When the leaders of the Group of Eight (G-8) industrial countries convene their annual summit this July in Okinawa, Japan, they will be deliberating issues in an economy shaped by the rapid expansion of global electronic commerce. The value of worldwide business-to-business electronic commerce is projected to leap to $7,300,000 million in the year 2004, or about 7 percent of total global sales transactions, up from $145,000 million in 1999, according to a recent report by the Gartner Group, a worldwide business and technology research organization.

Global electronic commerce has led to profound changes in the way business is conducted. Networked organizations and decentralized corporate processes have changed relationships between the producers and users of goods and services, and spurred the rapid integration of global markets. Information and communication technologies and new developments such as online business-to-business exchanges and virtual trading networks have transformed traditional business practices by connecting critical business systems directly to key constituents like customers, employees, suppliers and distributors via the Internet. Examples are the united online marketplace for auto parts recently set up by General Motors Corporation, Ford Motor Company and Daimler Chrysler, and the online buying alliance between International Business Machines Corporation, Ariba and software developer, i2 Technologies Inc. These exchanges have reshaped the world of business and trade transactions. The private sector has been the driving force behind this phenomenon. A report issued by Forrester Research, a leading Internet research firm found that of the 80 U.S. firms they surveyed, 93 percent plan to buy and sell on the Internet in 2002.

The paradox remains, however, that while networked technologies are a great leveler of economic and social structures, they also have the potential to exacerbate the "digital divide" -- the gap between the level of e-commerce development in industrial countries and that in countries and organizations standing on the sidelines of the global e-commerce revolution. Internet-based business-to-business electronic commerce creates new market structures that enable business partners to switch allegiances at low cost, since the Internet expands choices and options to suppliers and consumers on an exponential basis. In addition, it enables contracting parties to exchange information, best practices and market feedback in real time. Countries left out of the loop could experience the costs of severe economic isolation in this highly competitive environment. Recent findings by Computer Economics, an e-business adviser to corporations, suggest that while e-commerce will continue to boom in the next decade, Africa, South America and parts of Asia could be left out of the trade revolution. According to Computer Economics, just 6 percent of e-commerce will be transacted in these regions this year, and this figure will rise by only 1 percent by 2003.

There is a very real possibility that developing countries may be constantly playing catch-up with the technologies and policy principles that have been formulated in the developed world. Also, the "digital divide" is hampering the ability of developing economies to be part of the ongoing process in developed economies: of assessing and possibly re-defining the existing rules for global electronic commerce. One of the key functions of the Global Information Infrastructure Commission (GIIC), an independent, non-governmental initiative launched during the G-7 summit meeting at Brussels in 1995, has been to ensure that developing countries are constantly engaged in this dialogue. Through its global network of private and public sector commissioners who represent both developed and developing countries, the GIIC has worked with national governments, industry groups, and international organizations - to advance the dialogue on the rules needed for the global information economy, as well as to create awareness and build constituencies for change.

NEW REVOLUTION, NEW RULES

In its work over the past five years, several factors have led the GIIC to conclude that the global networked economy needs increasingly flexible legislative solutions to the challenges posed by rapid technological change. These solutions must be formulated on the basis of international dialogue among various stakeholders in the information revolution, including the private sector, national governments, international organizations and consumer groups. These factors are:

Legal and Regulatory Frameworks in Constant Flux: The technological convergence of telecommunications and computers has revolutionized the way in which society produces, stores, and uses information. Meanwhile, the rapid growth of networks across national boundaries has blurred the lines between providers, suppliers, and originators of information. These developments have called into question how regulatory systems can ensure trust, confidence and consumer protection within a rapidly globalizing technological environment. For example, on-line issues related to digital copying and Internet domain names are raising critical issues about the ownership of copyrights and patents - and are creating brief and sometimes fluctuating values for intellectual property rights, privacy, and security, as information is digitally transformed and moves through its various iterations. The continued education of government regulators and consumers, as well as the development of technology-neutral self-regulatory schemes in partnership with the private sector, is essential to spur institutional adaptation and quick response to new technologies and applications.

New Definitions of Individual Rights: In this new networked economy, businesses can employ data integration technologies such as customer profiling to understand customer needs, provide support over the Internet, and integrate these customer demands within their supply chain. The use of these technologies is leading to increased awareness of what consumers perceive as potential violations of their rights as individuals, such as the misuse or usurpation of personal data, inaccurate and incomplete information and payment fraud.

By the same token, the networked economy has put information and power back into the hands of the individual, with user communities being redefined in accordance with common interests rather than by geographical or physical proximity. In the electronic age, the buyer has access to information - and is thus empowered to change loyalty in an instant. So if businesses in the electronic age are to maintain customer loyalty and be competitive, they have to improve the service and value they bring to their customers.

Businesses recognize that it is in their best interests to protect the privacy of their customers, and to build trust and confidence that personal data are accurate and will not be misused. As a result, businesses are collaborating to develop self-regulatory codes of conduct, trustmarks, and seals to ensure flexible yet enforceable trust systems that are awarded to online retailers who comply with a high- and independently verifiable standard for electronic commerce. These seals cover every aspect of their operations, from their trading status to their privacy and security policy, customer service and support policy, information integrity, and warranty information. In its work in both developing and developed countries, the GIIC has observed that many countries do not have laws or cultural morés that support the preservation of personal privacy. We do not want to see the lack of a globally recognized framework for privacy protection lead to the establishment of data havens in which personal information is illegally traded or abused.

