01 June 2000

Text: Daley on E-commerce Growth Between U.S. and EU

U.S. Commerce Secretary William Daley has called for cooperation between the United States and the European Union (EU) on four issues to promote use of the Internet and electronic commerce.

In order for e-commerce and the Internet to achieve their full potential, Daley said, the two sides need to work together to improve consumer protection, intellectual property protection, Internet security and access to the Internet.

He spoke of those issues in Lisbon, Portugal, June 1 while attending the annual U.S.-EU summit meeting.

Daley said the same problem-solving attitude used by U.S. and EU negotiators to bridge the differences over protection of data transmitted on the Internet needs to be applied to these other issues.

Daley said the spread of the Internet in China will nurture democracy in the world's most populous country. Daley said promotion of e-commerce will be on the agenda of the summit of the G-8 industrial countries and Russia, which will be held in Okinawa, Japan, in July.

Following are terms and abbreviations used in the text:

-- billion: 1,000 million.

-- OECD: Organization for Economic Cooperation and Development.

Following is text as prepared for delivery:

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Remarks by U.S. Commerce Secretary William Daley
American Chamber of Commerce/American Club
Lisbon, Portugal

June 1, 2000

It has been a good few weeks. First, the European Union concluded its deal with China to enter the World Trade Organization. The biggest rooters for Europe to get a good deal were back in the United States -- because we all benefit.

Then last week, our House of Representatives voted for permanent normal trade relations, paving the way for China?s entry. It was a tough, emotional vote, but it is the right thing to do. The Senate will vote later in the month, and we will be working hard to secure the same results.

And this week, the meetings in Lisbon have been productive. The leaders talked about security issues, about Russia, about global warming, and AIDS. As the President said yesterday at the press conference, it was a good meeting that demonstrated the vitality and importance of our partnership.

On trade issues, old friends had some old spats. But we did see a new phase between the major partners geared toward the new economy, and one that I hope is less contentious. The leaders came to an agreement -- or I should say an e-agreement -- on online privacy protections. This is very important to American businesses -- it lets them interact online with their offices in Europe, without running afoul of European regulators.

Prime Minister Guterres has made great progress in bringing together the EU on e-commerce. Through his leadership, the June EU Summit will emphasize the job creation potential of e-commerce. Here in Portugal, the government is making great strides to bring the Internet to everyone, as libraries offer the Internet free of charge; and by next year, I understand the goal is to have all schools connected.

Today, I want to talk about America's Internet-driven public policies. But let me start with an observation. One of the things that surprises me as I travel around the world, is how many people have this feeling Americans are somehow taking over the world with the Internet.

No question it is important to us. One third of the growth of our economy -- and we are now in the longest economic expansion in our history -- is because of information technologies. As I look around this room, no question, American high-tech companies are very successful on world markets. This has helped lead to double digit job growth every year for information technology workers.

But, I think we need to put this in perspective. Yesterday, we announced that in the first quarter, Americans bought almost $5.3 billion in retail goods off the Internet -- e-tail sales as we call them. That is slightly more than was bought during the holiday season, showing on-line sales is not just for Christmas gifts. But, and here?s the perspective, the total spent by American consumers shopping online is still less than one percent of all retail sales in America. We are just at the beginning of this e-society. This is just year one of the Internet Century, and the more people we can connect around the world, the better off all of us will be.

Three years ago, when President Clinton and Vice President Gore came out with our first Internet policies on government's role, they said: let the private sector lead. Sometimes there are matters that require government action, but for the most part, let the private sector develop solutions, so government won?t mess things up.

They felt this way, because what makes the Internet the Internet, are its rapid technological change and its borderless nature. Both are totally foreign to government bureaucracy. Governments operate by developing a consensus -- a very, very slow process. And although the Internet knows no borders, governments' entire existence is based on borders.

This philosophy was pretty different than what we find in other corners of the world, including here in Europe. The privacy agreement the leaders struck this week illustrates that.

It took two years to bridge the differences between the American and European approaches to online privacy -- longer than any of us imagined. The number one concern Americans have online is privacy -- they want their private information kept private. Obviously, it is a concern here in Europe. But where Europe has a detailed government regulatory scheme, we let industry take the lead.

It is important we figured out how to solve our differences. If we failed to, multinationals could not transmit personally identifiable information about Europeans back to their U.S. offices. So if a company wanted to post its phone book online for internal use it would be a problem. Or if somebody placed a sales call and took notes and wanted to e-mail them to a colleague in America, they could not do it.

But we came up with a good solution. We have developed a safe harbor U.S. companies can voluntarily sign up for. They will self-regulate themselves to make sure they meet seven EU privacy principles. And if there is a problem, EU citizens can go to an independent body to take recourse.

I believe we need to find ways to bridge our differences in other areas, if the Internet is to meet its full potential.

