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Robert J. Gordon  Does the 'New Economy' Measure up to the Great Inventions of the Past? NBER Working Paper No. W7833 Issued in August 2000

Documents sur les Etats-Unis

American Embassy ParisUnited States Information Service Information Resource Center (IRC) [NB: Acrobat Reader needed]U.S. Dept. of Commerce. Economics and Statistics Administration. Office of Policy Development.'THE EMERGING DIGITAL ECONOMY II.'  June 1999. 'This year's report provides more information about th[e] growth and the changes that are taking place in our economy. It details the extraordinary contribution that telecommunications and information technology are making to the longest peacetime economic expansion in history. It provides fresh evidence that our Nation's massive investments in these sectors are producing gains in productivity and that these sectors are creating new and higher paying jobs faster than any other sector.' [NB: Acrobat Reader needed] U.S. Dept. of Commerce. Office of Technology Policy. 'DIGITAL WORK FORCE: BUILDING INFOTECH SKILLS AT THE SPEED OF INNOVATION.'  June 1999. 'This report discusses the impact of rapid creation and adoption of information technology (IT) on the U.S. economy, describes the demand and supply trends for core IT occupations, discusses the business environment and its impact on the IT labor market, and proposes steps key stakeholders can take to address the challenge.'  (Please note: This constitutes to new update for the famous 1997 report 'America's New Deficit: The Shortage of Information Technology Workers.') U.S. Congress. House. Committee on Science. Subcommittee on Technology. 'FEDERAL AGENCIES UNDER ATTACK: WHY ARE GOVERNMENT WEB SITES VULNERABLE?'  Hearing.  June 24, 1999.   'In recent months, government agencies have had their Web Sites infiltrated and altered by various outside groups. The most publicized cases involve the Central Intelligence Agency, Department of Defense, the Department of Justice's Federal Bureau of Investigation (FBI), the Department of Interior, the National Aeronautics and Space Administration, the Department of Energy's Brookhaven National Laboratory and even the White House.  As a result of recent attacks, the Department of Defense is considering backing away from the Internet in favor of intranet enclaves. In addition to eroding public confidence in the Federal Government, these attacks have compromised the agencies' ability to deliver information and services.' U.S. Federal Communications Commission. 'CONNECTING THE GLOBE: A REGULATOR'S GUIDE TO BUILDING A GLOBAL INFORMATION COMMUNITY.'  June 16, 1999. 'The FCC has begun a new technical assistance initiative to assist developing countries in building independent regulatory regimes that will promote competition, liberalization and privatization, Federal Communications Committee Chairman William E. Kennard said today.   In a speech to the AFCOM '99 conference in Arlington, Va., Kennard said,'Fair, open and transparent regulatory processes are essential to U.S. companies doing business abroad. This Initiative is designed to promote pro-competitive regulatory policies so that consumers around the  world can reap the full benefits of the telecommunications revolution.' U.S. Federal Reserve Board. Testimony of Chairman Alan Greenspan before the Joint Economic Committee, United States Congress. 'HIGH-TECH INDUSTRY IN THE U.S. ECONOMY.'  June 14, 1999. ABSTRACT: 'Something special has happened to the American economy in recent years.   An economy that twenty years ago seemed to have seen its  better  days, is displaying a remarkable run of economic growth that  appears to have its roots in ongoing advances in technology. The evident acceleration of the process of 'creative destruction,' which has accompanied these expanding innovations and which has been reflected in the shifting of capital from failing technologies into those technologies at the cutting edge, has been remarkable.' U.S. Congress. Senate. Committee on Commerce, Science, and Transportation. 'ENCRYPTION HEARING ON S. 798, THE PROTECT ACT: A BILL TO PROMOTE ONLINE ACCESS TO ENCOURAGE COMMERCE AND TRADE.'  June 10, 1999. : '[E]ncryption remains a hotly debated issue. The Administration continues to support a balanced approach which considers privacy and commerce as well as protecting important law enforcement and national security equities. We have been consulting closely with industry and its customers to develop a policy that provides that balance in a way that also reflects the evolving realities of the market place.' U.S. President. Executive Office. Office of the U.S. Trade Representative. Ambassador Charlene Barshefsky. 'ELECTRONIC COMMERCE IN AMERICAN TRADE POLICY.' Address at the Federal Trade Commission, Washington, D.C. June 9, 1999. :  'Electronic commerce, and the broader phenomenon of the Internet, are in their infancy. They are developing with great speed and unpredictable consequences, and are already forcing governments to think differently about many issues. Trade is no exception. And today I would like to offer some thoughts about the principles and specific objectives we believe can be a guide to trade policy as this new world develops.' U.S. Congress. Senate. Committee on Commerce, Science, and Transportation. 'HEARING ON THE MILLENIUM DIGITAL COMMERCE ACT, S. 761.'  May 27, 1999. 'Millennium Digital Commerce Act - Directs the Federal Government, to the extent practicable, to observe certain principles governing the use of electronic signatures in international commercial transactions, including to: (1) remove paper-based obstacles to electronic transactions by adopting relevant principles from the Model Law on Electronic Commerce adopted in 1996 by the UN Commission on International Trade Law (UNCITRAL); (2) permit parties to a transaction to determine the appropriate authentication technologies for such transactions, with assurance that they will be recognized and enforced;  (3) permit such parties to have the opportunity to prove in court that  such authentication approaches and transactions are valid; and (4) take a  nondiscriminatory approach to electronic signatures and authentication  methods from other jurisdictions.' Massachussetts Institute of Technology (MIT) 'UNDERSTANDING THE DIGITAL ECONOMY: DATA, TOOLS, AND RESEARCH.' Papers presented at the U.S. Department of Commerce Conference.  May 25 and 26, 1999. 'The Conference examined the most recent research on the scale, direction,and significance of the emerging digital economy and promoted an open research agenda for better understanding the growth and implications of information technology and electronic commerce.' [NB: Acrobat Reader needed] Alliance for Global Business. 'DISCUSSION PAPER BY THE ALLIANCE ON TRADE-RELATED ASPECTS OF ELECTRONIC COMMERCE IN RESPONSE TO THE WTO'S E-COMMERCE WORK PROGRAMME.' April  1999. 'This discussion paper provides a consensus view from the membership of the Alliance for Global Business (AGB). It addresses some of the most important questions raised by each of the World Trade Organization (WTO) bodies in their work programs relating to electronic   commerce.' U.S. National Commission on Libraries and Information Science. 'MOVING TOWARD MORE EFFECTIVE PUBLIC INTERNET ACCESS: THE 1998 NATIONAL SURVEY OF PUBLIC LIBRARY OUTLET INTERNET CONNECTIVITY.' March 1999. ABSTRACT: 'This report raises pertinent questions about unequal  distribution of Internet access among libraries serving rural, suburban and urban populations. It also addresses for the first time the concept  of effective public Internet access, including access to the World Wide Web on workstations with sufficient capability and at speeds of 56 kbps or greater, as well as having a sufficient number of workstations for the population to be served.' [NB: Acrobat Reader needed] The Rand Corporation.THE EMERGENCE OF NOOPOLITIK: TOWARD AN AMERICAN INFORMATION STRATEGY.'   1999 ABSTRACT: 'In our view, a new paradigm is needed in fact, it is already emerging which we call noopolitik . This is the form of statecraft that we argue will come to be associated with the noosphere, the broadest informational realm of the mind (from the Greek  noos) under which cyberspace (i.e., the Net) and the infosphere  (cyberspace plus the media) are subsumed. Noopolitik is foreign-policy  behavior for the information age that emphasizes the primacy of ideas, values, norms, laws, and ethics it would work through 'soft power' rather than 'hard power.' Noopolitik is guided more by a conviction that right makes for might, than by the obverse.' The Rand Corporation.  Khalilzad, Zalmay; White, John, Eds. 'STRATEGIC APPRAISAL: THE CHANGING ROLE OF INFORMATION IN WARFARE.'   1999 ABSTRACT:'Because emerging information technologies will affect all corners of our lives, their national security implications have many dimensions.  This volume will reflect those wide-ranging implications. The book is divided into three parts: Part I analyzes the effects of  information technology on society and the international system. Part II   focuses on the United States and examines what new opportunities and vulnerabilities these new  information technologies will present for the United States. Part III  focuses on current issues and lessons that today's U.S. decisionmakers  need to understand if they are to function in the world to come.' Please visit the Info Tech Web page of the American Embassy at: 7rl.gif (3193 octets)Fleche_haute60E0.gif (891 octets)

Digital Economy

Electronic Cash and the End of National Markets

Kobrin, Stephen Kobrin, Stephen Foreign Policy, Summer 1997, pp 65-77

"As the use of electronic cash soars, governments will face growing difficulty controlling monetary policy, taxation, financial regulation and crime. Will this be a lethal blow to national autonomy?"

Giving Away the Store

Fialka, John Fialka, John Wilson Quarterly, Winter 1997, pp 48-63

"At the close of the 20th century, a new global information economy is being born, and knowledge is its coin of the realm. Nations now measure their wealth in software codes and chemical formulas rather than gold and silver. Knowledge-based industries such as software, computers, and pharmaceuticals generate half the output of the world s richer countries. Swarming around them, our authors warn. Is a whole new brand of postindustrial spies and pirates, poised to strip an unwitting America of some of its precious assets."

Dragnet: National Journal, May 17, 1997, pp 978-981

"Colossal sums of money are changing hands in cyberspace, and that s got policy makers considering how to regulate on-line enterprises. Tax collectors are eager for a windfall, while others want to police the Internet for scams and swindles."

Economic Growth in the Information Age: From Physical Capital to Weightless Economy

Cameron, Gavin Cameron, Gavin Journal of International Affairs, Spring 1998, pp 447-496

"This paper argues that while globalized and weightless activities have become increasingly important, they do not pose insuperable threats to the world economy... Inequality and unemployment need not rise in the face of competition from the developing world or in response to technological change. However, government policy can play a major role in promoting adjustment to change, especially in terms of adjustment to the growing importance of weightless technologies."

The Emerging Digital Economy

U.S. Department of Commerce, 1998, 61 p

"While the full economic impact of information technology (IT) cannot yet be precisely evaluated, its impact is significant. IT industries have been growing at more than double the rate of the overall economy -- a trend likely to continue... This report also begins a discussion about the potential impact on the economy of the Internet and electronic commerce."

Making Microsoft Safe for Capitalism.

The New York Times Magazine, November 5, 1995, pp. 50-56, 64

Microsoft may be the most important single economic enterprise in the United States today. And, according to some, the most dangerous. The problem is not the charisma of chairman Bill

Gates, the company's technological prowess, or even its go-for-the-throat competitiveness. Rather, it is Microsoft's ability to control the standards for virtually every computer software application. In short, they could potentially charge of every computerized transaction in the information age. The solution, Gleick writes, is not the dismantling associated with conventional anti-trust actions. Instead, the government should ensure that Microsoft's operating standards be "truly and permanently open."

Is Web Business Good Business?

Hodges, Mark (Georgia Tech Research Institute) Hodges, Mark (Georgia Tech Research Institute) Technology Review, August/September 1997, pp 22-32

"Although tangible returns are elusive, the first wave of Web-based companies have learned valuable lessons about how to make the most out of a presence on the Net... A Web site selling the right king of products with the right mix of interactivity, hospitality, and security will attract online customers."

Left for Dead: Asian Production Networks and the Revival of US Electronics

M. Borrus, Co-Director of BRIE M. Borrus, Co-Director of BRIE BRIE Working Paper 100, April 1997, 18p

"From the early 1970s until the mid-1980s, Japanese producers were ascendant in electronics... By 1994, US producers of silicon chips and semiconductor materials and equipment were again flourishing, having regained the dominant world position... But it would be imprudent to conclude that US firms are organizationally or strategically better placed than other competitors just because they thrived in the latest round of competition: Their success is the phenomenon to be explained not the proof that those who thrived are better adapted for the future than those who did not.

The Great Manhattan Geek Rush of 1995.

New York, November 13, 1995, pp.34-42

With its vast array of businesses, universities and global contacts, New York City has evolved into a computer software Mecca to rival those in Boston and California. "New York, once computer-resistant, has gone online with a vengeance as its old-line businesses retool themselves for the cyberspace revolution," says the author. He describes the new local industry and subculture the revolution is spawning.

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(FTC concerned about consumer fraud and personal privacy) By Skip Keats, USIA Staff Writer

Washington -- Representatives of several federal regulatory agencies spoke to a gathering of Internet industry leaders and policymakers on February 9 at the Washington Web Internet Policy Forum.

Among the agencies represented were the Federal Trade Commission (FTC) and the Federal Communications Commission (FCC) whose officials presented administration objectives and pointed out that if the industry does not begin to negotiate with Washington, then the government will make decisions which could affect the industry for decades to come, and these could be decisions the Internet industry would not view favorably.

Lee Peters, representing the Federal Trade Commission (FTC) on behalf of Commissioner Sheila Anthony, led the discussion by noting his agency's two primary concerns: protections against consumer fraud and personal privacy safeguards on the Net. He said that as the popularity of the Net has dramatically increased, so have Ponzi (pyramid) schemes, which the agency thought it had finally eliminated nation-wide. Peters said the FTC is concerned that too many people are dispensing too much personal information without safeguards on how the information is used. They want to ensure that such information is not being used for illegal purposes such as the Ponzi scams.

