Select Committee on European Union Fourteenth Report



117. In this chapter we look at what governments are doing in the United States, in five EU Member States, in the United Kingdom, and in the OECD. We also give a brief survey of the attractiveness of various countries for potential IT investors.

118. The United States' experience of IT is longer and more extensive than that of the EU or of other countries and organisations. It is characterised by five principles which establish the primacy of the private sector and set conditions on the role of government. The United States is the dominant force in IT. More United States companies and customers use the Internet than anywhere else in the world. Most do so through a PC. The United States Administration plays a leading role in international fora on IT issues.

119. The Nordic States are the furthest advanced of the EU Member States in exploiting IT for both commercial use and for delivering government services. A higher proportion of their populations has access to the Internet. Through companies such as Ericsson and Nokia, they are currently at the forefront of advances in Wireless Application Protocol (WAP), ie mobile telephony. The three continental EU States exhibit different approaches to the promotion of IT: France favours strong government direction; Germany prefers to let the private sector set the pace, though not to the extent that the US does; Italy, which has a high use of mobile telephony but low use of PCs, emphasises the opportunities offered in applying IT to governmental structures. France and Germany are wary of US style liberalisation of telecommunications and protect national companies.

120. While the United Kingdom shares, to an extent, the United States' attitude to IT, it is bound by legislation deriving from the transposition of EU Directives and legal instruments. The United Kingdom's embrace of the liberalisation of telecommunications, promotion of IT and of business generally is applauded in industry. The Government's plans for applying IT to Government services and procurement are still in their infancy.

121. We end with a brief view of IT issues in OECD and elsewhere in the world.

The United States of America

122. e-Commerce and the Internet emerged from US Department of Defense investment in military technologies and the linking of American universities. It is not surprising, therefore, that the Americans are e-commerce pioneers. The first draft of an Electronic Commerce Strategy Proposal was posted on the Internet for public comment in December 1996. In July 1997, President Clinton issued A Framework for Global Electronic Commerce, and the Presidential Directive on Electronic Commerce. These set out the principles governing the new technologies:

  • the private sector should lead;
  • governments should avoid undue restrictions on electronic commerce;
  • where government involvement is needed, its aim should be to support and enforce a predictable, minimalist, consistent and simple legal environment;
  • government should recognise the unique qualities of the Internet; and
  • electronic commerce over the Internet should be facilitated on a global basis.

123. In his 1997 and 1998 Presidential Directives on electronic commerce, President Clinton asked Vice President Gore to oversee the work of the "Working Group on Electronic Commerce". The Working Group, which is charged with developing and implementing the Administration's policy on electronic commerce, comprises representatives from the White House and the principal federal agencies involved in electronic commerce, including the Departments of Commerce, Treasury, State, Justice, Agriculture, and Health and Human Services, the US Trade Representatives' Office, the General Services Administration, the Small Business Administration, the FCC, and the Federal Trade Commission.

124. Although United States' users represented approximately half of those online world-wide in September 1999, the use of the Internet is growing faster outside the United States, where the numbers using the Internet have increased from approximately 20 million to 80 million in less than two years. But the United States is still the benchmark. In B2B, for example, Ford Motor Company, in partnership with Oracle Corporation, recently announced plans to develop an automotive e-business supply chain to streamline its 80 billion dollar annual purchasing transactions with its more than 30,000 suppliers and 300 billion dollar extended supply chain. Similarly (and on the same day), General Motors with its partner, Commerce One, announced its own electronic commerce initiative to develop the world's largest "virtual marketplace" for a wide array of products, raw materials, parts and services. Some companies have completely re-engineered their businesses to take advantage of the productivity improvements made possible by the Internet, for example, Cisco Systems uses the Internet in virtually all facets of its business.[29] Projections for the B2B share of the growing e-commerce market in the United States rises from a base of 43.1 billion dollars in 1998 to 1,330.8 billion dollars in 2003.

