TEXT: BARSHEFSKY ON INFORMATION AGE TRADE POLICY
(She says Internet commerce should be tariff free)

Washington -- U.S. trade policy will continue to focus on the longtime goals of increasing market access, protecting intellectual property and ending duties, quotas and export subsidies in agriculture while working to keep the newest form of trade -- electronic commerce -- free from tariffs, U.S. Trade Representative Charlene Barshefksy says.

"We must act now -- not as trade policy usually does, to remove barriers -- but to prevent them from arising. That is the essence of our policy on electronic commerce," Ambassador Barshefsky told a May 5 meeting of the Economic Strategy Institute, a Washington policy research organization.

Barshefsky said recent successes in reaching trade agreements that "ease the development and dissemination of new technologies everywhere" represented "trade policy at its pro-active best." In particular she cited the recent Semiconductor Agreement with Japan, broadened to include Europe, South Korea and other major producing nations, and the three agreements reached last year in the World Trade Organization -- the Information Technology Agreement, the Agreement on Basic Telecommunications and the Agreement on Global Financial Services.

On intellectual property, Barshefsky said the United States along with its trade partners "see the value of a broader effort." Governments seeking to protect patents, trademarks and copyrights "must look ahead to prevent piracy of future technologies like digital video discs and address the threat of an explosion of on-line piracy through implementation of the World Intellectual Property Organization copyright treaties," she said.

In agriculture, Barshefsky said, "tariffs, quotas and export subsidies remain at the center of our agenda." Nonetheless, "we can also look ahead to broad reform and international standards that both reflect and promote scientific advances in agriculture," she said.

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

(Note: In the following text "billion" equals 1,000 million.)

(begin text)

I am very pleased to be here at the annual Economic Strategy Institute conference. It is a great tradition. It is great because it dares to think big. And that is what you have asked me to do today.

In my view, our trade policy faces three great challenges. At home, maintaining public support for trade policy as trade grows. Abroad, responding to the end of the Cold War, as three billion people in Southeast Asia, Latin America, Africa, China, Eastern Europe and the former Soviet Union turn toward the market and away from state control. And, third, looking ahead to ensure that trade policy keeps pace with the technological revolution that is changing the face of the world. And let me begin with that.

A WORLD TRANSFORMED

We can look at statistics -- 60 million people on the Internet today, over a billion by 2005. Fifty Web pages when President Clinton took office in 1992, 300 million today, over three billion by 2002.

Or we can look at daily life. Food supplies made more secure by new plant varieties that resist disease. Rural health care transformed as family doctors consult on-line with the Centers for Disease Control through telemedicine. Family vacations made easier and safer as the Global Positioning Service satellites provide immediate warnings of bad weather or traffic jams ahead.

Either way we see the same thing. Extraordinary change is here; and it is making life better. As Thomas Jefferson said of the young America, the world of the information age:

"though but a child of yesterday, has already given hopeful proofs of genius."

TECHNOLOGY AND TRADE POLICY

And it promises much more to come. Neither government, nor business, nor even the best-informed scientists and engineers, can predict the future of the scientific revolution. Alan Turing, one of the scientific geniuses of the 20th century, applying to the British government in 1945 for a grant to build one of the world's first computers, said he thought it could calculate range tables for field artillery and "count the number of butchers due to be demobilized in June 1946." He said it might also solve jigsaw puzzles. Within fifteen years, his work, together with that of a few other computer pioneers, had sent a man into space. A few years later it has transformed the world.

Our responsibility now is not to predict the innovations of the next decades. Rather, it is to set some ground rules that will encourage scientific advance; ease its passage from the laboratory to daily life; and ensure that its benefits are worldwide. And if we do it right the rewards -- in healthier lives, reduced hunger in poor nations, cleaner air and water, freedom of expression and inquiry, safer workplaces and much more -- will be greater than we can imagine.

POLICY AGENDA: MARKET ACCESS

That is the effort we have begun; and let me give you four examples.

