Dear Mr. Pettigrew:
The Canadian Advanced Technology Alliance wishes to express its concern about an issue that has arisen in the WTO discussions of international trade rules for electronic commerce. The issue is whether on-line delivery of information products such as software, music and books is trade in goods, or trade in services. The matter of particular concern to our members, many of whom are leaders in the Canadian software and e-commerce industries, is trade in software.
The software products industry is one of the fastest growing in Canada. Industry Canada reports that in the period 1990-96 the growth rate of revenues for the information and communications technology services sector was 8.0 percent. It is known that the software industry grew significantly faster than the sector, but Statistics Canada does not publish any data at the industry level.
The best data on the industry is gathered by the Branham Group, for publication annually in the National Post Business magazine. They show that in 1999 the top 50 independent Canadian software companies had revenues of $3.1 billion. They had exports of $2.3 billion, 77 percent of total revenues. Branham reports another $300 million of exports by two large foreign- controlled Canadian software companies. A number of other large foreign-owned players, like IBM Canada’s software lab, Softimage and Alias-Wavefront, which are known to be major exporters, are not included in the survey.
These extraordinary results have been achieved under the current trade regime, which treats software products as goods, covered by the GATT. There is essentially global free trade in software. It would be foolish to interfere with this success by changing the trade rules now, based simply on the mode of delivery. An increasing percentage of software is being delivered electronically, rather than via boxed media. If this trade is treated as "services" subject to GATS, rather than "goods", it creates uncertainty and opens the door to governments to exempt their software industries from vital MFN obligations, or apply severe limitations. Software is the cornerstone of the New Economy, and such an outcome would inflict serious damage on an industry in which Canada has established a position as a world leader.
We urge you to strenuously resist efforts to treat electronic delivery of software as "trade in services", rather than "trade in goods", as the WTO negotiations proceed. To do otherwise risks causing serious harm to one of the most dynamic sectors of the Canadian economy. It is a critical component of the new economy on which Canada’s prosperity increasingly depends.
CATAAlliance members understand the concerns revolving around the treatment of cultural industries in trade negotiations. We must point out, however, that software is not a cultural product, it is an industrial product, whose market is primarily improvement of corporate productivity. It should not be scooped up in the cultural basket during WTO discussions.
CATAAlliance appreciates the opportunity afforded by the May 15 Electronic Commerce and the International Trade Rules Workshop to provide our views on the WTO negotiations. We will be happy to assist you in any way that we can.
Yours sincerely,
John Reid
President
cc. The Honourable John Manley