125. A notable aspect of the United States approach has been its belief that it has a sense of global mission. The Framework for Global Electronic Commerce principles has shaped work-plans, guidelines, tools and policy recommendations in organisations such as OECD, the Asia Pacific Economic Co-operation (APEC) forum, and the Free Trade Area of the Americas (FTAA). Since publication of the Framework for Global Electronic Commerce, the United States has signed bilateral agreements with the Netherlands (October 1997), Japan (May 1998), France (June 1998), Ireland (September 1998), Korea (November 1998), Australia (November 1998), Egypt (October 1999).

126. On issues of consumer protection, the United States has depended on self-regulation. In August 1999 the Electronic Commerce Consumer Protection Group was formed and included a number of industry leaders such as America Online, American Express, AT&T, Dell Computer Corporation, IBM, Microsoft, Time Warner Incorporated, and Visa USA Incorporated. When we visited Washington in April, we were struck by the informal, but close, relationship between the Administration and the private sector.

127. The US Administration is also concerned to help bring benefits of the Internet to developing countries through US AID programmes. A similar concern for the disadvantaged in the United States has led to the setting up of a number of initiatives. The United States has also sought to ensure that all WTO governments refrain from imposing customs duties on electronic transmissions. It was expected that the moratorium on tariffs would have been endorsed and extended at the WTO's Third Ministerial Conference in Seattle in November 1999. The United States still expects this to happen when the Third Ministerial Conference resumes.

128. Congress agreed a moratorium on additional taxation relating to e­commerce and, in the early part of this year, extended the moratorium. While, in part, this reflects the principle that "government should avoid undue restrictions on electronic commerce", it is also evidence of the difficulty that the United States has encountered on the issues of taxation, which is a competence shared by state as well as Federal government, and indeed at levels beneath that of the state governments.

129. The United States has expressed concern about developments in the European Union. EU Directives on data protection, in particular, could have caused difficulties for the American, private sector-led, self-regulatory system, but an agreement between the US and the EU for the mutual recognition of what the Americans call "safe harbors" appears to have resolved this problem.[30]

130. The EU is worried about the trend in US policy on patents.[31] US companies have begun to patent Internet business systems and services, rather than specific innovatory discoveries.

131. Because we wanted to investigate the problems of co-ordination at United Kingdom national level and also within the EU institutions, we took the opportunity during our visit to Washington to see how the Americans were tackling this subject. The American experience has not been particularly good. Many Departments and Agencies at the Federal, State, and local levels have interests without clear primacy or direction. Co-ordination is poor, and inter-agency funding has been difficult without clearly designated arbitrators.[32] At State level, however, the Commonwealth of Virginia has demonstrated an impressive ability to co-ordinate policy. It seems to have done this primarily by the appointment of a powerful Secretary for Technology, who reports directly to the Governor. He chairs a committee which comprises state officials and industry. Already, citizens of Virginia have a wider range of access to government services electronically than is the case elsewhere in the USA.[33]

132. According to Cooper and Friedlander,[34] the factors which account for the US dominance of the new technologies include:

  • historically, strong basic research system, government-funded and significant interaction with corporate laboratories;
  • a well-developed system for exploiting research;
  • availability [and nature] of 'angels', 'incubators', venture capital, and a robust equity market;
  • a history of superior performance in systems and manufacturing process engineering;
  • historically, the US government, particularly the Department of Defense, as an early consumer of high-risk technologies;
  • fewer government barriers to innovation (but problems over intellectual property and anti-trust);
  • greater societal acceptance of change; and
  • a tax structure conducive to personal investment and risk-taking.
  • For Americans, Europe appears to be characterised by:
  • too much concern for top-down government planning and stimulation;
  • too many claimants to "world leader in e-commerce" status;
  • excessive concern for government-led development and incentives; and
  • conflation of key issues, for example consumer protection / fraud / data privacy / information security.[35]

134. The US Administration has established a statistical base for measuring e-commerce as a distinct element in overall economic activity.[36]

Other EU Member States: Sweden, Finland, France, Italy and Germany

135. We received evidence, in various forms, from five Member States.


136. Sweden, like Finland and the other Nordic Member States, represents that group of Member States which are furthest advanced in the application of IT, both to commerce and to government services. The reasons for this progress, apart from having spotted the importance of IT at an early stage, seems to be the presence of the major manufacturing telecommunications company, Ericsson, and a relatively small, well-educated population scattered over a large geographic area.

137. In their evidence to us, the Swedish Ministry of Industry, Employment and Communications identified trust—secure communications— and familiarity with the technology, as well as easy access, as being the ingredients for creating confidence and stimulating e-commerce.[37] Since 1 January 1998, Swedish employers have benefited from tax reductions on PCs provided to their work force. This has led to a widespread uptake of the technology. By March 2000 there were PCs in 58 per cent of Swedish homes. The government was conscious of the importance of improving Information and Communication Technology (ICT) skills at different levels—schools, universities—as well as for the work force. They were also introducing measures to support SMEs.

138. The Swedish government welcomed the Commission's initiative, the eEurope Action Plan. It believed that "Europe should aim for a technically neutral legal framework for secure electronic communication, in order not to restrain new technical innovations"[38] and added that "the future system must also be accepted outside the EU".

139. The Swedish government believes that codes of conduct or some other form of self-regulation have advantages compared to traditional legislation. Technical development in this area is very fast, and there is a need for more flexible regulation than traditional legislation. The Swedish government's view is that various national and industry-based initiatives for self-regulation should be co-ordinated, and that the Global Business Dialogue (GBD) would provide a suitable venue for this.

140. The Swedish government adds that there is a need for some kind of organisation that, at a European level, could be a focal point to support the development of co-ordinated approaches to e-commerce. It suggests it should operate in a networked way, drawing on the centres of competence in each of the Member States. Such an organisation should "support policy development in the Commission, and could comprise the following functions:

  • IT observatory and the gathering of best practices
  • benchmarking and follow-up on targets (eg from the eEurope Action Plan)
  • development of common agreements and voluntary standards as the basis for new products and services."


141. Finland enjoys a similar reputation to Sweden in being one of the leaders in the new technologies in the EU. It was the Finnish presidency which launched the eEurope Action Plan and the Finnish Commissioner, Erkii Liikanen, in his capacity as Commissioner for Information and Enterprise, remains the driving force within the Commission for the promotion of e-commerce. Finland has Europe's largest company, Nokia, which is a leader in the new technologies, particularly in mobile telephony, widely regarded as offering Europe an advantage over the United States.

142. We have taken evidence from the Finnish Parliamentary Committee for the Future, in the form of that Committee's presentation to the Finnish Parliamentary Grand Committee[39] on the eEurope Action Plan. The Committee for the Future, which reported in March 2000 (ie before Lisbon), was critical of the content of the eEurope Action Plan on the grounds that it offered no specific solutions. The Committee complained that the speed with which this Action Plan had been compiled meant that the Member States had not been effectively involved in discussing it during the preparatory stage.

143. The Finnish Parliamentarians were most concerned by the disparity between the United States' performance and that of the EU Member States. They argued that the eEurope Action Plan concentrated on subjects important to the citizen, but the Action Plan did not focus effectively on the "toughest areas of IT—the digital economy, e-commerce, and online business-to-business dealings".[40] Sufficient attention was not being paid to research or commercial exploitation and innovation. Nor was adequate attention given to accelerating the setting up of new IT companies, or of increasing the size of SMEs which had entered the market. The Parliamentarians' judgement was that the eEurope Action Plan had tended to push the interests of the business economy into the background.

144. The Finnish Committee suggested that the EU should establish ambitious objectives for Europe's future competitiveness in those areas where Europe enjoys a lead over the United States. These include:

  • Internet and other communications based on cellphones;
  • service in wireless communications and IT;
  • digitalisation and especially its use with television;
  • smart card technology and its applications;
  • construction of future "smart" houses and flats equipped with modern data technology; and
  • technology and expertise connected with health care ageing and welfare services.

145. The Finnish Committee also pointed up the shortage of skilled workers. It estimated that Europe had half a million vacancies in IT industries and believed that the number would triple by 2002.


146. "The French market is showing the fastest growth rates with 47 per cent market growth in 1999 compared with 33 per cent in Britain and 22 per cent in Germany."[41]

147. Twenty years before the rest of Europe, France entered the Information Age with the creation of the Minitel system.[42] This system accustomed French consumers to Information and Communication Technology (ICT), but because it was a closed system, it delayed the French take-up of the global Internet. Since January 1998 when France published a government action plan entitled Preparing France's Entry into the Information Society[43] (PAGSI), the French government and industry have moved with commendable speed.

148. At the same time, the government established the administrative apparatus to drive forward and monitor the implementation of this programme. A top level inter-Ministerial committee was established, chaired by the Prime Minister. Senior officials with lead responsibility for Information Society issues were designated in each Ministry and within each Minister's private office (Cabinet). An official within the French Foreign Affairs Ministry was given special responsibility for co-ordinating the government's position on the Information Society within international fora. By August 1999, France had made striking progress. Fifteen million French people had acquired mobile phones, computers were selling faster than TV sets, and the number of Internet users had increased by 45 per cent over the previous six months. In October 1999, the government published a consultation document in preparation for a major piece of primary legislation to be introduced into parliament at the start of this year—an Information Society Bill.

149. The French Presidency, which began on 1 July 2000, set itself three specific "Internet" priorities for the Telecommunication Councils in October and December:

    (a)  to adopt a community programme to promote European content and linguistic diversity on the Web;

    (b)  to agree a Council resolution on Internet governance; and

    (c)  to agree Council conclusions on the creation of a ".eu" suffix.

They will also need to continue work on the draft Copyright Directive.

150. The French are strongly convinced that progress in e-commerce and in the application of the eEurope Action Plan depends to a considerable extent on government intervention. As the Deputy Under-Secretary for Industry, Economic and International Affairs, M. Battistelli, said in evidence:

    "We have a tradition in France of public authorities trying to show the way when we consider that the market by itself is not in a position to do it."

  He added later in his evidence, "but we are more and more business-orientated". Other French witnesses[44] pointed out that the state had a duty to support the consumer.

151. The French government has a system similar to that of the United Kingdom, in that a Minister, the Minister in charge of Industry, Telecommunications and Public Services, has been appointed as the Minister with prime responsibility for the new technologies. The French had an E-Envoy equivalent—M. Francis Lorentz, a former CEO of the French IT company, Bull. He resigned just before the Sub-Committee visited Paris, but it was generally expected that a successor would be appointed soon. One element of the French system which caught our attention was the appointment of IT experts in the various regional authorities.

29   Towards Digital E-Quality, 2nd Annual Report, US Working Group on Electronic Commerce, 1999. Back

30   However, the European Parliament's Committee on Citizens' Freedoms and Rights, Justice and Home Affairs, voted on 28 June to adopt a report expressing doubts over the effectiveness of personal data protection in the United States. (European Report No. 2512 (V) 28 June 2000). Back

31   M.Battistelli, Deputy Under Secretary for Industry, Economic and International Affairs, Q 1330. Back

32   Dr Jeff Cooper, Director, and Amy Friedlander PhD, Associate Director for Research, Center for Information Strategy and Policy, Science Applications International Corporation, Appendix 5. Back

33   The Honorable Donald Upson, Appendix 5 and QQ 956-959. Back

34   Dr Jeff Cooper and Amy Friedlander PhD, p 428 et seqBack

35   Dr Jeff Cooper and Amy Friedlander PhD, p 428 et seqBack

36   Dr Robert Shapiro, Under Secretary for Economic Affairs, US Department of Commerce, "Information Technology, the Internet, and Influence on the World Economy", speech at the 593rd Wilton Park conference 'e-Commerce Governance', 21-23 February 2000. Back

37   Ministry of Industry, Employment and Communications, Stockholm, Sweden, p 481. Back

38   ibidBack

39   The Committee which deals with EU affairs in the Finnish Parliament. Back

40   Committee for the Future, Finland, p 411 et seqBack

41   NOP Internet Statistical Backgrounder for Launch of Citizens Online Back

42   Elementary computer terminal offered (initially free of charge) to all subscribers to the public network. Back

43   M Brégant, Head of Sub-directorate Programmes and Forecasts Service for Information Society and Technologies, Q 1321. Back

44   M Spitz, General Rapporteur for Electronic Commerce Task Force, Q 1325. Back

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