be worked out, any one of which can threaten the viability of this nascent form of trade. All of the Internet issues being debated in the United States -- consumer protection, data privacy, taxation, content regulation, copyright, spam, technology deployment, and many more -- need to be resolved at the international level as well. Moreover, conducting electronic commerce across national borders adds many more policy issues to the mix -- jurisdiction, customs duties, import and export restrictions, intellectual property licensing, protectionist regulations and policies -- that are only now being examined. If a system cannot be developed to provide both consumer confidence and a regulatory environment that makes it easy to deliver goods and services to customers around the world, buyers and sellers will both stop engaging in cross-border transactions, and the World Wide Web will become a balkanized system of "local nets."

To preserve the cross-border nature of the Internet and promote its continued growth, policymakers must address two essential questions: jurisdiction, the question of whose laws apply to a cross-border transaction; and sovereignty, the question of how much domestic control over access to the global Internet must be relinquished in order to promote global e-commerce. The Progressive Policy Institute (PPI) believes jurisdiction resides with the seller's country unless the seller targets consumers in another country, and that sovereignty dictates that countries cannot be stopped from placing restrictions on their citizens' Internet activity unless the activity is trade subject to World Trade Organization (WTO) principles.

Rooted as they are in the traditional modes of trade, it is possible that these issues can never fully be resolved. But through an innovative Third Way approach, combining government action and development of new private institutions, it is possible to create an environment of trust for buyers and sellers that will allow cross-border e-commerce to flourish. PPI has developed a framework of six principles to follow to achieve this goal: