Memorandum by the Department of Trade
The Government welcomes the Sub-Committee's
inquiry. This memorandum addresses the main points in the Sub-Committee's
call for evidence: the Government stands ready to provide more
detailed information on particular issues.
2. e-Commerce (ie transactions based on
the electronic exchange and processing of information) is already
a key driver of economic growth both in the UK and globally. It
enormously reduces transaction costs, improves access to information
and thereby creates new opportunities for businesses and for individuals.
It takes us a step further towards a genuinely global marketplace,
by eliminating many of the barriers to effective communication
previously imposed by geographical distance. Using e-commerce
effectively is therefore crucial to our success in business, employment,
education and as an inclusive society. The pace of development
of the markets, methods of doing business and the supporting technologies
for e-commerce is accelerating rapidly.
3. This calls for an equally rapid and flexible
response from governments. Governments must organise themselves
in a coherent and well focussed way if they are to assist, rather
than hinder, the growth of e-commerce. In particular they must
adopt a coherent policy approach across the wide range of issues
affected at national, regional and global level. Such issues include
the provision of cheap and speedy access; user skills and awareness;
the security of transactions; privacy of information; dispute
settlement; consumer protection; applicable law and jurisdiction;
the relative rights and responsibilities of the providers, conveyers
and users of information; intellectual property rights; taxation;
and law enforcement.
THE UK APPROACH
4. In September last year the Prime Minister
announced his commitment to making the UK the best place in the
world for e-commerce. This is a central part of building a modern
knowledge driven economy in the UK. This strategy was set out
in detail in a report from the Performance and Innovation Unit
of the Cabinet Office, email@example.com. The report
advocates a market-led approach to encourage understanding of,
access to, and trust in, e-commerce, and puts forward policy recommendations
and a targeted action plan. The 60 recommendations accepted by
the Prime Minister cover the regulatory framework; the conditions
for businesses and consumers to place the same confidence in transactions
online as offline; awareness of the benefits and challenges of
putting businesses and citizens online; access; e-government;
5. To encourage trust, the Government is
pursuing a policy of co-regulation with providers and users. The
government sees its role as being to define goals from a public
interest perspective, and to ensure that there is an adequate
and up to date framework of law where necessary. Wherever possible
it looks to those closest to the market, both providers and users,
to implement agreed goals through non-legislative arrangements,
such as codes of practice, guidelines and voluntary schemes for
dispute resolution. These generally provide a more rapid and flexible
means of responding to changing market needs, and achieving international
consensus, than is possible through legislation.
6. The Internet Watch Foundation is a successful
example of this approach. It was set up in 1996 to combat illegal
content, notably child pornography, on the web and to help develop
rating and filtering tools to enable users better to control their
experience of the Internet. It has recently extended its activities,
appointed a new Chairman and streamlined its management structures.
The EU has followed a similar approach in its Internet Action
Plan, a programme to stimulate Europe-wide development of hotlines,
filtering software and awareness activity.
7. A recent initiative is the "Trust
UK" scheme, which was announced in the Government's consumer
white paper "Modern markets: confident consumers" in
July last year, and which will be launched to consumers in May.
TrustUK, a private sector body, will accredit e-commerce codes
of practice which offer on-line shoppers good standards of protection.
Traders who subscribe to accredited codes will display the TrustUK
electronic hallmark. This is designed to increase consumers' confidence
about doing business on the Internet through a recognised hallmark
for websites which adhere to codes of practice certified by TrustUK
as meeting best practice standards in consumer protection.
8. A further example of an important partnership
between Government and industry is in the development, by the
Alliance of Electronic Business, of a self-regulatory scheme for
the approval of cryptography service providers (the so-called
"T" Scheme). The Government intends that this Scheme,
if it meets the objectives set, would replace the proposed statutory
arrangements in the Electronic Communications Bill currently before
9. Existing legislation applies online just
as it does offline. However the government recognises that some
legislation may have to be updated and that additional legislation
is needed to secure the legal integrity and certainty of electronic
transactions. It has therefore played an active part in supporting
the development at EU level of directives and regulations dealing
with the validity of electronic signatures (the Electronic Signatures
Directive (1999/93/EC) which came into effect on 13 December 1999)
and the basic legal framework for electronic commerce including
such matters as place of establishment, online contracts, information
for consumers, applicable law and liability of intermediaries
(the Electronic Commerce Directive which was approved by the Internal
Market Council on 7 December 1999 and will shortly be considered
again by the European Parliament). In the consumer field, the
basic rules are set out in EU Directive 97/7 on the protection
of consumers in respect of distance contracts, which has to be
implemented by June this year. There are also a number of other
directives, draft directives and regulations with implications
for electronic commerce in such areas as data protection, distance
selling, copyright and applicable law and jurisdiction. The Commission
has listed some 97 legislative and non-legislative e-commerce
related initiatives, described in the Annex to this memorandum.
At national level the Electronic Communications Bill creates legal
certainty for the use of electronic signatures; allows for a voluntary
approvals scheme for cryptography service providers; and helps
facilitate electronic government.
A COMPETITIVE TELECOMMUNICATIONS
10. The Government is also actively pursuing
measures to promote access to cheap and fast telecommunications
services, which are the essential foundation for competitiveness
in electronic commerce, through measures to stimulate competition
in the UK and other European markets and overseas. These include
in the UK the auctioning of spectrum for new mobile services,
the introduction of competition in digital TV over three different
platforms, and the release of further spectrum for broadband wireless
fixed access later this year. In Europe the Government is supporting
the Commission in its activities to implement the single market
in telecommunications which took effect in 1998 and to develop
a more robust and up-to-date system of single market regulation
to be introduced by 2003.
11. The Government is playing a leading
part in negotiations in the multilateral institutions to bring
about a more consistent global approach to e-commerce issues.
The OECD has promoted wide-ranging discussion between the governments
(both its own members and other substantial economies), representatives
of business interest and representatives of consumer and other
social bodies, notably at the Ministerial Conference on Electronic
Commerce in Ottawa in October 1998 and follow-up meetings. The
Conference launched action on taxation, consumer protection, protection
of privacy and authentication. The OECD adopted e-commerce consumer
protection guidelines in December last year. Important work is
also being pursued through other international institutions, such
as signature authentication through UNCITRAL (United Nations Commission
on International Trade Law), private international law through
the Hague Conference, the internet domain name system through
the Government Advisory Committee to ICANN and intellectual property
rights through the WIPO. Discussion on trade related matters is
scheduled to begin in the WTO soon.
12. There is a similarly wide-ranging programme
of activity at EU level. Together, the Electronic Signatures Directive,
the Electronic Commerce Directive, and the Telecommunications
Review, represent the core of a legal framework for ensuring a
competitive Community-wide single market for electronic commerce.
In the consumer field the Government's priorities are cross-border
out-of-court dispute resolution, co-operation between national
enforcement authorities and closer harmonisation in key areas
of EC consumer legislationwhere differences in national
implementation can be a barrier to e-commerce.
13. The European Councils in Berlin and
Helsinki last year commissioned a comprehensive plan for action
at Community level to promote the information society. The European
Commission's initial response was the document "eEuropean
Information Society for All" published on 8 December 1999.
Progress will be reviewed at the Special European Council in Lisbon
on 23-24 March with a view to confirming a full action plan at
the European Council in Feira in June.
14. The Government strongly supports these
European initiatives and is working with its European partners
to agree a demanding and effective action plan. It is crucial
that action at European level should be consistent with, and reinforce,
a coherent global approach. The Government particularly welcomes
the proposals in the "eEurope" paper dealing with cheaper
Internet access, accelerating e-commerce and improving education
and training opportunities. It regards these as the essential
foundations for future action, creating the market conditions
that will facilitate the other proposals in the paper.
15. In all administrations the policy issues
presented by e-commerce are the responsibility of many different
parts of the government machine. Where the arrangements for policy
coordination across government are not strong a coherent approach
may only emerge at a high level and very late stage and there
is scope for different parts of the administration to develop
their policies on an inconsistent basis. There is a wide range
of national approaches to policy co-ordination in this area, in
part reflecting different political circumstances and administrative
traditions. Some countries have a tradition of close policy coordination,
others do not. Some have put new arrangements in hand for e-commerce,
others are relying on traditional policy responsibilities. Current
arrangements for e-commerce are under review in a number of countries
in the light of its rapid growth.
16. From the perspective of the UK, which
for the past century has practised relatively strong central coordination
of policy, the PIU report argued that focus, prioritisation and
adequate resourcing within government, and the interface with
the private sector, is essential for the successful development
and coordination of e-commerce policy. Clear political leadership
is a prerequisite. So also is the vigorous management of day to
day co-ordination and monitoring of programmes and targets.
17. Accordingly, in September last year
the Prime Minister appointed Patricia Hewitt as Minister for Electronic
Commerce. In addition to ministerial responsibilities within the
Department of Trade and Industry (which leads on general telecommunications
and e-commerce policy), she is responsible for the coordination
of policy on information age-related issues across government.
She is supported by a senior official, the E-Envoy, with a small
secretariat based in the Cabinet Office. Ian McCartney, the minister
of state at the Cabinet Office responsible for modernising government,
has ministerial responsibility for driving e-government forward.
Patricia Hewitt also chairs a group of Ministers known as the
Information Age Ministerial Network, the purpose of which is to
ensure that the social, economic and e-government strands of the
Government's information age programme are combined as an integrated
18. The USA was one of the first countries
to address the coordination of e-commerce related issues in central
government (there are also an increasing number of initiatives
at state level). The central agencies involved include the Departments
of Commerce, Treasury, State, Justice, Agriculture, and Health
and Human Services, the US Trade Representative's Office, the
General Services Administration, the Small Business Administration,
the Federal Communications Commission and the Federal Trade Commission.
Until his departure from office in late 1998, the US Government's
policies were co-ordinated by a Special Advisor to the President
on e-commerce. The current chair of the Working Group is the Vice
President's chief domestic policy advisora measure of the
Vice President's strong personal interest. The Working Group's
programme for the year is set out in Presidential Directives,
with an annual report detailing progress against specific objectives.
19. In Canada and Australia the organ of
government responsible for communications matters has lead responsibility
for e-commerce. Thus Industry Canada has led and co-ordinated,
through an Electronic Commerce Task Force, the Canadian Government's
approach. In Australia, this role is fulfilled by the National
Office for the Information Economy, part of the Department of
Communications, Information Technology and the Arts, whose minister
chairs the cabinet subcommittee (the Council for the Information
Economy). The same minister also chairs the On-line Council, the
committee of all state and territory ministers for information
technology and information economy. In a similar way, in Japan
the Ministry of Posts and Telecommunications and the Ministry
of International Trade and Industry work together on e-commerce
with co-ordination from the Prime Minister's office.
20. Elsewhere in Europe the most thorough
attempt at specific co-ordination has probably been made in France,
where coordinated action at national and international level is
one of the objectives spelt out in the Government's Information
Society Action Programme (ISAP) launched in January 1998. At the
top level there is a coordinating interministerial committee,
chaired by the Prime Minister, which is also responsible for monitoring
implementation of the ISAP. This met once in 1998 and once in
1999; another meeting will be held this year. At official level
the Government has established a network of Information Society
representatives, one from each Minister's "cabinet"
together with other senior officials from key ministries. In addition,
for electronic commerce, a task force with a wide-ranging co-ordination
and reporting role has been set up by the Finance Ministry under
Francis Lorentz, a special advisor on e-commerce to the Prime
Minister. It structures its activity around working groups involving
numerous participants from both the public and private sectors.
Other officials have also been appointed with more specific co-ordinating
roles in relation to the information society for international
negotiations, for interoperability of IT within government and
for online government.
21. In Italy, the Government's overall approach
to e-commerce is coordinated by a junior Minister in the Prime
Minister's office, the recently created post of Under-Secretary
for Technological Innovation. He is supported by a taskforce (the
Forum for the Information Society). Other Government Departments
have responsibility for specific aspects of policy relating to
e-commerce. The most important of these is the Industry Ministry.
Similarly, in Portugal responsibility for e-commerce falls to
the Minister for Science and Technology who has set up an inter-departmental
task force called "Mission for the Information Society"
which is closely involved in preparing the conclusions of the
Lisbon Special European Council on e-commerce.
22. In Spain, policy for e-commerce remains
with the Communications Secretariat of the Infrastructure Ministry,
which leads on telecommunications, the information society and
new technology. They, along with representatives from the Justice
Ministry, attend all meetings in Brussels on the e-Commerce Directive.
Domestic meetings on e-commerce include representatives of the
Finance Ministry, the Ministry for Consumer Affairs, and the Culture
Ministry (for intellectual property rights). In November 1999,
the Communications Secretariat published a Green Paper outlining
measures to date on e-commerce and future development plans.
23. Similarly, in Germany policy co-ordination
on e-commerce is primarily the responsibility of the Federal Economics
Ministry which also has overall responsibility for telecommunications
and media policy, but other ministries are also deeply involved
in e-commerce matters. Thus the Federal Ministry of Justice has
a key and increasing role and it is likely that the Chancellery
will play a greater role in co-ordinating and driving policy if
the Chancellor becomes more personally involved in the wider economic
and employment opportunities presented by e-commerce.
24. At EU level the agenda set out in "eEurope"
cuts across the responsibilities of a number of different Council
formations and Directorates General of the European Commission.
Thus recent work on the Electronic Commerce Directive has been
led by the Commissioner for the Internal Market and considered
by the Internal Market Council, while the Telecommunications Review
is the responsibility of the Commissioner for Enterprise and the
Information Society and the Telecommunications Council. The lead
responsibility for "eEurope" rests with officials under
the latter Commissioner. The organisational implications of the
follow-up of an agreed eEurope action plan from June 2000 have
not yet been addressed, as far as we are aware.
25. To promote coherence there is a working
group of interested Commissioners and there are other working
groups at official level. The last European Council, in Helsinki
on 11 December, announced the intention of reducing the total
number of Councils to 15; details and timetable are still under
discussion. The recent proposals for administrative reform of
the Commission did not address coordination of cross-cutting issues
such as e-commerce.
26. The Government strongly supports the
general thrust of the EU's overall policy towards e-commerce,
in particular the development of specific action plans with demanding
targets, the development of a robust and competitive single market
and the adoption of minimum effective intervention wherever possible
27. The Government looks to the forthcoming
European Councils in Lisbon and Feira to provide the high level
political impetus to complete the preparation of a high quality
action plan by June. But it considers that if the action plan
is to be implemented effectively, and if the plan is to be developed
in the future to provide a speedy and effective response to the
challenging pace of change in e-commerce, it will be essential
to provide more effective and appropriate institutional arrangements
to co-ordinate and carry forward policy development both in the
Council and in the Commission.
25 February 2000