The FTC also wants to ensure American compliance with the European Union Directive on Internet personal information privacy which will take effect this coming autumn, Peters said. The directive will deny access to EU citizens' personal information to an entity based in any nation not in compliance with the EU standards. Access will be determined by top-level domain and country domain designations (most .com, .edu, etc. without country domain designations are U.S.-based domains).

At present, the United States is not in compliance with EU law. The FTC will be conducting a random survey of U.S. or U.S. affiliated sites to ensure that their sites state how requested information is used and for what purposes, as required by EU law, and as good "netiquette."

Commissioner Susan Ness of the Federal Communications Commission (FCC) stated that the Government must be "careful to tread lightly" in the field of Internet regulation. She noted that the FCC, in conjunction with the National Science Foundation and the Defense Department, nurtured the Net thorough its infancy and early adolescence.

Ness said that killing the Internet with overregulation as it reaches maturity would be economic suicide for the United States. The commissioner stated that "while transitions are fraught with problems, the marketplace, rather than regulation, is the best hope for competition" both in the United States and internationally.

Data traffic will pass voice traffic on the electronic net by 2000, and voice traffic will represent only 10 percent of all traffic by 2005, Ness pointed out. Consequently, she said that the FCC primary goal is to ensure redundancy within the system, akin to the redundancies now built into the electric grid under most circumstances.

In response to a question regarding systems failure, similar to the ice storms in the northern United States and Canada this winter which shuttered the electric grid in New York, Vermont, New Hampshire, Maine and Quebec, she said that as the Internet and related industries now represent 25 percent, and possibly upwards of 45 percent, of the U.S. economy, such repeated failures would be catastrophic to the economy and must not happen.

Further information may be found on the forum at:



(Congressional staffs using Net for research, e-mail) By Jennifer Coffey, USIA Staff Writer

Washington -- Congressional staffers are surfing the Web for information and receiving more e-mail than ever before. They are using the Internet to research bills and committee sessions and to hear the concerns of citizens via e-mail, according to a recent survey.

The study also reports that 73 percent of Senators and 52 percent of the Representatives use the Internet. Sixty-two percent of Republicans in Congress and 53 percent of the Democrat members surf the Internet, according to a survey conducted by Bonner and Associates and American University which was released February 17.

The survey revealed that 90 percent of Congressional offices use e-mail. About half of the offices polled receive 50 or more e-mail messages a week, and one-third receive 100 or more. "Congress has clearly entered another phase in grassroots" contacts, said Jack Bonner, president, Bonner and Associates.

Although Hill offices receive large numbers of e-mail messages, most do not use e-mail to communicate with constituents, according to the survey. Offices may prefer paper letters because the constituents may feel that their congressional representatives care more if they send an actual letter, according to Jim Thurber, director, American University's Center for Congressional and Presidential Studies.

The Internet survey showed that in addition to e-mail, congressional staffs use the Internet primarily obtain substantive information, such as text of bills and committee hearing documents.

The survey said that most members of Congress have individual home pages on the Internet to keep people informed of their activities, position on issues and specific information for constituents.

Thurber noted that legislative staffers, in general, do not use the Internet to get position papers of special interest groups.



(Conference discusses America's digital future) By Jennifer Coffey, USIA Staff Writer

Washington -- Business, community and government leaders are meeting to discuss how the benefits of the telecommunications revolution can be brought to all Americans. "Technology is the engine of growth" emphasized William Daley, secretary of commerce February 25 at the start of the "Connecting All Americans for the 21st Century " conference. According to Daley, half of the increase in American economy in recent years is due to technology.

President Clinton and Vice President Gore have called for efforts to bring the benefits of the information revolution to all Americans. They have also supported efforts to build a global information infrastructure to unite the peoples of the world.

The purpose of the three-day conference in Washington is to explore how to make all Americans, including those in rural and poor areas of the nations, part of the information society, said another speaker, Larry Irving, assistant secretary of commerce for communications and information.

Irving emphasized the principles that guided the American efforts to build an information society in both the United States and globally. He said the effort must be lead by private competition, open to competition, and provide universal service. Also, he added, the program must be open to all and structured with a flexible regulatory regime. Irving has said that the programs developed in the United States to expand telecommunication services can have world-wide applications.

To meet its goals, the Clinton administration is working to connect the six percent of Americans who do not have phone lines. In minority communities, the percentages are even higher. Some 25 percent of African Americans do not have phones. Half of native Americans do not have telephones. Daley said that minorities need the new communications technologies and the training to use them to advance their participation in American society and increase their education and employment opportunities.

Besides the discussion of developing technological resources in low income areas, some speakers focused on educating children for the information age.


Ruling the NET

Spar, Debora; Bussgang, Jeffrey J. Harvard Business Review, vol. 74, no. 3, May/June 1996, pp. 125-133

Many companies have scrambled into cyberspace looking for broader markets, increased efficiencies, and lower costs. But doing business on the Internet can be frustrating, confusing and even unprofitable due to a lack of formal online rules governing such things as property rights and exchange. The authors explain why companies need clear rules to operate online with confidence, and they analyze the tremendous opportunities open to the pioneers who figure out how to write, support, and enforce those rules.

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Horse Trading in Cyberspace: U.S. Trade Policy in the Information Age

Frost, Ellen L. (Institute for International Economics) Journal of International Affairs, Spring 1998, pp 473-496

"This article will make the case that information technology does not alter the nature of U.S. trade policy, but it greatly expands its scope and partially transfers the role of trade negotiators... Increasingly, both policymakers and negotiators will find themselves not only holding talks with foreign governments, but also mediating between a variety of regulatory authorities and interest groups in their own country."

A Framework for Global Electronic Commerce

White House, July 1, 1997, 23p

"The United States government has prepared a strategy to help accelerate the growth of global commerce across the Internet... The Framework establishes a set of principles to guide policy developments, outlines the Administration positions on a number of key issues related to electronic commerce, and provides a road map for international negotiations, where appropriate."

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President Clinton came out in suppport of legislation February 26 that would ban new sales taxes and other taxes on merchandise sold on the Internet. He called for passage this year of the Internet Tax Freedom Act, strongly favored by retailers, which would put up to a five-year moratorium on new local, state or federal taxes on electronic commerce and the Internet.

Clinton's position is contrary to that adopted this week by the National Governors' Association.

"There should be no special rates for the Internet, but we can't allow unfair taxation to weigh it down and stunt the development of the most promising new economic opportunity in decades," he said in remarks to the Technology '98 Conference in San Francisco.

The bill backed by Clinton would still allow states to collect taxes for items sold to individuals living in the same state as the merchant, which is the same policy that now applies.

The President also announced a new government program to put "America's treasures online." He said $23 million would be earmarked in the next fiscal year to put "at least three million objects from the Smithsonian, the National Archives and other federal collections" on the Internet by year 2000.

Clinton said he wants to promote and expand what he called "the fastest-growing social and economic community in history, the Internet." Ten years ago, he said, the Internet was still the province of scientists, "an obscure project developed by the Defense Department. Five years ago, he said, the World Wide Web barely existed. "I think there were about 50 sites. Today, there are one and a half million new web pages created every day, 65,000 every hour.

"This phenomenon has absolutely staggering possibilities to democratize, to empower, people all over the world," the President said. "It could make it possible for every child with access to a computer to stretch a hand across a keyboard to reach every book ever written, every painting ever painted, every symphony ever composed. The next big step in our economic transformation, it seems to me, is the full development of this remarkable device and the electronic commerce it makes possible."

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Following is the text of Rita Hayes' statement to the WTO General Council meeting (February 19, 1998):

I take the floor today to discuss with my colleagues in the WTO the idea that the Information Age is upon us and that electronic commerce will continue to dramatically affect the way we all live and conduct business. My delegation is proposing that we respond to the Information Age by agreeing in the WTO to continue the current practice of each WTO Member concerning customs duty treatment of electronic transmissions.Today, no Member considers that electronic transmissions are importations for customs purposes and, thus, no Member imposes customs duties on electronic transmissions. Our proposal is to codify this practice in the WTO.I ask that each delegation take a careful look at the written U.S. text circulated by the Secretariat (document WT/GC/W/78 of February 9). A careful look at the proposal reveals that it is very straightforward, it is very simple and it is very direct. The WTO can welcome and be a part of these events. We should discuss how electronic commerce should relate to the WTO system.Let me try, Mr. Chairman, to clarify even further the idea so that we all understand what I am not talking about. Clearly, electronic commerce covers a wide range of issues.First, I am not discussing tax policies of any country. I am not suggesting that we discuss or take decisions on any measure that would affect the way in which our tax authorities treat electronic transmissions. My discussion today is solely focused on customs duties.Second, I am not discussing reducing tariffs on goods imported through normal commercial channels. Let me be clear: I am not talking about the circumstance in which, for example, a tennis racket, a bouquet of flowers, or a refrigerator are ordered through electronic means -- let's say over the Internet -- but delivered through normal commercial channels.Third, I am not discussing how we define what is an electronic transmission, that is, whether it is a good, a service, or something in between. While it may prove to be fascinating theoretically, I am not proposing that we debate at this time the nature of electronic transmissions. There should be WTO work in this area and we want to work with others on ideas.I am proposing that we send a message that WTO Members intend to maintain current practices. Today, no country considers that electronic transmissions are importations for customs duty purposes. Such transmissions cannot even be given a tariff classification in the Harmonized Tariff Schedule.Not a single Member imposes customs duties on electronic transmissions. There are no customs duties on telephone calls across borders; there are no customs duties on fax messages; and there are no customs duties when computers access data bases. Telephone calls, faxes and computers share a common element: They rely on electronic transmissions that may travel across borders.The growth of this environment has brought us into the Information Age. And part of this environment has been that these electronic transmissions are not considered as importations for customs duty purposes.The idea is simple: It is to declare a continuation of our current practices. That is, to declare that we will maintain our current practices not to impose duties on electronic transmissions.Mr. Chairman, I have often been asked about the way in which the WTO can take this decision. How we record the consensus is a matter that can be discussed. We are not asking this body to decide anything today. Rather, we are asking the General Council to begin exploring the issue and to focus first on the concept. Then we can focus on how to formalize our agreement.Some say that it is premature to discuss the U.S. idea of codifying existing practice for electronic transmissions because too little is known about the intersection between the WTO and global electronic commerce. They have said that there are too many bigger issues related to electronic commerce and the WTO including its impact on the General Agreement on Trade in Services (GATS).As many of our trading partners, the United States is studying those issues, but I do not agree that the approach we suggest is premature in the context of the WTO. It is important and timely for us to discuss this proposal now.-- First, electronic commerce will only increase in importance in the next few years and certainly in the next century. We can start agreeing on points that do not require any particular concession by any country. Preserving current practice is the best place to begin. Agreeing on this under the WTO would send the right message to the business community -- that the WTO wants to promote the expansion of electronic commerce.-- Second, an agreement regarding our customs duty practices does not set a precedent for our practices in other areas in this sector, such as taxes or regulation.-- Third, this is but a first and important step of what will be a journey for the WTO. An agreement on duty-free electronic transmissions does not prevent us from studying, analyzing, and reviewing all of the other aspects of electronic commerce. Indeed, the WTO Research Division will be issuing a report in the next weeks that all of us will want to study carefully.Mr. Chairman, I conclude my remarks by reminding delegations that the idea being proposed is quite simple: that is, to agree to maintain our current practices whereby no country considers electronic transmissions as importations for customs duty purposes. Our proposal does not require a sacrifice or concession from any Member country. Agreement on this narrow approach would allow us to place the WTO boldly in the forefront of work on global electronic commerce and squarely facing the demands of the next century.

I will make copies of my statement available and a list of questions we have typically received including our responses. Thank you.


Questions and answers about Global Electronic Commerce

submitted February 1998 by Rita Hayes, head of the U.S. delegation.

