Select Committee on European Union Minutes of Evidence

Memorandum by the Department of Trade and Industry


  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.


  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, 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; and monitoring.


  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 Parliament.


  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.


  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 legislation—where 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 "eEurope—an 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 strategy.

  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 advisor—a 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 through co-regulation.

  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

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