The first is market access. Our efforts here really began in the early and mid-1980s. They were driven by concerns about our own technological leadership, and focused on specific disputes with Japan. The result was a series of bilateral agreements -- on semiconductors,computers, supercomputers, satellites, cellular phones, medical equipment, telecommunications, the NTT procurement agreement and the broadened semiconductor agreement of 1996. The Mutual Recognition Agreements with the European Union in telecommunications and other technology intensive areas such as pharmaceuticals are another example.

These agreements have won results. In Japan we see foreign semiconductor market share up from 8.5% in 1985 to 35.8% in the first half of 1997. Cellular phone subscriptions to the North America TAC system up from 22,000 in 1994 to 600,000 at the end of 1995. Growing market share in medical technology procurement. And deregulation measures in basic telecommunications, wireless cable, direct-to-home satellite services and cable TV.

But we now see opportunities to go beyond specific agreements on specific products, toward global rules that ease the development and dissemination of new technologies everywhere. And that is because open markets in technology also serve the interest of our trade partners. They can more easily export their own innovations, of course, but they also see the advantage of access to new medicines, software programs and specialized semiconductor chips that make their people more secure and their economies healthier. And thus we move towards international or global agreements, reached not so much to solve disputes as to take advantage of common interests. Trade policy at its pro-active best.

These agreements include the most recent Semiconductor Agreement with Japan, broadened to include Europe, Korea and other major producing nations. And more recently, the three agreements we reached last year under the WTO, which together lay the foundation for the economy of the 21st century.

-- The Information Technology Agreement (ITA) will eliminate tariffs on global information technology products over the next several years. Semiconductors, or computers, telecom equipment, integrated circuits -- the range of equipment that every factory needs to become safer, more productive, more able to meet the demand of individual customers. Even today these products make up about one in every thirty dollars of world GDP. And we are now negotiating ITA II with expanded product and country coverage.

-- The Agreement on Basic Telecommunications, which includes 70 countries and over 95% of world telecom revenue in an industry estimated at $750 billion. It gives U.S. and foreign companies access to local, long-distance and international service through any network technology, and allows them to acquire, establish or hold a significant stake in telecom companies around the world. Thus it replaces sixty years of national telecommunications monopolies and closed markets with market opening, deregulation and competition.

-- And financial services. Last December, we completed the Agreement on Global Financial Services, including banking, securities, insurance and financial data services. It covers 95% of the global financial services market and 102 WTO members. Their commitments include $18 trillion in global securities assets; $38 trillion in global (domestic) bank lending; and $2 trillion in worldwide insurance premiums.

POLICY AGENDA: INTELLECTUAL PROPERTY

The same phenomenon -- the advance of trade policy from specific disputes to global rules that advance science and recognize the mutual interests we and our trade partners share -- is also clear in my second example: intellectual property rights.

Intellectual property works -- pharmaceuticals, software, entertainment -- are often cheap to produce at top quality, once the initial very expensive research and development has been done. American companies and agricultural producers are the world leaders in these fields. We should not tolerate theft of their research.

Fifteen years ago the world's intellectual property standards were very weak. Many countries simply had no copyright, trademark or patent laws at all, Some saw such laws as obstacles to development. And we saw billions of dollars in losses for our own country every year. And so, in the mid-1980s, our efforts on IPR with began with bilateral negotiations, soon bolstered by the "Special 301 11 law, to simply win the passage of basic laws. And from there, we moved on to enforcement.

These efforts vastly improved the world's intellectual property standards. They remain very important, as we continue to use Special 301 to ensure passage and enforcement of laws, and will apply it to new areas like the emerging problems of CD and end-user software piracy.

But as we look ahead, both we and our trade partners see the value of a broader effort. If piracy of intellectual property is widespread, neither Americans nor foreign entrepreneurs will see much advantage in putting in the work that creates a new software program or an improved staple food. That will slow advances in every field from medicine to entertainment, environmental monitoring, travel and anything else you can imagine. It will prevent countries with weak standards from developing their own film, pharmaceutical and software industries, and it may bar their access to the most modem technologies in other areas.