QUESTION: What does the U.S. seek with its proposal with regard to customs duties and electronic transmissions?ANSWER: The U.S. proposal envisages that members continue their current practices of not treating electronic transmissions of information as importations for purposes of customs duties: In other words, the proposal envisions a codification of the status quo.Q: What is the significance of such a WTO "codification" that electronic transmissions, such as conveyances over the Internet, will continue to be treated not as importations subject to customs duties?A: The U.S. proposal is intended to be an important first step as the WTO undertakes work on electronic commerce. The WTO has made significant contributions to the development of the global electronic environment infrastructure through the Information Technology Agreement and the Agreement on Basic Telecommunications. This progressiveness by the WTO would continue with a codification of current practices that ensure continued treatment of electronic transmissions not as importations for customs duties purposes.Q: Is there other work to be done at the WTO on electronic commerce?A: Yes. Electronic commerce -- and in particular the dynamic growth of the Internet -- is already having a profound effect on how business is conducted. Future work will, by necessity, touch upon many traditional areas of concern to WTO members -- such as under the GATS or in the area of government procurement, as well as with regard to various elements within the important area of trade facilitation. The U.S. proposal is a small but important first step for the WTO to begin this journey. Such an action by the WTO will further enhance the certainty and stability which allows the electronic commerce environment to flourish, and will also be a WTO measure that is a positive action directly affecting the increasing number of individual citizens throughout the world who utilize the Internet each and every day.Q: Other international bodies are dealing with GEC. Why should the WTO be involved?A: The WTO is involved in electronic commerce. There is no backing away from the issues and we should welcome the advances that electronic commerce can bring to the global economy.Q: Under the U.S. proposal concerning electronic commerce and customs duties, are members being asked to provide a concession?A: No. The proposal simply seeks a codification of current practices.Q: What is the current situation? Does it vary from member to member?A: The current situation is that no member's trade regime treats electronic transmissions -- for example a phone call, a fax transmission, or a computer accessing a data base (such as via the Internet) -- as an importation for the purpose of the application of customs duties.Q: Would this involve a change of WTO commitments?A: No. The United States is unaware of any member that has a tariff line in its WTO schedule that provides for customs duties on electronic transmissions, such as those over the Internet. Indeed, such transmissions do not have a tariff classification in the Harmonized Commodity Description and Coding System (also known as the Harmonized Tariff Schedule).Q: Isn't it necessary to define electronic transmissions, such as those involving Internet conveyances, as a "good" or a "service," or something else?A: Such an undertaking is unnecessary, and may actually make a simple situation more complicated. The U.S. proposal simply seeks agreement to codify the current practice with regard to the treatment of electronic transmissions for purposes of customs duties.Q: Has the World Customs Organization taken a view on this question of the customs treatment of electronic transmissions across borders?A: In 1997, a working party of technical experts at the World Customs Organization considered the question of whether downloaded transmissions were to be considered "imported goods." It was concluded that the question presented was a policy matter for national governments to decide.Q: What is the U.S. practice with regard to customs treatment of electronic transmissions?A: The U.S. Tariff Schedule contains a special "national" general note which states that "telecommunications transmissions" are not goods subject to the provisions of the tariff schedule. The U.S. Customs Service has issued rulings confirming such treatment for electronic transmissions of, for example, information accessed from a computer database and transmitted via satellite -- rendering such transmissions as exempt from being considered an importation for purposes of being subject to customs duties.Q: Is there any relevance to the 1984 GATT Decision 4.1 on the customs valuation of software (which states that customs duties should be applied only to the value of the carrier media rather than the value of the "data or instructions" contained thereon)?A: At the time of the GATT Decision 4.1, computers, electronics, and information technology was in its infancy. Yet it was agreed at that time that an importation of information on carrier media (e.g., a floppy disk) was merely an importation of the carrier media itself -- even though in terms of the interest of the importer the carrier media was incidental. For purposes of the U.S. proposal, it is notable that at the time of the 1984 GATT Decision 4.1, the Chairman of the GATT Committee on Customs Valuation observed that "software can be transmitted by wire or satellite, in which case the question of customs duties does not arise." (VAL/W/14/Rev.2; 25 July 1984).Q: A book or magazine can be dutiable and treated as an importation. Is it reasonable to give duty-free status to electronic transmissions that may represent information contained in a book or magazine?

A: The information in a book or magazine is not dutiable; the book or magazine itself is dutiable. Moreover, it already is the practice of members not to treat electronic transmissions as importations for customs duties, whether the information represents pages that were copied and faxed across a border, or information from a computer data base transmitted across borders via satellite or a telephone network. The U.S. proposal is intended to codify this practice within the WTO.



(Urges growth of electronic commerce);

Washington -- One of the most significant uses of the Internet is in the world of commerce, President Clinton said in a July 1 message to Internet users.

"Trade and commerce on the Internet are doubling or tripling every year -- and in just a few years will be generating hundreds of billions of dollars in sales of goods and services," he said. "If we establish an environment in which electronic commerce can grow and flourish, then every computer can be a window open to every business, large and small, everywhere in the world."

Following is the White House text:

I have today approved and released a report -- "A Framework for Global Electronic Commerce" -- setting out my administration's vision of the emerging electronic market-place and outlining the principles that will guide the U.S. government's actions as we move forward into the new electronic age of commerce. The report also suggests an agenda for international discussions and agreements to facilitate the growth of electronic commerce.

The invention of the steam engine two centuries ago and the harnessing of electricity ushered in an industrial revolution that fundamentally altered the way we work, brought the world's people closer together in space and time, and brought us greater prosperity. Today, the invention of the integrated circuit and computer and the harnessing of light for communications have made possible the creation of the global Internet and an electronic revolution that will once again transform our lives.

One of the most significant uses of the Internet is in the world of commerce. Already it is possible to buy books and clothing, to obtain business advice, to purchase everything from gardening tools to high-tech telecommunications equipment over the Internet. This is just the beginning. Trade and commerce on the Internet are doubling or tripling every year -- and in just a few years will be generating hundreds of billions of dollars in sales of goods and services. If we establish an environment in which electronic commerce can grow and flourish, then every computer can be a window open to every business, large and small, everywhere in the world.

Governments can have a profound effect on the growth of electronic commerce. By their actions, they can facilitate electronic trade or inhibit it. Government officials should respect the unique nature of the medium and recognize that widespread competition and increased consumer choice should be the defining features of the new digital marketplace. They should adopt a market-oriented approach to electronic commerce that facilitates the emergence of a global, transparent, and predictable legal environment to support business and commerce.

The report I released today raises a number of important issues that must be addressed by governments worldwide as this electronic marketplace emerges. I have had it added to the White House homepage on the World Wide Web (

I call upon all Internet users -- both in government and in the private sector -- to join me in seeking global consensus and, where necessary, agreements on the issues raised in our report by December 31, 1999, so that we may enter the new millennium ready to reap the benefits of the emerging electronic age of commerce.

William J. Clinton

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Following is text of an executive summary of the electronic commerce report:

The Internet has the potential to become the United States' most active trade vehicle within a decade, creating millions of high paying jobs. In addition, Internet shopping may revolutionize retailing by allowing consumers to sit in their homes and buy a wide variety of products and services from all over the world.

Many businesses and consumers are wary of conducting extensive business electronically, however, because the Internet lacks a predictable legal environment governing transactions and because they are concerned that governments will impose regulations and taxes that will stifle Internet commerce.

A FRAMEWORK FOR GLOBAL ELECTRONIC COMMERCE outlines the Administration's strategy for fostering increased business and consumer confidence in the use of electronic networks for commerce. The paper reflects widespread consultation with industry, consumers groups, and the Internet community.

The paper presents five principles to guide government support for the evolution of electronic commerce and makes recommendations about nine key areas where international efforts are needed to preserve the Internet as a non-regulatory medium, one in which competition and consumer choice will shape the marketplace. With respect to these areas, the paper designates lead U.S. government agencies and recommends international fora for consideration of each issue.


1. The private sector should lead. The Internet should develop as a market driven arena not a regulated industry. Even where collective action is necessary, governments should encourage industry self-regulation and private sector leadership where possible.

2. Governments should avoid undue restrictions on electronic commerce. In general, parties should be able to enter into legitimate agreements to buy and sell products and services across the Internet with minimal government involvement or intervention. Governments should refrain from imposing new and unnecessary regulations, bureaucratic procedures or new taxes and tariffs on commercial activities that take place via the Internet.

3. Where governmental involvement is needed, its aim should be to support and enforce a predictable minimalist, consistent and simple legal environment for commerce, where government intervention is necessary, its role should be to ensure competition, protect intellectual property and privacy, prevent fraud, foster transparency, and facilitate dispute resolution, not to regulate.

4. Governments should recognize the unique qualities of the Internet. The genius and explosive success of the Internet can be attributed in part to its decentralized nature and to its tradition of bottom-up governance. Accordingly, the regulatory frameworks established over the past 60 years for telecommunication, radio and television may not fit the Internet. Existing laws and regulations that may hinder electronic commerce should be reviewed and revised or eliminated to reflect the needs of the new electronic age.

5. Electronic commerce on the Internet should be facilitated on a global basis. The Internet is a global marketplace. The legal framework supporting commercial transactions should be consistent and predictable regardless of the jurisdiction in which a particular buyer and seller reside.


The principles described above guide the following recommendations:

1. Tariffs and Taxation. The Internet should be declared a tariff-free environment whenever it is used to deliver products and services. The Internet is a truly global medium, and all nations will benefit from barrier-free trade across it.

No new taxes should be imposed on Internet commerce. Existing taxes that are applied to electronic commerce should be consistent across national and subnational jurisdictions and should be simple to understand and administer. State and local governments should cooperate to develop a uniform, simple approach to the taxation of electronic commerce, based on existing principles of taxation.

2. Electronic Payment Systems. The commercial and technological environment for electronic payments is changing rapidly, making it difficult to develop policy that is both timely and appropriate. For these reasons, inflexible and highly prescriptive regulations and rules are inappropriate and potentially harmful. In the near-term, case-by-case monitoring of electronic payment experiments is preferable to regulation.

3. Uniform Commercial Code for Electronic Commerce. In general, parties should be able to do business with each other on the Internet under the terms and conditions they agree upon. Private enterprise and free markets have typically flourished, however, where there are predictable and widely accepted legal principles supporting commercial transactions.

The United States supports the development of an international uniform commercial code to facilitate electronic commerce. Such a code should encourage governmental recognition of electronic contracts; encourage consistent international rules for acceptance of electronic signatures and other authentication procedures; promote the development of alternative dispute resolution mechanisms for international commercial transactions; set predictable ground rules for exposure to liability; and streamline the use of electronic registries.

4. Intellectual Property Protection. Commerce on the Internet will often involve the sale and licensing of intellectual property. To Promote electronic commerce, sellers must know that their intellectual property will not be stolen and buyers must know that they are obtaining authentic products. Clear and effective copyright, patent, and trademark protection is therefore necessary to protect against piracy and fraud.

The recently negotiated World Intellectual Property Organization (WIPO) treaties for copyright protection should be ratified. Issues of liability for infringement, application of the fair use doctrine, and limitation of devices to defeat copyright protection mechanisms should be resolved in a balanced way, consistent with international obligations.

The government will study and seek public comment on the need to protect database elements that do not qualify for copyright protection and, if such protection is needed, how to construct it.

The Administration will promote global efforts to provide adequate and effective protection for patentable subject matter important to the development of the Global Information Infrastructure (GII), and establish standards for determining the validity of patent claims.

The Administration also will work globally to resolve conflicts that arise from different national treatments of trademarks as they relate to the Internet. It may be possible to create a contractually based self-regulatory regime that deals with potential conflicts between domain name usage and trademark laws on a global basis.

The Administration will review the system of allocating domain names in order to create a more competitive, market-based system and will seek to foster bottom-up governance of the Internet in the process.

5. Privacy. It is essential to assure personal privacy in the networked environment if people are to feel comfortable doing business across this new medium.

Data gatherers should tell consumers what information they are collecting and how they intend to use it. Consumers should have meaningful choice with respect to the use and re-use of their personal information. Parents should be able to choose whether or not personal information is collected from their children. In addition, redress should be available to consumers who are harmed by improper use or disclosure of personal information or if decisions are based on inaccurate, outdated, incomplete or irrelevant personal information.

The Administration supports private sector efforts now underway to implement meaningful, user friendly, self-regulatory privacy regimes. These include mechanisms for facilitating awareness and the exercise of choice online, private sector adoption of and adherence to fair information practices, and dispute resolution. The government will work with industry and privacy advocates to develop appropriate solutions to privacy concerns that may not be fully addressed by industry through self-regulation and technology.

6. Security. The GIl must be secure and reliable. If Internet users do not believe that their communications and data are safe from interception and modification, they are unlikely to use the Internet on a routine basis for commerce. The Administration, in partnership with industry, is taking steps to promote the development of a market driven public key infrastructure that will enable trust in encryption and provide the safeguards that users and society will need.

7. Telecommunications Infrastructure and Information Technology. Global electronic commerce depends upon a modern, seamless, global telecommunications network and upon the "information appliances" that connect to it. In too many countries, telecommunications policies are hindering the development of advanced digital networks. The United States will work internationally to remove barriers to competition, customer choice, lower prices, and improved services.

8. Content. The Administration encourages industry self-regulation, the adoption of competitive content rating systems, and the development of effective, user-friendly technology tools (e.g., filtering and blocking technologies) to empower parents, teachers, and others to block content that is inappropriate for children.

The government will seek agreements with our trading partners to eliminate overly burdensome content regulations that create non-tariff trade barriers.

9. Technical Standards. The marketplace, not governments, should determine technical standards and other mechanisms for interoperability on the Internet. Technology is moving rapidly and governments attempts to establish technical standards to govern the Internet would only risk inhibiting technological innovation.


The Administration will continue to coordinate its approach to electronic commerce. The interagency team that developed this framework and strategy will continue to meet to update the strategy and facilitate its implementation as events unfold.

Background on President's Memorandum for Department and Agency Heads

The President today issued a memorandum for the heads of all Executive Branch Departments and Agencies directing them to implement the strategy outlined in A FRAMEWORK FOR GLOBAL ELECTRONIC COMMERCE.

The memorandum first instructs Executive Branch officials to apply the Framework's five basic principles to any actions they take with respect to electronic commerce. These principles call for the Internet to function as a market-driven environment with minimal government regulation, and for the Internet to be governed by a consistent set of rules across state, national and international borders.

The memorandum then lists 13 specific objectives and designates appropriate Executive Branch officers to head government efforts to achieve these objectives. In several cases, the memorandum directs Executive Branch officers to achieve specific objectives within the next 12 months.

1. The memorandum directs the U.S. Trade Representative to secure international agreement within the next 12 months to reduce tariffs on Internet-related equipment to zero and to ensure that products and services delivered across the Internet are not subject to tariff.

2. The memorandum directs the Secretary of Commerce to seek domestic and international agreement within the next 12 months on common approaches for the authentication of electronic transactions through technologies such as digital signatures.

3. The memorandum directs the Secretary of Commerce and the Director of the Office of Management and Budget to encourage private sector development and deployment within the next 12 months, of effective, industry-developed codes of conduct and technology tools to protect privacy online, especially with respect to children.

4. The memorandum directs the Secretary of Commerce to encourage the development of user-friendly filtering technologies and private rating systems within the next 12 months that empower parents, teachers, and other Internet users to block content that they deem inappropriate for their children.

5. The memorandum directs the Secretary of the Treasury to work with domestic and foreign government officials to assure that no new taxes are imposed on Internet commerce and that existing taxes are applied in ways which do not hinder nor distort commerce.

6. The memorandum directs the Administrator of the General Services Administration to bring federal government purchasing into the electronic age by arranging for federal purchasing of four million items online within the next 12 months.

7. The memorandum directs the Secretary of Commerce to support efforts to establish a private, competitive system for allocating domain names and to create a contractually based self-regulatory regime to resolve conflicts between domain name usage and trademark laws globally.

8. The memorandum directs the Secretary of Treasury to work domestically and internationally to ensure that no new taxes are imposed on Internet commerce, that existing taxes are technology neutral and avoid inconsistent tax jurisdiction and double taxation problems.

9. The memorandum directs the Secretary of Commerce to work globally to support development of a "Uniform Commercial Code" for cyberspace that recognizes, facilitates, and enforces electronic agreements worldwide.

10. The memorandum directs the Secretary of Commerce to support private sector development of technical standards for the Internet and direct the U.S. Trade Representative to oppose governmental efforts to mandate standards or use standards as non-tariff trade barriers.

11. The memorandum directs the Secretary of Treasure to monitor emerging electronic payment technology, to oppose government efforts to regulate electronic payment at this time, and to work with the private sector to ensure that any necessary government activity in this area can flexibly accommodate the needs of the emerging marketplace.

12. The memorandum directs all agencies to work domestically and internationally to make the Internet a secure environment for commerce, supported by a robust infrastructure, and well-trained Internet users who understand how to protect their systems and their data.

13. The memorandum directs the Secretary of Commerce to enhance the ability of our patent system to protect patentable innovations in the electronic age, and to work to ensure that patentable subject matter important to global commerce is protected globally.

The memorandum establishes an interagency group under the leadership of the Vice President to coordinate implementation of the government's strategy for electronic commerce and directs agency heads to report to him through the interagency group every six months on progress towards meeting all of the specific objectives outlined in the memorandum.

The full report can be found on the Internet at: OR

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(Following Global Info Networks Conference)

(Following Global Info Networks Conference);

Bonn -- Secretary of Commerce William H. Daley met July 8 with the press following the Global Information Networks Ministerial Conference here July 8 and stressed that electronic commerce should be led by the private sector in an "unregulated medium."

In response to reporters' questions, the secretary said there should be no tariffs on electronic commerce, and that issues remaining to be addressed include intellectual rights and taxes. He stressed the leading role of the private sector in electronic commerce."

Following is the transcript of the press conference:

DALEY: ...It has been a pleasure to be here these past two days in this very dynamic city, participating in the Global Information Ministerial Conference. It's indeed an honor to be here representing President Clinton and the United States in sharing with my counterparts and industry leaders the United States' approach to maintaining the incredible potential and economic promise of the Internet as a tool for growth into the Twenty First Century. We believe that the global electronic networks should be preserved in a non-regulatory medium in which competition and consumer choice are the determining factors for the market place. We believe -- as do my counterparts with whom I have met in the course of the past two days -- that electronic commerce should continue to be led by the private sector.

As you heard in my comments earlier today, the U.S. strongly believes that government intervention in electronic commerce should be kept at a minimum. Emphasis should be on user empowerment tools and industry-driven self-regulation before any government regulation is considered. Governments should continue to support the development of electronic commerce by working internationally to develop a predictable and a simple legal environment that facilitates global electronic commerce and brings the opportunities of the information revolution to all the peoples of the globe.

In doing so, we must not forget to include our fellow citizens of the developing world. We must work together so that the benefits of global electronic commerce are truly accessible to all the people of the world. I would like to thank Minister Rexrodt for the invitation to participate in this conference. I look forward to working with him, as well as with all of my counterparts and industry leaders, to achieve the full potential of the global information age. I'd like to thank you and I'd be glad to answer any questions which you may have. I'd like to introduce Ira Magaziner who's just arrived, who is the special advisor to President Clinton on electronic commerce and who helped to developed the framework which the President spoke of last week.

Q: What did the U.S. President mean by "a free trade zone on the Internet?"

DALEY: Well, what we're talking about is that over the last 50 years, most of the nations of the world have worked to lower tariffs which are barriers to economic growth. There has been an attempt by all of us, over this last fifty years, to lower tariffs, to free trade, and to help grow our economies. This has been a very successful effort. There are many countries, though, which will look at this medium as a possible opportunity for revenue. To do that would be to distort this medium, so what we are advocating is that there be no tariffs, no new tariffs especially, specifically on this medium. We think it has enormous potential to improve our economies, create jobs, create new businesses. But actions like increasing tariffs or introducing new tariffs will only do one thing and that is stymie the growth and potential that it has to help people.

Question: In your speech you mentioned bridging the gap between the U.S. and Europe on the global networks. Could you please identify where you see the main gap?

DALEY: There is, as was noted by some speakers, a difference of opinion on encryption technologies and how we address that. The question of digital signatures is another issue, as is privacy. There is a whole host of issues, not that we necessarily differ on, but that we have got to come to some common plan on and some common way to address the issues that were enunciated not only by myself but by many of the other speakers. Commissioner Monti spoke of the tax issues. We've got to come to some conclusion on how we address tariffs and new taxes that may be instituted. Intellectual property issues -- we've addressed many of those in many different forums, but I think there will be new issues like that which we will have to address together. So there is a lot of bridging of the gaps but not a basic disagreement as to how we should approach them.

I think that as you read the declaration that's coming out today, and you look at President Clinton's framework issued last week, you'll see that they are very similar, especially on the most important principle to the President, and that is that the private sector must lead on so many of these issues and that government should really take a step back and work with the private sector. President Clinton's administration has done that for four and a half years, on all sorts of issues and specifically on electronic commerce.

The development of our framework was done under the leadership of Mr. Magaziner along with our private sector, working very closely with them to develop it so, even though I think there are issues that we will all have to work on over the next number of years to bridge any differences we may have, we seem to all be starting off pretty much at the same point and that is a strong belief that government should do a minimal amount of intrusion and that the private sector must be encouraged to act.

Q: In your answer to the first question concerning the free trade zone, you said that there will be no additional taxes, but doesn't the term free trade zone suggest that there will be reduced taxes compared to other ways of trade?

DALEY: We should continue on the plan which we've been following for fifty years and that is to reduce tariffs and not create new ones. We should reduce the ones in existence today that some may believe apply to electronic commerce and activities over the Internet. We should make sure they do not apply to commerce over the Internet. So the goal here is to continue with the progress that's been made over the last fifty years and do away with tariffs and to reduce them with the objective of doing away with them and in therefore encouraging further economic growth.

Q: I just wanted to ask you further about this issue of encryption. We heard the president of Microsoft Europe basically say the biggest inhibitor to growth of electronic commerce is not the issue of trade and tariff barriers but this encryption issue and that the U.S. should release this, I think it's a 52-bit and 120-bit technology. I was wondering if you could respond to that criticism directly, and also for us who are not complete experts in this field, I mean we've heard also from the gentleman from IBM saying that there were other technologies available for the smart cards and so how does that all play into this issue of encryption?

DALEY: Well, first of all, we feel very strongly that there must be a balance between the need to encrypt products to protect them and legitimate law enforcement and national security needs. We have had extensive discussions over the last number of months with governments and with the private sector. We have tried to encourage the development in the private sector of a "key recovery" market so that products that the American companies like Microsoft and others -- who have been so successful at the development of these technologies -- would have the opportunity to market them.

Speaking as Secretary of Commerce obviously we look to promote American businesses and American products all over the world, and we do that in a rather aggressive way. I don't think that's ever been denied, so this is an area that presents a conflict for us, that to some degree makes us uncomfortable, because we know there are opportunities for American ingenuity around the world with these products and at the same time we acknowledge that there must be consideration given to legitimate, and I underline that, legitimate law enforcement and security concerns.

Every minister I've met with, those who even are aggressively stating a position that encryption products should be freely available, do acknowledge the fact that there are law enforcement concerns. Much of this may be by virtue of the fact that these technologies are moving so quickly that this is another area where government -- and specifically in this case, law enforcement or security concerns -- are slow to understand, slow to have the technological competence to deal with some of these issues. We are struggling. Our Congress is dealing with this issue, but it is a difficult one.

As I say, all of the ministers that I've met with and talked about this issue with, they all acknowledge the need for some balance here and what we've attempted to do with our key recovery encouragement is to try to develop a balance. We would like to see other ways that other governments would address this. How do they answer the question? I guess to some degree it's a burden of leadership that one is required to step out in a sometimes unpopular way. But we would turn it around and ask other ministers, how do they see addressing this legitimate issue of security and law enforcement balanced with opportunities for their businesses around the world and again the legitimate needs of the consumer to make sure that his information is protected? It's a very difficult issue. We're struggling with it, our Congress is struggling with it, and so is industry.

Q: ... The U.S. is known to have very strong regulations on consumer protection ... regulation on pharmaceuticals ... Do you foresee a situation of similar safety standards and security regulations on electronic commerce services, perhaps even at the price of distortion of free trade inside the "triada"?

DALEY: I think that is the opposite of what we are encouraging. I think the basic principle of the framework that President Clinton outlined last week, as I believe is the basic principle of the declaration that will be issued today, is that government should do less. So we, as an administration, will be very vigilant to make sure that regulatory agencies are not taking actions that would impede the progress of this medium. It is the opposite. Obviously, the FDA (Food and Drug Administration) in the pharmaceutical and health areas is protecting our citizens is a most critical arena, but I think what we are saying, what we are trying to say very strongly is that the opposite attitude must prevail to see electronic commerce grow and improve the standard of living for all the people in our country. As electronic commerce grows around the world, the same will happen in other countries: create wealth, create jobs, create opportunities that do not exist today.

Q: Would you accept that the nature of this medium means that the lowest common denominator will usually apply and that where something is not regulated somewhere, it will become applicable globally, and in this respect has this conference not been a disappointment for you because the European governments have not backed your line on encryption? Indeed, if anything, the sentiment seems to be moving in the opposite direction, not only the Microsoft comments we've heard about but Dr. Sommer of Deutsche Telekom but also Minister Rexrodt yesterday?

DALEY: We did not come here with an anticipation that on the idea of encryption that our opinions would receive a standing ovation. It has been known that there is a disagreement. It has been known that we are working with industry to try to address these issues. It has been known that we are also working with law enforcement and security interests -- again legitimate interests -- to make them comfortable and have industry make them comfortable with the technologies that are being proposed to be sold around the world.

I think a lot of this deals with such a rapid pace of technology growth and products that government, at times all governments around the world, are slow to be able to respond. In the law enforcement and security agencies there is a natural tendency to be very hesitant of new technologies that are introduced that can be used for illegal purposes and how, again, legitimate law enforcement and security interests respond to those technologies. So I don't think this has been a failure by any stretch. I think it has been a huge success because we seem to be in agreement on about ninety-eight percent of principles, and I think there is a determination by the ministers that I've spoken with and listening to some of the comments today to make sure that we move forward with the general principle that the private sector must be not only encouraged, but must be expected to respond on a number of these challenges if government is not to going to be involved.

If governments take the position that their involvement should be minimal, then it is up to the private sector to lead in many of these arenas because if they don't, the most important thing that will happen will be that the consumers will not have the confidence and trust which was stated not only by President Clinton but by many of the speakers today, including the private sector.

And if the consumers don't have the confidence and trust to use the Internet then it will not be the new engine for economic growth in the next century that many people believe it can be. So if the governments take the position not to be involved then the private sector will have to be. If they don't, then I would imagine in the future then you're going to leave a vacuum for some government regulators to step into.

Q: How can you say you don't want government involved, and then you say...

DALEY: There are certain legitimate areas a government has to be involved in. There are obviously legal issues that have to be addressed. There must be some uniform commercial code developed. You've got tax issues that have to be addressed. There's nothing in your life -- except maybe breathing -- that government isn't in some way involved in, and even there, they have to be involved to make sure it's clean, so we're not saying that this medium doesn't touch the government and that government will not in many ways affect it.

Q: You mentioned legitimate needs to do electronic surveillance when it comes to the reasons for the U.S. export policy on cryptography. But with what legitimacy does the U.S. have the right to do electronic surveillance of abroad communication, because if I understand you, the U.S. exports weaker cryptography abroad.