Challenges to Jurisdiction in Cyberspace. As transactions become more global, the control of government institutions over economic or other activity occurring in cyberspace is increasingly eroded. Jurisdiction and rules of origin are the two key factors impacting cross-border e-commerce, requiring that national and international frameworks be harmonized to enable dispute resolution and redress. Currently, issues relating to taxation, intellectual property, and consumer protection all depend on the rules of origin -or country of consumption. However, as transactions move online and become increasingly global, both business and consumers are becoming wary of the costs they may incur if they need to engage in cross-border litigation of their rights. By using Alternate Dispute Resolution (ADR), consumers and merchants can settle their disputes through a trusted third party in a low-cost and speedy way. There are several examples of ADR, such as BBBOnLine, part of the Council of Better Business Bureaus in the United States, and Cybertribunal in Canada. Other organizations involved in international dispute settlement for electronic commerce are the ICC International Court of Arbitration of the International Chamber of Commerce (ICC), and the World Intellectual Property Organization's Internet-based WIPO-Net, which has been set up to arbitrate IP-related electronic commerce issues. However, to give businesses and consumers in global electronic commerce additional certainty, together with robust, reliable electronic commerce transactions, such certification efforts need to be extended to other countries and jurisdictions.

Authentication and Security: Authentication and security are critical for assuring people that they are transacting electronic commerce in an environment free from illegal attack or trespass. Strong, market-led encryption technologies are essential, as well as minimum necessary legal frameworks to authenticate electronic signatures. In addition, a legal framework must be in place to punish the dishonest. Since the private sector is leading in the area of encryption, there needs to be a partnership between the private sector and governments to create the frameworks necessary to ensure the trust and authentication needed to stem criminal activity. Since users tend to distrust government controls on encryption, governments should commit to removing all controls on cryptographic technologies and applications and should cooperate with businesses to facilitate the internationally secure exchange of information.

Universal Commercial Codes: Legal codes specifying commercial, contractual, and liability issues are the underpinnings of electronic commerce and are essential to building consumer confidence. As global electronic commerce expands, businesses are looking to a permanent framework for electronic commerce transactions that is also guaranteed and recognized by national governments. The 1996 Model Law of the United Nations Commission on International Trade Law (UNCITRAL) provides national legislators a technology-neutral framework of internationally acceptable rules to remove legal obstacles to e-commerce and creates a more secure legal electronic environment. The Model Law has been the basis for the development of e-commerce laws in Singapore, Korea, and Colombia, and has spurred the discussion of similar initiatives in Australia, Canada, Chile, France, Hong Kong, India, Slovenia, Brazil, Mexico, Morocco, New Zealand, Peru, the Philippines, Thailand and Tunisia. However, in spite of this activity, most countries have been slow to convert what has been the norm for commerce between parties for several centuries -- the exchange of paper documents -- into the electronic environment. Increased education and the involvement of the legal community within countries or trading blocs or regions such as Asia-Pacific Economic Cooperation and Free Trade Area of the Americas are critical to the rapid expansion of global electronic commerce and the involvement of additional countries.

The GIIC has been spurring the dialogue about removing barriers to electronic commerce in many countries around the world, including India, China, the Philippines and Venezuela, as well as many countries in Africa. In addition, the GIIC has worked in partnership with the Alliance of Global Business (AGB), a coalition of businesses in 140 countries, to urge governments to rely on business self-regulation and the voluntary use of empowering technologies to create trust across the spectrum of users and providers for e-commerce goods and services. Some initiatives include the AGB's 1999 Global Action Plan for Electronic Commerce, the Fact Sheet on the Duty-Free Treatment of Electronic Transmissions, and the Discussion Paper on Trade-Related Aspects of Electronic Commerce -- (see www.giic.org/focus/ecommerce).

A CALL TO G-8 LEADERS

Most countries of the world - including the developed ones - are still only learning how various information technology innovations will affect the economy and labor markets. For developing countries, this process is far more profound, as governments and private sector groups endeavor to restructure their economies for the global digital economy.

The G-8 representatives at the Okinawa summit have a unique and unprecedented opportunity to facilitate international cooperation for a secure global environment and a new international approach to building a global information economy in which every nation and every individual has a chance to participate.

Any global approach or framework needs to be flexible enough to support the growth of the information economy, encourage trade and investment flows, create jobs, and provide consumers with the benefits of competition, while encouraging a stable, secure environment for electronic transactions. Partnership with the private sector and international organizations such as World Intellectual Property Organization, the World Trade Organization, Organization for Economic Cooperation and Development and UNCITRAL is essential in creating cooperative systems to:

Exchange information about best practices.

Increase consumer satisfaction and confidence in doing business on the Internet.

Establish merchant credibility and trustworthiness.

Support and enhance the self-regulation of Internet commerce.

Encourage the development of guidelines and symbols to support electronic commerce.

Finally, G-8 leaders need to extend these endeavors to provide technical and financial assistance to those nations on the sidelines of the global electronic commerce revolution and also to bring consumers and small and medium-sized enterprises in the dialogue. The inclusion of these actors can only serve to create a robust, secure, global information infrastructure, expand global trade and economic growth, and, most significantly, minimize the threat of an ever-widening digital divide.

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The Global Information Infrastructure Commission (GIIC) is a global forum of private sector and government leaders from the information and telecommunications industries who address policy decisions impacting the growth of the world's information networks. The work of the GIIC focuses on three main areas: global information infrastructure development, global electronic commerce, and education in the information age. The GIIC's regional co-chairs are H. Brian Thompson, (vice chairman and CEO, Global Telesystems), Volker Jung, (executive vice president, member of the managing board, Siemens AG), and Michio Naruto (special representative and board member, Fujitsu Limited). W. Bowman Cutter (managing director of E.M. Warburg Pincus), acts as the GIIC managing director. The GIIC is a project at the Center for Strategic and International Studies (CSIS) in Washington, D.C.

Note: the views expressed in this article do not necessarily reflect U.S. policy.