And so we were able to set standards for the world through the TRIPS agreements in the Uruguay Round. That is a very profound change. And our task now is to broaden them, deepen them, and ensure that they keep up with the advance of science. We must look ahead to prevent piracy of future technologies like digital video discs, and address the threat of an explosion of on-line piracy through implementation of the World Intellectual Property Organization copyright treaties. And we must include innovations in other areas, such as biotechnology products and new plant varieties which arc resistant to disease or capable of growing in harsh conditions.

POLICY AGENDA: AGRICULTURE

And that brings me to my third example: agriculture, where trade is as old as civilization.

Our trade policies here again, begin with market access, fairness for American producers, and bilateral negotiations. Prior to the Uruguay Round agreement, agriculture was only a weak participant in the GATT system. We had little leverage over export subsidies, high tariffs and other policies common among agricultural importers and exporters. And with the Uruguay Round, for the first time we were able to discipline subsidies, reduce tariffs, and win an international commitment to continue reform through the "built-in agenda."

Tariffs, quotas and export subsidies remain at the center of our agenda. But we can also look ahead to broad reform and international standards that both reflect and promote scientific advances in agriculture.

The Uruguay Round's Agreement on Sanitary and Phytosanitary Measures, requiring trade restrictive measures taken to protect plant, animal and human health, to have a scientific basis, is the beginning. And the future will require much more.

The New York Times yesterday carried a fascinating story on the application of information technologies to farming, as productivity improves through better predictions of the weather, deeper analysis of soil and continuous monitoring of each part of a field. Biotechnology and genetic engineering are better known and even more impressive.

The potential for these advances to make agriculture more productive and to reduce hunger has no limit. But to reach this potential, we need to ensure open markets. And we must do it through broad agreement to renounce policies on importation and planting of these organisms, and the labeling of products containing them, with no basis in scientific principle.

POLICY AGENDA: GLOBAL ELECTRONIC COMMERCE

Having touched on the oldest form of commerce, let now me address the newest.

Today, 45% of all business equipment investment in America is in information technology. That will support a leap in electronic commerce, in the U.S. alone, from $8 billion today to $300 billion by the year 2000. This may make us think first of big companies and technological leaders. And Americans rightly take pride in the success of IBM, Microsoft, Intel, Cisco, Oracle, Netscape and others. But its benefits will be greatest in for people now often shut out of trade. A few minutes on the computer already finds the Hopi Nation in northern Arizona advertising kachina dolls to urban buyers, and warning them to protect the tribe's intellectual property by refusing to buy fakes. Or the manager of a real estate firm in Dhaka, the capital of Bangladesh, selling luxury condominiums to wealthy overseas Bengalis, noting that:

"the Internet has become an extremely practical medium through which to contact and inform our international and local clientele."

And we must act now -- not, as trade policy usually does, to remove barriers -- but to prevent them from arising. That is the essence of our policy on electronic commerce. In trade terms, the Internet is pristine. No member of the WTO considers electronic transmissions imports subject to duties for customs purposes. There are no customs duties on cross-border telephone calls, fax messages or computer data links, and this duty-free treatment should include electronic transmissions on the Internet.

We must not close off the possibilities even before they open up, Government must certainly fight crime and defend children. But its reflex should be to applaud and support, not to limit or regulate, new technologies and their commercial applications. So while government can help a great deal by supporting basic research, its first responsibility -- as the Vice President said at the launch of the Next Generation Internet project -- is to learn from medicine and "first, do no harm."

END OF THE COLD WAR

Let me now move to our second great challenge.

That is the end of the Cold Way. Regions of the world that were once Cold War battlegrounds -- Latin America, Southeast Asia and Africa -- are now by and large at peace, The ideological battles of the Cold War in these regions have ended as well, as they turn to the market for the prosperity. And so beginning about fifteen years ago, a billion and a half people have joined the world trade system. And we must help write the ground rules for their full integration into the trade system. Our creation of the Free Trade Area of the Americas; President Clinton's inauguration of the annual summit meetings at the Asia Pacific Economic Cooperation forum; the President's Africa policy and pending Africa legislation in Congress; all are part of this effort.