DALEY: What we're talking about, again primarily what you are talking about is, and I'll give you a very good example, in our country under the proper court-approved procedures, law enforcement can wiretap a telephone call to try to intercept, if they expect there is a crime going to be committed. In a paper society in order to prosecute a case after a crime is committed you have to put together a case. The questions that are being asked are, how do you put that case together in a paperless society, that you are unable to put that together. How do you intercept communications, again under the legally approved procedures. Those are legitimate questions to be asked.

So we are struggling with that, as I believe other governments will struggle with it in the future. But it gets back to a balance that we are trying to do. We're not, no one is looking for the United States government to be involved in the intercepting of private communications for legitimate purposes in the United States at all. So that's not the point of this. But it is a balance and again I stress that every minister I've talked to acknowledges that. But they have not tried to develop some other system as we have tried to do and encourage the private sector to be involved, and we will continue. There is quite a political difference in our country also in our Congress as to what the position ought to be of the government and obviously as spoken today, of the private sector's opinion.

MAGAZINER: Maybe I can make one general comment on this issue and also a number of the others that we're going to address, and that is that we are really entering a new age and just as when we entered the Industrial Age there were new commercial and legal frameworks put in place that took a number of years to develop and that you could not anticipate beforehand, so it will be the case again. Those of us who have been working in this area are very humble about our ability to understand what is going to happen. And that's one reason why we don't want to have governments acting too much, because chances are we would make mistakes if we acted. And this is moving very fast, it's evolving. None of us has all the right answers or even probably a majority of the right answers yet about what's going to happen.

So what we've tried to do is establish some principles, the "do no harm" principles, the private sector leading, the fact that it has to be global, the fact that it has to take cognizance of the particular characteristics of this new medium. And then to identify issue areas where we have to come to some global agreements so this can flourish, and then to take some tentative ideas about how to move on those. And undoubtedly there will be dot two, dot three, dot four versions of this as we learn more and the marketplace teaches us more, so, I think some of the certainty you are asking for in your answers we can't give you because, to pretend that we have that certainty would be arrogant, it's not correct. And that I think is a part of the spirit that informs this whole process of moving forward...

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U.S. Framework for Global Electronic Commerce


Brussels -- Ira Magaziner, special advisor to the president on electronic commerce, outlined the strategy for global electronic commerce released a week ago by the White House, stressing in a July 9 press conference that the foremost goal of any government in dealing with commerce on the internet is "first, do no harm."

Magaziner, who had just attended the ministerial conference on global information networks in Bonn, said that in looking at the enormous potential of electronic commerce, the Clinton administration tried to develop a strategy for putting in place "a global framework that could support the development of electronic commerce, that could allow us the realize the economic potential, the job growth and the overall economic growth, that this new medium can provide."

Following is the transcript of the press conference.

Ira Magaziner: First of all, thank you all for coming. Last week, the President at the White House released our strategy for electronic commerce. And perhaps I can explain for a couple of minutes what it is that we have worked on. And then I can take your questions.

In doing this, the President was indicating his belief that the advent of the internet and the electronic commercial opportunities that it opens up have created the potential for economic growth well into the next century, which in many ways rivals the advent of the industrial revolution a few hundred years ago. If you look at the reach of what is going to occur, it can affect dramatically manufacturing industries and their ability to organize themselves. That will be affecting services, and trading services will be finding that export of everything from your own product, information and news, to professional consulting services, engineering services, educational services, medical diagnostics services, software movies, audio products and so on, all be taking place actually delivered on the internet.

In addition, a significant portion of retailing will move to the internet as sales will be conducted on the internet but delivered physically, and within about seven or eight years time there will probably be about a billion people internationally connected on the internet, which means that if I'm starting a business, I can have instant access to a very large global marketplace via the internet, so that it would really revolutionize the way of doing business.

In looking at this potential we tried to develop a strategy to put in place a global framework that could support the development of electronic commerce, that could allow us the realize the economic potential, the job growth and the overall economic growth, that this new medium can provide. And we established a series of principals and then we addressed a number of issues that we think need to be addressed globally to bring this about.

I'll briefly run through the principles because they are very important to all the issues. Number one, we think it is very important the private sector leads this development, not the government. And that even where collective action of some sort is necessary to help foster the growth of electronic commerce, that it be private collective action where possible. Government simply moves too slow and is too bureaucratic for this fast-moving media.

The second principle is that we think this new emerging global electronic commerce should be a market-based industry, and what we mean by this is that you could think of two different models for industry. One is a traditional telecommunication or broadcast model, where the government essentially says "this is ours." And it allows private industry to operate but only in a very regulated way. In some cases in Europe these were government-owned or government monopolies. In our case we have them as private but nevertheless highly regulated, a regulatory agency that coordinates them. The other model is one where you say that people who want to buy and sell something should be able to come together freely, free of government interference, and do their business and that the role of the government is only to provide a predictable environment for making contracts if you want to make contracts as you do this business -- a predictable commercial code.

We have said in this strategy that the second model should be the one that holds for internet commerce. And that's a very important statement because we believe over the next five or ten years that broadcast, telephony, and the internet will all come together into one medium. And so we are essentially saying that that medium should no longer be regulated, it should be a market- based industry as it develops. Within a relatively short period of time you will be able to use your television set or your computer, you will be able to interact from that television set or computer, buy things, shop, communicate, order movies from around the world to rent and bring down, order software or transact business of various sorts, so that the lines among these three -- broadcasts, telephone and internet -- will merge; and we are advocating that it be a market-based industry as it merges because the reasons why it was regulated in the past will no longer be the case in the future. It was regulated because in broadcast you have a limited amount of band width, a limited amount of stations that could operate. In telephone you had massive infrastructure investments that had to be made, which only a relatively few could make. But as the internet develops you will have almost unlimited capability for stations or websites. And the infrastructure investments will be spread across such a large base that they won't be prohibitive, so we advocate it be a market-based environment.

The third principle is that where government action is necessary its aim should be to be minimal, simple and aimed at only very focused goals like protecting intellectual property or trying to ensure this predictable environment for commerce that I described.

The fourth principle is that whatever is done needs to take cognizance of the particular nature of the internet. For example, the internet has flourished because it's a very decentralized medium. And you don't want to try to control or centralize it. Number one, you would fail. And number two, in the process you would stifle it. Also, it is a medium where the technology changes very rapidly. So any policies you make have to be technology neutral. They can't depend upon one technology or another, or else they run the risk of being outdating before you even enact them.

The fifth principle is that the internet is born global. It is the first example of a market place that from the beginning was global, and therefore the traditional ways that we formed agreements among nations where industries grew up within countries and countries legislated around those industries, and then eventually there were agreements brought in trade negotiations between governments -- that does not work for electronic commerce. You have to start from the beginning with a global approach. Which is one reason why we're here and why we think it is important that there be a common approach developed globally from the beginning.

Those principles then lead us to a number of issue areas that I will not go into in detail, but I can give you a couple of the highlights. We cover issues related to tariffs and taxation, related to intellectual property, uniform commercial code, privacy, content questions, technical standards questions, questions of non-tariff trade barriers and so on, which we can go more into detail. I think we are making available a copy of the paper to you.

We are now engaged in a series of meetings. We have just come from Bonn, where there was, as you know, a conference on electronic commerce, and we also had meetings with German officials and members of German industry. We are now here in Brussels and we will be going on to Paris and London. Before that we were in Malaysia and Singapore, and then we will be going on to Korea and Japan next week to try to introduce our paper and our ideas and to listen to the ideas of others, to try to have an exchange of ideas so that we can begin the process of trying to think globally about these issues. So with that as an introduction, perhaps I can take any questions you might have.

Q: In this morning's talks with the European Commission, the Commission has just briefed us saying that one of the problem areas that has to be settled is the whole area of data privacy that rules ... the European Union just not consider the U.S. rules are sufficiently high enough, and this it may cause problems next year. Could you also tell us what was said about the all issue with encryption.

Ira Magaziner: Sure. Well, first of all on privacy, let me say that we in the United States are very concerned about the issue of privacy. It is a fundamental value that we hold very dearly -- that people's privacy should be able to be protected -- and also we think that commerce will not flourish unless people feel comfortable that their privacy is being protected when they make transactions. So we feel very strongly that it's important to protect privacy. On the other hand, we don't think we could put some of our best lawyers in a room and they could anticipate every way in which somebody's privacy could be violated and write thousand pages of regulations and create a government board and everything else to enforce those regulations. And I suppose the result would be that nobody's privacy would be violated because nobody would do any business. The regulations would be so heavy that it would be impossible to do business. What we would prefer is, we think that the industry working with consumer groups that are concerned about privacy, have the same incentive -- we would have to have to want to protect privacy because they won't do business unless they can assure customers that their privacy is protected. And so what we are advocating -- and this has already begun in the United States -- is for industry to come together with both technological solutions and also agreements on business conduct, and we have in the states something called the "Better Business Bureau," which means kind of standards set by business and consumers about how to protect privacy. And we would prefer to have that method develop because we think in the long run it would be more effective as well as more flexible. And we think that that would be the best way to ensure privacy protection. So far, in Europe, there has been an inclination to take a more governmental approach, and this is something that we've exchanged ideas on and will continue to exchange ideas. But that is our idea.

Q: For example this morning, they said that the data privacy director apparently has an external aspect which will mean, according to the Commission, that from October 1998 personal data will not be allowed to be exported to the United States from Europe because for the moment Europe does not consider U.S. rules to be of sufficient quality.

Ira Magaziner: Well, of course, we hope it won't come to that kind of conclusion, but I would think it would be a great mistake for Europe to isolate itself from the rest of the world by not allowing its citizens to do business with rest of the world on the internet. So, hopefully, we will be able to persuade them over time that that's unwise. But I don't think it will come to that. I think we both have the same aims. We both want to protect privacy and I think right now we have some different views on how best to do that. But we will be discussing with them, and hopefully from our point of view we'll be able to persuade them that our ways would work better, because we believe they will.

Q: What evidence do you have from the past that industry is interested? For example, it would seem to me that industry would be commercial. It's to their advantage to know who's a bad debt, who's a good debt, who paid, who didn't pay, which is of course credit information, which you can get off the internet. Why do you think that industry, if you bring them together, would want to give up that right?

Ira Magaziner: Well, I think the principles that we are operating under and I think which also, in at least some countries in Europe we have had discussions, are also prevalent, are the principles of notice and consent. That is that somebody who wants to sell something has to notify a potential buyer, "here is what I am going to do with the information you give me." And the buyer can then say, "no, I don't want that," or "yes, that's OK." And then the seller is bound by that. And we think that ultimately the power rests with consumers. They can buy or not buy, they can go to a website or not. And with the internet, one good thing is that you are not locked in to one place to do something. You know it's not like when you are in a small town where you have only one shop you can go to to buy something. On the internet you can buy from around the globe. And so what we see happening in a number of companies -- this has already started in the states -- there are different organizations that have already began forming, with seals of approval, for example, that can be posted by businesses, that will behave according to a certain set of standards in protecting privacy and would follow these notice and consent procedures. And what we see happening is that these seals of approval will become kind of assurances to consumers, that if they do business with a website or a company that has that seal, then they will know their privacy's protected. If they don't see that, one of these seals, then they ought to beware and perhaps not to do business. And as that develops, it will become, we think, de facto standards, which all companies that want to do business are really going to have to follow. Now, why is that more effective? Because what it does is it sets the vast majority of companies that want to do business and want to do it legitimately, in a sense, as the developers and enforcers of the system, which can be more effective than a government body trying to police the whole internet. When we talk about the particular characteristics of the internet having to be taken into account, one of the characteristics of the internet is that it is so far-flung and decentralized, that setting up government bodies to police is not necessarily to make you feel comfortable because you have a thousand-page law, and you have government bureaucracy to supposedly protect you, but in reality, its effective ability to protect you may not be very strong, so it's a false assurance.

What we prefer is something where you're empowering people to protect themselves, and giving them the tools and means to do it, and we are creating a situation where the good actors in industry have an interest in policing it as well, because that way you have a much more widely dispersed protection than you get with just a government enforcement. So, it's a sincere attempt to try to accomplish the goal more effectively, given the nature of the medium.

Q: In the past, before the internet, it's obvious the credit checking agencies did not obey the law, that they did exchange information among themselves in violation of private rights. Why do you think they're suddenly going to change their minds?

Ira Magaziner: I think that if there are standards developed of notification and consent, if that is the framework you're using, and a credit agency has to notify somebody, "here's what I'm going to do with the information," and you can say "yes" or "no" to that, as to whether you are accepting that or not ...

Q: It's always been that way.

Ira Magaziner: Well, not necessarily, because credit agencies now, for example, if you do business with a certain company, and that company gives information to a credit agency they don't necessarily have to tell you to do it. But if you're going to do business with someone on the internet and part of the basis of the notice and consent is that you need to know what is going to be done with information given, that gives you a layer of knowledge that you don't necessarily have today. So, I think that you have the potential for better protection in the system like this. But I think, again it's something that we have to see how it plays itself out. Nobody knows what is going to happen with the internet, but we think that this is a more effective way to go, and we want to try this. And if we are proven wrong, we will have to look at it. On the other hand, the European system as they are proposing it may also not be very effective, and that we have to see.

Q: I just wondered, what sort of meeting of minds you had with the Commission on the issue of taxation.

