25 July 2000

U.S. Commerce Official Discusses E-Commerce and the European Union

Washington -- Robert LaRussa, acting under secretary of commerce for international trade, discussed his recent trip to Europe at a Department of Commerce briefing July 24. In Brussels, LaRussa met with senior commerce officials from the European Commission (EC) and its member states to follow up on the safe harbor initiative, as well as U.S. concerns over proposed European taxation of digital content -- downloaded material such as videos, games, music and software -- and other issues.

The European Union's 1998 data privacy directive bans the transfer of personal data to the United States and other non-EU countries that do not meet the EU standard for adequate privacy protection. On May 31, 2000, the United States and the EU announced a "safe harbor" Data Privacy Accord that was intended to maintain transfers of information from Europe to the United States and assure that U.S. companies meet the EU requirements for privacy protection.

Despite opposition from the European Parliament, the EC recently announced that it would adopt the safe harbor agreement with the United States.

LaRussa noted that the United States favors a private sector-driven approach to e-commerce, including data privacy, in contrast to Europe's use of comprehensive privacy legislation. The safe harbor principles, which are the result of more than two years of high-level discussions between the sides, help bridge the differences between these approaches.

LaRussa said he assured the EC and its member states that the United States remains "flexible.... This is an evolving process -- we made up safe harbor in order to deal with a difficult situation where we had two different systems basically in conflict with each other. It could work really well, but we certainly didn't anticipate every problem that we possibly could have.... I think flexibility is really the way to make this happen."

He stressed the importance of engaging in dialogue and forming a bilateral mechanism with the EC and its member states to discuss this and other e-commerce issues -- "not a formal mechanism, but something informal where we can discuss these issues before we get wrapped up in three-year negotiations on them."

Another focal point for LaRussa's meetings in Brussels was a European Commission draft law made public in June, which proposes value-added taxes for digital products such as music sold to and downloaded by customers in European Union countries. The Clinton Administration is concerned, he said, and sees such taxation as counterproductive to Internet and e-commerce growth.

"You've got sellers all over the place and buyers all over the place, and a lot of interaction results," LaRussa said, but if there are different jurisdictions acting under different laws -- such as non-European companies selling cybergoods to customers in Europe -- and "it can be very inefficient, costly, and slow down growth on the Internet if you don't do it right."

He highlighted the need for both the United States and Europe to take a careful look at the analysis on e-commerce taxation that is to be conducted by the Organization for Economic Cooperation and Development (OECD).

"What we would like to do," he said, "is ask the Europeans to slow down enough" so that the OECD can look at the taxation issue in a broader context and all of the industrial nations can work it out jointly, as opposed to having multiple systems and jurisdictions.

LaRussa said the focus of the U.S. International Trade Administration (ITA), which he heads, is on the digital economy. "From a very broad perspective, this is my priority for the rest of the Clinton Administration," he said.

At the briefing, LaRussa also mentioned a 12-point action plan to be introduced by President Clinton aimed at addressing U.S. steel industry concerns over high levels of steel imports. He also discussed the debate in Congress over granting China permanent normal trade relations (PNTR) status.

(The Washington File is a product of the Office of International Information Programs, U.S. Department of State. Web site: http://usinfo.state.gov)