One of these is consumer protection. Say a person in Lisbon buys a coat from some e-place. And the coat was to arrive by a certain date, and it did not. Or it came, and it was not what the consumer ordered, and the company has no effective return policy, and it?s located in another part of the world. Which rules will protect consumers? Those of the merchant?s country -? which could create a race to the bottom, where merchants locate in places that have weak consumer protection. Or the rules where the consumers live, which means every merchant must be ready to comply with the rules of every jurisdiction in the world. That could be a costly nightmare.

The OECD is working on this. The private sector is working on this. It is important we come up with a way consumers anywhere in the world can have access to a cheap and effective remedy.

Second, we need to come together on our policies on intellectual property protections. What is good about the Internet is it makes access to software and creative works easy. What's bad is it makes piracy easier as well. Someone has described the Internet as the largest and cheapest copying machine in the world.

The World Intellectual Property Organization has negotiated two treaties that protect copyrighted music, movies, or creative works sold online. They are of great importance -- our copyright industries annually contribute $250 billion to our economy. We were one of the early countries to ratify the treaties. But for them to take effect, 30 countries need to be on board, and we are just about half way there. This week, I encouraged my friends in the EU to sign on.

Three, is the issue of hackers. The security threats to the networks are very real. When hackers break in or disrupt some of America?s popular websites as they did in February, or when they steal credit card numbers and hold them for ransom, or when they send around an I love You e-mail -- it is a very serious problem. It is serious because when computers go down companies can lose customers or revenues. But it is bigger than that -- there is an economic risk. In the old economy if one plant that makes widgets goes down, it hurts. The impact in the new economy, where a network failure can bring down all of the phone service in a region, or all of the communications, or all the e-commerce is enormous.

This is the first time in American history the government alone cannot protect our infrastructure. We cannot hire a police force big enough. Nor would industry want us to. So, again, this is a case where industry has to come to the forefront. We want an atmosphere where companies are willing to share information with competitors, for the overall good of their industries and our economy.

Fourth, and finally is the digital divide, which was a topic of discussion here this week. In America, when we talk about the digital divide, we mean not everyone in our country has equal access to the Internet. There is a divide between rich and poor, between those who live in the city and the country, between racial groups. and there?s a divide between single- and two-parent families.

President Clinton has made closing the digital divide a big priority. When we release a report later this year on how we are doing, it would shock me if we weren't making good progress. As we see Internet access and computers getting cheaper, and mobile access take off -- something Europe is quite good at -- it will closer further.

The President has gone around America, talking about the problem. Early in his tenure, he set a goal to get every school online by the year 2000 and he?s nearly there. He has made it a priority in his budget. And he has enlisted the support of corporate America. I personally appreciate seeing the large number of American CEOs who have put the digital divide on their agendas. And not just anywhere on their agendas -- but on the top of the list. They are helping people who need it in America, and wherever they have businesses -- including Portugal.

I think there are some people here from Cisco Systems. They now have 3,500 networking academies around the world, training youth how to maintain networks. They started one in Portugal last year, and already 160 students are enrolled. I think there are some people here from Sun Microsystems, also. They have a joint venture with Telecel, to provide free e-mail and Internet access to all schools and universities, which is a pretty good way of closing the divide in Portugal.

There is also an international digital divide between countries, and it is immense. Only half of the 275 million people now online live outside North America. In Europe, I have seen numbers where penetration goes from a low of 5 percent in France and Italy, to 55 percent in Sweden. Only 3 percent of the world?s Internet users live in South America. There are more Internet users in New York City than on the entire continent of Africa.

I think governments around the world can -- and should -- create an environment that will encourage more Internet access. Today, I have told you about our approach. I have heard all about how the European Commission came to Lisbon in March, at a dot-com summit. They came up with an e-Europe plan to bring every European citizen, and home, and school, and business, and government office into the digital age. They have endorsed a plan to have a dialogue and share experiences on the digital divide. At the G-8 meeting in Okinawa the digital divide is an issue the leaders hope to put on its agenda. We may need to call it the e-8. `

Many countries will need to change. No question, they will need to have a competitive telecommunications market, because affordable and reliable telecom service is the foundation for the e-economy. They will need to develop an Internet infrastructure. They will need to create a legal framework, so that e-business can thrive. And they will need to build consumer and business confidence in e-commerce so that people will join the digital revolution.

This will not happen overnight. But the more people there are online, the better it is for business. And I mean that for businesses of all sizes -- this will make small and medium-sized businesses global.

It?s also good for democracy. Since I started the speech with China, let me end it with China. The Internet in China is growing faster than anywhere in Asia. One of the arguments in the debate in Congress, is that if we wire China, and everybody is connected to the Internet, China will change more rapidly. People will be able to have access to information they have never had before. They can define their future independent of the government's ability to control it more than ever before. That is whether you're talking about religion, or politics, or personal life choices, or anything else.

So, this Internet century is really an amazing thing. We have a technology that can change business in ways we have never seen, change the way we learn, the way we communicate, the way we shop, and maybe the way we govern. Maybe one day everybody will even believe the less regulation, the better, although maybe not in my lifetime. Thank you.

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