Ira Magaziner: Well, we more exchanged ideas and explained our relative paper to each other. We weren't sort of seeking agreements or seeking ... this was not a negotiating meeting. It was more of a "we have put our strategy paper." The EU, as you know, put out a paper, I think, in April or May, and this was more an attempt for us to explain all our ideas to them and answer questions, and for them to do the same thing back. And so, it wasn't really intended to read minds, as I said, per se, it was intended to exchange information. And from our point of view it was very successful in that regard. I think we understand the EU points of view on a whole variety of issues much better than we did before we came, and hopefully they understand our points of view. But that's what we were trying to accomplish.

Q: There seems to be a lot of confusion and misconceptions when you speak of a "tax-free area" -- there's a lot of different ideas. So I was wondering if you could just give us the basic idea ...

Ira Magaziner: I think this is important because there has been some misreporting on this and that what was one of the things we wanted to explain, in terms of what we meant. First of all, with respect to tariffs -- customs tariffs -- that is where is where we're talking about a "tariff-free zone." And what we mean by it is a couple of things: one, is that for all products and services delivered across the net, so if I download software, if I download a movie or audio, or if I sell an accountancy service or engineering service, whatever, anything I deliver across the internet should have a zero tariff. It should be a "tariff-free zone" in that sense. And then secondly, any of the products that are involved in building the internet ought also to be tariff free. And I think our basic feeling on this is two-fold. One is we've spent over 50 years trying to bring down tariffs in the physical world. Why introduce them to this new world? And number two, that the process one would have to go through to collect tariffs and measure tariffs, given the nature of the internet, would be a bureaucratic nightmare. And you would wind up stifling the internet's growth. So for those reasons we want to try to get agreement to create a tariff-free zone.

With respect to taxation, that's a separate issue. The United States government, in terms of our own taxation, we have a corporate income tax, which is part of our taxation system, and it's our belief that if we can stimulate the growth of electronic commerce, a lot more companies will do a lot more business, they'll make a lot more money, and we'll get our share automatically through the corporate profits tax. We don't need to do anything else.

For those countries, as those in Europe, that have a VAT, or some of our state and local governments that have sales taxes, what we are advocating is that there not be new taxation -- for example a bit tax, we would oppose a bit tax which has been discussed here, or other forms of new taxation that are internet specific -- and that the application of existing taxes like that be done in a way that is tax-neutral, simple, transparent, automatic as much as possible. We're not saying that there should not be tax, but rather that it should be neutral and that it should be done in a way that is simple and transparent and more effectively harmonized so that it doesn't impede the growth of the internet. And I'd say the most important word is probably "uniform," because one of the problems we're facing in the states is, if you have 50 different states, each of which has a different tax system for the internet, it could require that somebody trying to sell something hire a hundred different accountants to do business because you'd have to figure out your liability in each state and it would be a different system, so it would be a nightmare. And the same thing could be true among different countries. So it's important there be uniform agreements on how to approach it.

Q: So, it wouldn't have to be some kind of system like where if you lived in Belgium and bought something from the states over the internet, how does the VAT get paid?

Ira Magaziner: I think this is something for the Europeans to work out, not us, but I think in principle one could envision a system where there is some set of agreements among nations that avoided double taxation, that had a set of rules on the collection, much as there is today for normal commerce, and which made clear both to buyer and seller, and what the tax regime was and that there were agreements among countries so that the tax didn't take place doubly, and so on and so forth. And there are number of different ways you could do that. What we're advocating is just to come to some agreement as soon as possible and how to do it so that you can have a uniform system. But I think it would be presumptuous for me to say how that should work in Europe.

Q: Just one last follow-up. With your discussions yesterday and today, what's the reception so far to this concept of tariff-free trading?

Ira Magaziner: I never like to characterize somebody else's reaction. I think you have to ask the "somebody else." We've presented our ideas and I think you need to ask, or should ask the Europeans -- we've talked -- and what they think. I don't want to speak for them. I think we've had very good discussions from our point of view in the sense that we covered a lot of topics, exchanged a lot of information, and the discussions were very friendly in the sense that we all see the potential for this and we all know that it's important that we discuss approaches and make sure that we're consistent in our approaches so that we allow this thing to take off. So the discussions have been very positive and very friendly and very productive. But I don't want to characterize anybody else's reaction.

Q: Can you answer, what went on on encryption, was it also ...

Ira Magaziner: Yes, we had a good exchange of information on that too. I think a lot of these issues we -- the issues are very complicated, encryption is one of them, taxation is another, privacy protection is another -- they're all very complicated issues. So I think we had a very good exchange of information. And also in many of these areas, when you get into the details, we're still trying to work out our own positions, much as people in Europe are. So I think discussions are good. I don't think reports that come out about clashing over this, clashing over that, I think that's not the character of what the discussions have been. They've been more just exchanging information at this point. The honest truth about all this is that we're entering a new world that none of us fully understand. It's one reason why we need to be cautious when we act. We're trying to do the best we can to learn from this world to create policies which are sensible. But it's helpful to exchange information because our policies are all going to evolve as the technology evolves, as the marketplace evolves. So I think it's not so much an issue of, as you mentioned on privacy, we're trying different approaches right now. But we both have the same aim and we know that privacy has to be protected. And it's not as if we're doing great battle over these different approaches. We're interested in learning from each other's experiences.

Q: Was it the first time you had this conversations on this kind of subject with the Commission since internet begun?

Ira Magaziner: No, we've had a series of discussions. I think this is probably the largest meeting we've had in a sense that there were five Directors General there and probably about 30 or so people from the EU side, and we brought a group representing a number of our different agencies, but we certainly had numerous contacts, personally over the past year in my case and the case of some of my colleagues dating back a number of years. So, no, we've been discussing for a long time. I think the fact that they've produced a paper and we've produced a paper now makes it a more comprehensive discussion and we've advanced to a point now where we can discuss more comprehensively, but it's not the first contact.

Q: What sort of items are there still tariffs on, given that we've had the ITA agreement?

Ira Magaziner: There are two things we're trying to accomplish here, one is that for a number of items, like for the services, there are not now tariffs on those services. But part of what we want is that we want to create a predictable environment and an agreement that says we won't tariff them because as they grow dramatically, which we think they will, there will be the temptation to tariff them. So we want agreement not to do that so we can create a predictable environment. On others, for example, on things like a movie, we think that in a relatively short period of time you'll be able to sit at your computer or television set and essentially order movies from around the world, and download them and watch them, and either rent them or buy them. Today if you were shipped that movie physically, the plastic, if you will, is tariffed, not the content, but the plastic. So that's one example of something tariffed. Also, we're investigating various areas that the ITA did not reach, related to internet equipment that may be tariffed today. But I think the important thing, the guiding principle of what we're doing is to create a predictable environment for the electronic commerce to take off because when you're making a lot of investments in new business, predictability is important, and that's part of what our motivation is.

Q: Did the question of the internet being really an English language thing come up in your talks. I mean, you can't put a cedilla, you can't put an accent on a hundred and four character keyboard.

Ira Magaziner: Well, the question didn't come up, actually, but personally I don't regard it as such, I don't regard it as something which is an English- language medium.

Q: You don't?

Ira Magaziner: No, I think, as the internet evolves, I mean, it -- the internet I suppose in some ways took off in the United States first. And therefore as a research tool ...

Q: Was it invented in the United States?

Ira Magaziner: Yes, and it took off in the United States, as well, as a tool and so I guess a lot of the initial conventions and so on were in English. But it strikes me that over time the internet will provide the opportunity, and software will provide the opportunity, for multi-language transmissions and translations, beyond what we're able to do now, that if you think of the power of light transmission, as we harness this, and as it becomes and you develop algorithms which can do translations and so on, I think that it's going to be more possible for it'll be multi-linguistic and also multi-cultural activities and the centralized nature of it means that if I want to produce a programming in my own language, even if my own language is spoken only by a small number of people, the barrier to do that will be much less on the internet to set up a website in my language or to transmit that around the world if I want to or to certainly to other communities of people that are interested in that language, or if I want to develop programming that reflects my cultural in heritage, I'll be able to that more easily to send it to like-minded people more easily than I can now much more cheaply, so I don't view it as -- you know it may be a medium that started in English because of where it was invented. But I don't view it as a medium that is an English-only medium.

Q: You don't think the fact that the language the internet is easiest to use in is English is an issue with French speakers or Flemish speakers?

Ira Magaziner: I think that the extent to which it is an issue for the French or the Japanese or the Chinese or anybody else, it's a relatively easy matter to create the capability -- the keyboards, the software -- the capability to make it friendlier to your language if that's what you want to do, and to go back and forth between languages. And my guess is that that will happen on the internet, that there be a market demand for it, and it will happen. I think one of the key messages here -- and I'll repeat it in this context -- but it is so overwhelmingly important to the dawn of this new age, is that sometimes we take issues like that -- and I think it's a real issue, I don't mean to say it's not a real issue -- we take an issue like that and we say, "Ah, this is a problem governments have to get together and negotiate and solve it." In my view it's an issue. And I think it'll be solved by the marketplace long before governments could ever get together and wrestle through some kind of solution. Because there's going to be a demand for language based in different languages. There are going to be people who are going to develop software to meet that demand. There are going to be websites that develop. There are going to be people that see a business opportunity. And that's all going to happen much faster than if we get ten bureaucratic committees of intergovernmental this and that together and spend weeks deciding where we're going to meet. I'm being a little facetious, but not too much, and I think that's the way these issues will be addressed. Now, there will be some that can't get addressed that way. And when those come up then it may be necessary for governments to act. But I think our going-in proposition, as Vice-President Gore says, do no harm, and only act when a very clear consensus develops that we need to act.

Thank you all very much for coming.

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(Says "We are on the brink of an electronic revolution")

London -- Speaking to the American Chamber of Commerce and the Confederation of British Industry following his participation in the European Ministerial Conference on "Creating a Favorable Environment for Electronic Commerce" in Bonn, Secretary of Commerce William Daley praised the special commercial relationship between the United States and the United Kingdom.

Still, he noted, there is more to be done, pointing to electronic commerce as an area that is on the verge of experiencing revolutionary changes. "Nations are being asked to forge a consensus on how to develop this important new tool in ways that encourage commerce and communication within and across borders," he said.

Daley recapitulated the U.S. Framework for Global Electronic Commerce released last week in Washington by President Clinton and Vice President Gore, "which presents our country's view of what will best spur electronic commerce and ensure it evolves in the most useful, efficient way." He stressed the importance of the private sector's taking the lead in developing electronic commerce.

Turning to the Bonn conference, Daley acknowledged that there are differences on the subject between the United States and its European partners but expressed confidence they would be bridged.

"On Monday, I was in Bonn, participating in the European Ministerial Conference on "Creating a Favorable Environment for Electronic Commerce." The Bonn Declaration offers a set of guidelines to expand the benefits of Global Information Networks to EC countries and EC businesses.

Like the principles enunciated in the U.S. Framework, the Bonn Declaration calls for the expansion of Global Information Networks to be industry led and market driven. We strongly believe that if an Internet marketplace is to fulfill its potential as a network where buyers and sellers, manufacturers and consumers, can do business transcending geography, language, currency and time, then it is imperative that the private sector lead the way.

As President Clinton said, " Where government involvement is necessary, its aim should be to support a predictable, consistent legal environment for trade and commerce to flourish on fair and understandable terms."

The Bonn Declaration also calls on government to provide a reliable legal and fiscal framework for electronic commerce, to minimize regulation and to use its purchasing power to stimulate private sector development of content and technology. It calls for free choice of cryptography products and services and encourages industry to develop secure technologies. While we do have some areas of disagreement -- non-tariff barriers to content, balancing encryption for privacy needs with national security concerns, varied technical standards and digital signatures -- we have every reason to be confident that we will bridge the gap between us.

Given the wide and diverse areas to be covered in building this electronic marketplace, the fact is there is much more common ground than disparity between the Bonn Declaration and the U.S. recommendations.

We look forward to working with Europe to ensure that the Global Information Infrastructure becomes the fountain of economic growth and opportunity that we envision, giving both the largest corporations and the smallest start-up companies an unlimited network of sales at the touch of a fingertip.



(Lays down principles for expanding Internet-based business)

U.S. Commerce Secretary William Daley says freedom from taxation, protection of consumers and helping developing countries achieve economic expansion via the Internet should be guiding principles for electronic commerce.

Global Business Dialogue On E-Commerce, September 13, 1999

Paris, France

I am delighted to be here today. These meetings I truly believe mark the coming of age of this industry. They are a kind of a celebration of the life of a young industry -- a child prodigy -- that grew up faster than any in history. So I feel like I am at the first meeting of the international chamber of e-commerce.

When President Clinton and Vice President Gore began drafting their let-industry-lead policy for the Internet back in 1996 -- which was the first of its kind by any country -- few people could have imagined how rapidly e-commerce would grow.

Since then, the percentage of retailers with websites has more than tripled to 40 percent of the industry. Two years ago, e-commerce was hardly a decimal point in world economic statistics. But a few years from now it will be a trillion dollar business.

When I first became commerce secretary two-and-a-half years ago, I would occasionally read something about e-commerce in the business pages. Today it is the talk of the business world, and frequently gets front page play in the A-section.

And we're not just talking about new businesses, the Amazon.coms of the world. We're talking about a revolution in all business models. Change and become an e-business, or die -- that is the new reality.

We did a study at the Commerce Department that shows information technologies (IT) account for a third of U.S. economic growth.