Equally large, and with effects even more profound, will be the integration of another billion and a half people -- the citizens of Eastern Europe, China, Indochina and the former Soviet Union. Our task is to bring these countries into the world trade system, on the basis of the rules created by the GATT and WTO over the past fifty years. As long as they remain outside the rules-based system that now includes most of the world's trading countries, the system will be incomplete, imperfect and subject to distortion from those who are not bound by its rules.

But their WTO admissions are a complicated task. While the Latin, Southeast Asian and African economies are at least familiar, the reforming communist countries often lack basic price mechanisms. They are only beginning even in theory to separate governments from business and banking. And at an even more basic level, they have little familiarity with the concept of the rule of law. So to strengthen rather than undermine the world's market-based rules, they should be brought in, but only on the right terms. The result must be enforceable commitments to open markets; transparent, non-discriminatory regulatory systems; and effective national treatment both at the border and within the domestic economy.

This is very demanding, both for the countries involved and for our own negotiators. And having just returned from China, I can tell you we have a ways yet to go. It will take patience and effort; but the reward will be worth the time and the effort.

In trade policy terms, the integration of these countries will make sure that standards of market access, intellectual property, and openness are truly accepted worldwide. And underlying this, the principles we seek to promote -- rewards for individual initiative, intellectual property rights, open flows of information -- are also the basis of the free markets, civil society and the rule of law. Thus trade policy will help us complete a broader effort to re-integrate China, Russia and the others into the world community. And by doing so, it will complete the work begun with the reintegration of Japan and Germany after the Second World War. That is, it will lay the foundation of an era of peace as well as an era of prosperity.

EQUALITY OF OPPORTUNITY

Finally, let us look to the third great challenge trade policy faces -- the challenge at home.

Any policy, trade or not, must always remember one essential point: it must work to the benefit of ordinary men and women. And this brings us to the final great challenge: ensuring that trade policy retains the support of citizens as trade grows. And as we see technology advance, and three billion people enter the world trade system, this will be no easy task.

As technology advances, Americans will need a new level of skill and education. Those who have these skills are already prospering, as jobs in the information technology and electronic commerce fields already pay 46% more than other jobs. And the future may be dazzling, as employment in the information technology industries doubles in the next ten years, from 1.2 million to 2.5 million and the value of electronic commerce soars.

By contrast, those who lack education and skills are at a disadvantage. Already today, if you have a college degree, unemployment is under 2%; but for those without high school degrees, it is over 7%. This disparity may well worsen as the years pass. And we must recognize and act upon that fact today.

So we must make education, from elementary school to college and on throughout life, must be available to every American. And we must ensure that worker training, health care, adjustment assistance and other services are guaranteed when workers change jobs or lose jobs through no fault of their own.

That is why the President has asked Congress to help hire 100,000 new teachers and link every school to the Internet. For lifelong learning programs to help older workers upgrade their skills, through Pell Grants, tax credits and tax deductions to finance returns to school. For broad reform in trade adjustment assistance. And increased funding for worker training

CONCLUSION

Let me then sum up.

If we adapt the right policies today, new technologies can revolutionize every walk of life. They can help people live safer, healthier lives. Make the air and water cleaner. Make governments everywhere more accountable to citizens. Give citizens more ability to become artists and entrepreneurs.

And the right approach is clear. It rests on an insight almost as old as America itself -- in fact, once again, to Thomas Jefferson.

Jefferson, as the author Timothy Ferris writes, was an amateur scientist and patron of research; founded the University of Virginia and originated our broader concept of public education; and was our early nation's great defender of individual rights. He did not pursue these things in isolation -- instead he saw that "science, education and liberty form a whole."

That whole is the good life. And his insight will serve the modem world, as it served the young republic, very well.

Thank you very much.

(end text)