Alan Greenspan notes that IT has begun to fundamentally alter not only the way business is done, but how economic value is created. As a result, American workers, he says, are more productive and enjoy a higher standard of living. At the Commerce Department, we now look at computer software as an investment, instead of treating it as a corporate expense.

All this means that if we can bring the world a little closer together by linking it to the Internet, we can spread the economic benefits that it can create around to people in other nations.

Just as e-commerce challenges traditional business practices, so too does it challenge traditional ways of governing. The e-commerce paradigm demanded that we in government take a new policy approach: let the private sector lead. And government will provide the legal framework so e-commerce can grow.

This is reflected in President Clinton's and Vice President Gore's Internet framework. We may not have known how fast e-commerce would grow, but we knew that the best way for it to flourish was to let business lead.

Obviously, that is why this gathering is so important to us. You have done well by issuing broad statements on many of the major issues that must be dealt with. But I view this as a good beginning, not the end, not by a long shot. I hope you will follow up with very specific and concrete work.

Frankly, you also must include other constituencies. What about consumer groups, privacy advocates, and law enforcement officials? They need to sit at the table, also.

My point is, if you want government out of the picture and self-regulation to work, you must hear all the voices. The fact of the matter is, if you don't hear them, or ignore their legitimate interests, I guarantee they will be knocking on my door, calling for regulation.

Privacy is a case in point. It is among the biggest issues we face, and I am proud that our industry came up with self regulatory standards that provide real protection for people's privacy. This is very significant so consumers will have confidence when shopping on the Internet.

We asked our businesses to step up to the plate, and they are responding.

A number of new groups are forming -- like the OnLine Privacy Alliance, TRUSTe, and BBB OnLine. They have signed up many companies or associations. They have adopted strong privacy protection principles, and are committed to enforcing them through independent audits and consumer recourse.

We're seeing real leadership by individual companies, such as IBM which won't advertise on any website that doesn't post a clear privacy policy statement. Others have taken steps, including Microsoft, Intel, and Disney.

But it's not enough for 10 or 20 or 50 of the largest companies to sign up. I am working to broaden the base so that every company -- from a one-person,, to a Fortune 500 -- is on board.

And we need to globalize the system. I hope one day soon we see websites all over the world offer buyers and sellers strong privacy protection.

One more thought. As you find solutions that work globally, I don't believe they have to be global solutions. What I mean is we have to recognize there are differences in legal traditions and cultural patterns between America, Europe, and Japan. When we come up with consumer protections, they don't have to be exactly the same. But they must work in every single jurisdiction in the world.

As you know, we have virtually 100 percent agreement with the Europeans on privacy protection issues. To be honest, it took a whole lot longer than I would have liked. But we've reconciled our differences.

And now, the question is: how do we implement and enforce our agreement? We have a ways to go. And I want to be sure American companies won't be put at a disadvantage, versus their European competitors.

On this, I think the GBDe is on the right track by calling for transparent practices. But I think industry needs to commit to enforcing privacy protections based on fair information practice principles and with means for consumer redress.

If we do all this successfully, it can be used as a model for self-regulation in other markets around the world.

There are two other key areas where we need to see progress, also. First is consumer protection, and second, is taxes and tariffs.

Consumer protection involves many elements. Consumer recourse: How do I get my money back if my order is wrong or damaged? Liability: Who is responsible when something does go wrong? Where does a consumer go? Security: Is my credit card number and other personal data protected when I place an order over the Internet? Authentication: How do we make electronic signatures carry the same legal effect as handwritten ones?

All this boils down to consumer confidence. If e-businesses cannot come up with the right answers, I am confident that consumers will shop at the mall and not on the Net. And that, would be a sorry day.

Industry needs to develop effective consumer protection practices, and set a floor, or minimum standards.

In the end, a quality seal could be pasted on websites that are safe for consumers to use. Something equivalent to the good-housekeeping seal of approval we have back in America.

I was very happy to see, just a few weeks ago, a number of U.S. companies -- many represented here today -- formed the E-Commerce and Consumer Protection Group. It will work to create a predictable and stable legal framework for doing business on the Internet. Their focus is global, so I hope more international companies join.

And I urge everyone here to look beyond legal or policy solutions. Use your high-tech abilities to come up with solutions, such as instant confirmation of purchases on the Net.

Finally, let me turn to tariffs. On this America's policy is very clear: we want a duty-free cyberspace.

I can report today that at the WTO meetings in Seattle this fall, we will seek an extension of the current moratorium on tariffs. And we will seek a permanent ban at the earliest possible date. Ambassador Aaron will elaborate on this later.

I hope we're not alone on this. I don't know where Europe stands. But I can't seriously believe that they wouldn't support us, unless they have tactical reasons not to. So, I urge our friends here in Europe, in Japan, and everywhere around the world to make a decision, and stand tall with us in Seattle.

I know I have only touched a few of the key issues. There are many more that must be resolved. Tomorrow, for example, I will be in Geneva to formally ratify American participation under the new World Intellectual Property Organization copyright treaty. This is a major step in protection of intellectual property rights on the Net. And this is a positive contribution by government.

Let me end on this. Today as we celebrate this new industry, and all its hope and promise, let us not forget there is a digital divide. In America, we are working to narrow that gap between those who have access to technology, and those who don't.

But this is not just a domestic problem within countries. There is a digital divide among nations, also. So I hope as we move forward, that business and government work together to close the gap among nations so e-commerce can realize its fullest potential.



(Daley in Geneva cites work still to be done)

Following is the text of Daley's speech as prepared for delivery:

Remarks by Secretary of Commerce William M. Daley

World Intellectual Property Organization Conference

On Electronic Commerce and Intellectual Property

September 14, 1999

Geneva, Switzerland

[As Prepared For Delivery]

On behalf of the United States, it is a great honor to be here. In this technology-driven economy, few organizations have a mission more vital than WIPO's. Especially as the Internet grows, WIPO will have an ever increasing role to play. So I look forward to a global dialogue on all the intellectual property issues the Internet raises.

I became Commerce Secretary when a major new international framework had just been put in place for intellectual property. The Uruguay Round of the GATT [General Agreement on Tariffs and Trade] negotiations had produced the TRIPS [trade-related aspects of intellectual property rights] Agreement. It, of course, weaves the protection of patents, copyrights, trademarks -- and the relevant WIPO treaties -- into the world trading system.

And right before I took office, WIPO negotiated the Copyright Treaty and the Performances and Phonograms Treaty. So, I came in facing a new world of legal issues related to the Internet.

As a manager, I believe you leave your successor a different set of problems than what you found. Obviously, my predecessor did that for me. But I would like to take that philosophy one step further. As the last U.S. Commerce Secretary of this century, I feel a special responsibility. A responsibility to prepare my Department not just for new problems, but for the opportunities the next century, with all of its technology, will bring.

We wanted to begin the century with our Patent and Trademark Office as high-tech as the patents that they review. So, we have just made more than 21 million pages of patents and trademarks available for free on the Net. Lawyers can search their hearts out 24 hours a day, 7 days a week, 365 days a year. Imagine all those billable hours -- I can say that, I am a lawyer.

We have made it possible to apply for a trademark on-line. A customer recently e-mailed us to say: "it is the best interaction I have ever had with the federal government." Another wrote us a complimentary e-mail and ended it by saying: "have a nice day." Can you imagine someone telling the government to have a nice day?

And one of my first priorities was to work with our Congress to change our copyright laws, bringing them into compliance with the new WIPO treaties. To be frank with you, it took a huge effort. It was the most significant revision of U.S. copyright laws in two decades.

My argument was simple: one day people with a computer may have immediate access to every song ever sung, every movie ever made, every creative work ever created. America leads the world in creating copyrightable works. Our copyright industries annually contribute $250 billion [$250,000 million] to our economy. And we had an absolute obligation to lead in protecting artists in America, and around the world.

Of course, like anything in Washington, there were long negotiations. There were testy discussions. But the bill passed overwhelmingly (99-0 in the Senate). And last October, President Clinton signed the legislation into law.

As trusting as I am of e-mail, these papers were just too important, not to deliver personally. So, I am pleased to announce this morning I formally deposited our instruments of ratification. I understand just this summer, Japan and Argentina passed implementing legislation. And I know we all look forward to the 15 members of the European Union joining us.

Something we don't think often enough about is the fact the Internet is itself a result of many people's intellectual property. Here we have something changing the way we shop, we work, we conduct business -- and it is a result of patented and copyrighted creations.

So, the challenge before all of us, I think, is how do we accelerate the technology trends under way into the next century and spread more prosperity around the world?

How do we harness copyright, patent, and trademark law to produce the greatest possible benefits from the Internet?

How do we make sure innovators have incentives to create new products, and investors have incentives to pour capital into new ideas, and intellectual property is well protected so it can create new jobs?

And how do we do it so material on the Internet is available to users, such as our academic institutions and our libraries? After all, the real value to society is not from its creation -- but from its use.

Let me put it more simply: What kind of policies can government offer the private sector to maximize the digital age, or at least not mess it up?

I would like to offer five suggestions on how we move forward from here.

First, we must understand the future of the Internet will be determined not only by technology, but by policies that work globally.

I was in Paris yesterday, meeting with e-commerce CEOs. The point they drove home is this will not work if it is just one country's answer. It will not work if it's just a U.S. answer on privacy, or a European answer on consumer protection. We must find solutions that work globally, but they do not necessarily have to be global solutions. When we come up with consumer protections, they do not have to be exactly the same around the world, but they must work anywhere in the world.

After all, the Internet is attractive because it makes it possible for companies to instantly distribute information -- anywhere in the world. They can instantly take orders -- anywhere in the world. So, obviously we must spend much time and thought reworking the legal system. Contract law, consumer protection law, privacy issues -- all of these must be addressed.

But the only way the Internet will ever reach its potential is if we strengthen its intellectual property protections. You may be able to buy candy or auction antiques on the Internet. But let's face it, the only products that can be delivered on the Net are intellectual goods. The postman does not have to come to your door to deliver music, software, and novels any more. The phone line can do it.

That brings me to the second point. We need to change some attitudes. Too many people have the view that emerging economies cannot benefit from intellectual property rights on the Net -- that this is only important to developed countries.

The fact is, the Internet can help African singers more than it can help Madonna. I say that because today consumers can go to a record store in Washington and buy Madonna -- but maybe not find the music of African singers. Yet with the Internet, suddenly African singers' works are available -- and suddenly these artists could sell music to people everywhere.

Or look at it this way. If somebody pirates a Madonna CD and sells it on the street -- Madonna will lose some royalties, no question about it. But the person hurting more would be the local artist, who might have been able to sell a legitimate record, if the pirated Madonna had not been so cheap. And if that artist had a good local following, soon the artist could be on the Internet, selling to the world.

Ten years ago, when many Asian economies were producing pirated cassettes -- from foreign artists -- their local music industry had difficulties. Then these countries started taking effective measures against pirates -- and now their local artists have 40, 50, even 70 percent of their own local markets. That is the power of protecting intellectual property rights in developing countries.

I am pleased to see emerging economies -- from El Salvador to Moldova -- have ratified the new treaties. Obviously we need everyone on board, and we need the next step as well: everyone concerned with enforcement issues. Pirates are smart -- they will always find distribution channels where we are least vigilant. So if the Internet is to ever meet its enormous potential, intellectual property over the Internet must be secure.

Third, as we create a digital legal system it must be anchored in existing reality that there are already long-established trademark rules. We need to ask: how do we ensure the new world of dot.coms is compatible with the very successful old world of trademarks?

Let me put this in context. Two years ago, President Clinton and Vice President Gore asked me to privatize the management of the Internet's domain name system. They wanted to increase competition. And they wanted more international involvement.

The problem is an address on the Net is radically different than an address on Main Street. In the physical world, there can be a United Airlines, and a United Parcel Service, and a United Telephone Company. In the e-world, there is only one address:

In the physical world, there can be a Tom's Cafe in New York, and one in Geneva. In the e-world, there is only one

President Clinton and Vice President Gore also wanted a way trademark and domain name holders could resolve their conflicts. The last thing they wanted -- and we understand this even more today -- is for businesses to be tied up in lawsuits as courts around the world apply their laws of their jurisdictions, to the Net.

So the private sector created the Internet Corporation for Assigned Names and Numbers -- ICANN. We have worked with ICANN to transfer domain name registration to the private sector.

We turned to WIPO for advice and expertise on curbing the abuse of trademarks. At Commerce, we are the U.S. guardian of trademarks. And the fact is, in the e-world, there have been too many people registering as domain names some words and phrases other people use as trademarks. Then they try to sell them to the trademark owner -- at a hefty price. These are cyber squatters.

By the way, I understand someone registered and tried to sell it, first for $5,000 and then $3,000. There is a lesson there, I guess!

After careful study, WIPO recommended a uniform dispute resolution policy that ICANN adopted two weeks ago. The WIPO report also recommended a limited number of globally famous marks be made off-limits, an issue still under discussion at ICANN.

WIPO demonstrated, once again, the key role it can play in solving the complex Internet issues. And I thank them for all the work they have done.

The fourth point I want to make is this: there are still many more important issues, where WIPO must help. I know the Standing Committee on Copyrights is continuing to work on audio visual performers' rights, and protection of databases in addition to copyright. These are critical issues for e-commerce that the 1996 diplomatic conference did not fully address. The American delegation, led by our Patent and Trademark Office, will continue to work with you on this.

I am also pleased to be here knowing WIPO will host a diplomatic conference on revisions to the patent law treaty. I believe it will make great strides in converging administrative procedures for the world's patent offices. And let me say, we are interested in exploring further steps we can take to realize our shared vision of a global patenting system -- one reflecting the realities of a global economy.

Fifth, and finally, there are great possibilities for technology itself to protect the creative work of people around the world.

We are seeing engineers create the means to securely label every piece of information that moves over the Net. We are seeing digital watermarks attached to music being made available on the Net. We are only beginning to see technology answer the issues you have wrestled with. I hope, together, we encourage our scientists and engineers to employ their skills. For they can help address issues in ways even more efficient than legal means.

Let me end on this. In the last years of the 19th century, America moved from an agricultural to an industrial society. And our president at the time, President McKinley, saw all these new products and he told Americans: we must broaden our commercial relations with other nations and engage in trade agreements.

In the last months of the 20th century, we have a situation in the United States, where a third of our economic growth comes from information technologies. They have dominated every sector of our economy, increasing productivity, and keeping inflation low.

So, with just months to go before the next century, we are moving from the industrial to the information age. And I just hope every nation engages the Internet to bring opportunity to all citizens of the world.



(Treaties provide copyright protection equivalent to U.S. law)

Secretary of Commerce William Daley is formally depositing in Geneva U.S. ratifications of two electronic commerce treaties aimed at protecting copyright.

PTO Takes Part in Depositing WIPO Ratifications

As part of the first deposit of an instrument of ratification by a major industrialized nation, Q. Todd Dickinson, acting Assistant Secretary of Commerce and acting Commissioner of Patents and Trademarks, will accompany the U.S. Secretary of Commerce William M. Daley to deposit with the Director General of WIPO the United States' instrument of ratification for two new WIPO treaties, The WIPO Copyright Treaty (WCT) and the WIPO Performances and Phonograms Treaty (WPPT). This will take place September 14, 1999, at WIPO Headquarters in Geneva, where the Secretary and the Commissioner will be speaking at the WIPO Conference on Electronic Commerce and Intellectual Property.

The WCT and the WPPT include provisions that ensure that other nations will have to provide copyright protection for electronic commerce at a level equivalent to such protection provided under U.S. law. Specifically the treaties provide that the copyright owner must have the right to authorize availability of their works to the public via electronic commerce.

The WCT additionally includes provisions on the copyright protection of computer programs and databases and provisions on the rights of distribution, rental and communication to the public. The Treaty also contains a provision that increases the minimum term of protection for photographic works from 25 years to 50 years.

The WPPT includes provisions on the minimum rights granted to performers and producers of sound recordings, including the rights of reproduction, distribution, and rental. The Treaty also creates a new international standard for the minimum term of protection of these rights of 50 years, rather than 20 years as under the Rome Convention.

The PTO is the Commerce Department's user fee-funded bureau that administers laws relevant to granting patents and registering trademarks; advises the Secretary of Commerce, the President of the United States, and the Administration on patent, trademark and copyright protection; and advises the Secretary of Commerce, the President of the United States, and the Administration on the trade-related aspects of intellectual property. Nearly 6 million patents have been issued since the first patent in 1790. Last year PTO issued 155,000 patents and registered 106,000 trademarks.


Secretary of Commerce William Daley welcomes the start U.S. business has made toward protecting privacy in Internet transactions, but warns that consumers will demand government regulation if that protection falters.

September 17, 1999

(...)When I became Commerce Secretary two-and-a-half years ago, no one could have imagined how e-commerce would grow. While my predecessors spent a huge amount of time on trade issues -- and obviously I do my fair share -- increasingly e-commerce has taken a higher priority, as it has for most CEOs [chief executive officers] around the world.

This morning, I want to report on my efforts in a number of areas and outline our agenda for the next 16 months. I want you to understand where I am coming from: Just as e-commerce has challenged traditional business practices, it clearly has challenged traditional government practices.

This week, which I spent living the e-life, illustrates the complexities confronting us in government.

As you may know, I was at the White House yesterday announcing some very welcome news on exports of encryption software and hardware products.

Under Vice President Gore's direction, we have taken a common sense approach to this issue that balances e-commerce and privacy interests with our national security and law enforcement priorities.

After a thorough review, and with input from business, we believe we can relax the rules and make it simpler to export these products without compromising national security. This will give our companies a more competitive edge in global markets and open new ones that may have been closed in the past. We will maintain controls needed to protect national security. And we will make sure law enforcement has additional tools to fight cyberspace crime and the government is putting sufficient resources into developing secure information systems.

To be honest, these are major concerns for Americans, and I don't think anybody in the industry would disagree. The new rules continue the three fundamental principles of our encryption export control policy: One-time technical review; post-export reporting; and the right to deny sales to foreign government or military users. This means that after a one-time review companies will be able to ship their products freely under a license exception -- except for sales to states that support terrorism, which are barred.

Sales of customized products to government or military users would require a license. Exports of lower-level encryption will be decontrolled entirely, consistent with our international obligations. In addition, post-export reporting will now be required for any export to a non-U.S. entity of any product above 64 bits. These regulatory changes basically open the entire commercial sector as a market for U.S. encryption products. And that is very good news.

Now, earlier in the week, I was in Geneva at an e-commerce conference held by the World Intellectual Property Organization. They have two treaties that protect artists whose copyrighted music, movies, or creative works are sold over the Internet.

They are of major importance to Americans -- our copyright industries annually contribute $250 billion [$250,000 million] to our economy. We were one of the early countries to ratify the treaty; and I want to encourage the rest of the world to join us -- from the European Union to emerging markets.

And I began the week in Paris meeting with the Global Business Dialogue on E-Commerce. It's a kind of International Chamber of E-Commerce, which, by the way, Steve Case will be heading up this year, along with Gerald Levin of Time Warner.

The meeting represented a recognition by companies that if they want government out of the picture and they want to police themselves, they must take some serious responsibilities. Clearly they did. They proposed a number of ideas that will allow electronic commerce to flourish, but protect the public interest. Was it perfect? No. They absolutely need to flesh out the details and make commitments to take concrete actions. And they need to reach out more to the legitimate interests of consumer groups and privacy advocates -- but it was a very, very good start.

I mention privacy advocates and consumer groups because I have focused more on their issues than on any others. Why? Because privacy and consumer protection are what concern consumers most. And if we don't deal with them, consumers will shop at the malls, not on the Web, and the Internet will become a target for intrusive government action.

First, on privacy, I can report I am pleased with the progress that has been made. When I started focusing on this issue a year-and-a-half ago, only 14 percent of Web sites had privacy policies. Today, more than 65 percent of Web sites tell visitors what they do with the personal data they collect.

New groups are forming -- like the OnLine Privacy Alliance. They have adopted strong privacy protection principles and are committed to enforcing them through independent audits and consumer recourse. In fact, nearly 1,000 Web sites now carry privacy seals from third-party enforcement services like TRUSTe, BBB Online, or CPA Webtrust.

And some of the biggest companies are showing the most leadership -- IBM pulled ads from Web sites that had no clear privacy statement. The pressure worked. Within three months, 97 percent of IBM's regular ad sites had posted privacy policies.

A few months ago, I challenged other top advertisers to follow IBM's lead. Several have.

Intel has. Disney not only stopped advertising, it went so far as to say it will no longer accept ads on GO Network, on, on and its other sites unless companies have clear privacy policies. That is a real risk on Disney's part, but it obviously sends a clear statement on where Disney stands.

And Microsoft decided to restrict its advertising, and then went on to offer a free on-line Privacy Wizard. This helps other companies create and post their own privacy statements. Frankly, it is not enough for the Fortune 500 to have policy statements. We have to broaden the base so every one-person in America has one -- and what Microsoft did can be very helpful to them.

I am pleased to announce today that three more companies are putting their money where their mouth is to promote privacy protection. Proctor & Gamble, Novell, and Compaq are making similar commitments to restrict advertising.

This means more than one-third of America's top 20 Web advertisers will only put ads on Web sites serious about protecting the privacy of Internet users. Web sites have now been put on alert: post a policy, or lose ad dollars.

I hope more companies join them, because as good as the progress has been, there is no doubt in my mind consumers will demand government regulation, if their privacy is not protected.

And advertising isn't the only way to do it: America Online has a certified merchants program. It requires all of its merchants to adhere to fair information practices. Microsoft has adopted a similar approach for a new merchants program it is launching. I encourage other companies to join their ranks. I would love to be up here naming names all day. If self-regulation is going to work, responsible companies have to bring the rest of the community on board.

This doesn't mean every problem has been solved. The newest area of concern is profiling. More and more, companies are gathering information on the habits of consumers who visit Web sites. They take a kind of digital snapshot of each consumer. Once they know their habits, they target ads straight to them.

Is that going too far, or is it just giving consumers more choices?

Right now, not too much of this information is being tied back to a particular individual -- but the technology is clearly capable of tying mouse clicks to a particular person. No doubt, Net users will want to know what information is being collected. How it is being used? And whether consumers control how it will be used -- and whether they stay anonymous.

I think there are more questions than answers. And the reality is as profiling grows in popularity because of the enormous marketing benefits it brings to businesses, we need more answers. So I am pleased to announce today that Commerce, along with the Federal Trade Commission, will hold an online profiling workshop on November 8th.

I hope what comes out of it is a better understanding of the technology and where it is headed. I hope we get a better understanding of the implications of profiling on privacy, and a vision on what role self regulation can play in this.

Now, the second issue I have focused on is consumer protection. Consumer protection is a lot more complicated than privacy.

It involves recourse -- where do I get my money back if my order is wrong? And liability and jurisdiction -- who is responsible when something goes wrong, and whose law do you go by? It involves security -- is my credit card protected when I place an order? And authentication -- how do we make electronic signatures carry the same legal effect as handwritten ones? It all boils down to consumer confidence.

Last month, we made some progress. A number of companies -- including AOL -- formed the E-Commerce and Consumer Protection Group. It will work to create a predictable and stable legal framework for doing business on the Internet.

In my opinion, industry needs to develop effective consumer protection practices and set a floor, or minimum standards. We all need quick and effective dispute-resolution procedures. In the end, a quality seal could be pasted on Web sites that are safe for consumers to use. Something equivalent to the Good Housekeeping Seal of Approval.

You and I know, that will not be ready next week, or next month, or in three months -- when we are in the heart of our second E-Christmas season. But we have to get to work. Last year, E-Christmas was a surprise in terms of how big the market could be. It marked a real turning point.

The final holiday shopping season of the century is expected to lure millions more e-customers this year. The real challenge is to lure shoppers with clever ads and then address the issues I have been talking about -- protecting shoppers' privacy, having appropriate return policies, recognizing consumer protection laws, handling complaints and not keeping customers in the dark.

I would like next January to point to the Internet -- and say: we had a merry little Christmas! I would like to turn to consumer protection advocates and say: look at how well they've done ... and not look at how much more we have to do.

I also want a far better grasp on how much e-shopping business really occurs. So, I am pleased to announce today, that when the Commerce Department conducts our retail sales survey for October, November, and December, we will ask retailers a new question: How much of your sales were on-line?

This will be a pilot test. We want to be careful about this. We want to make sure the numbers are reliable, and we are getting a proper cross section -- before we release the results. But we think e-tailing is so important, that we have to develop our ability to measure it and report it in government statistics as soon as possible.

That brings me to the final point I want to make. I want to move the Commerce Department from being a paper-based bureaucracy to a truly digital department. Earlier this year, I set a goal: by 2002, the Commerce Department will be an E-Commerce Department.

There is a huge difference between what a Secretary can do in Washington and what a CEO can do on this side of the Potomac. Let me illustrate: can you imagine a CEO, having a budget, where 535 people could add to it, subtract from it, or tell you to have some new fish program instead of wiring your building for the Net?

In my opinion, government has been way behind the curve. We're not using information technologies for internal purposes, to increase worker productivity and improve quality. So, we have put an aggressive plan in place to enter the digital age.

But where government has used the Web as well as industry, is externally -- by making it easier for citizens to get information. We have made, for example, it possible to apply for a trademark on-line.

A customer recently e-mailed us to say: "it is the best interaction I have ever had with the federal government." Another wrote us a complimentary e-mail and ended it by saying: "have a nice day." Can you imagine someone telling the government to have a nice day?

The busiest part of the Commerce Department this week has been the National Hurricane Center. As Floyd approached, we were inundated with people tracking weather online. On Tuesday, we had 12 million hits; on Wednesday, 15 million hits for information on Floyd. Our Web page will not replace radio and TV for getting information to masses of people, but it clearly has become a valuable tool.

And we want to continue making government more user-friendly. Next year when we conduct the 2000 census, people for the first time can file their short forms on the Internet.

Let me put this in perspective. The 2000 Census is the biggest project Commerce undertakes. I think it is the most important project all of government will undertake next year.

Five of every six families will receive the short census questionnaire -- 100 million families. They can now go and file on-line if they want to.

Let me end by saying, I think government has taken some new policy approaches. One might say they are revolutionary. The town on the other side of the Potomac may be the hardest place in the world to change, but the Internet is giving it some new life.And that is a good way to begin a new century. Thank you very much.

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