20 February 1999
Source: http://www.usia.gov/current/news/latest/99021904.clt.html?/products/washfile/newsitem.shtml

19 February 1999

### JONATHAN SPALTER ON ELECTRONIC COMMERCE

    Washington -- The rise of electronic commerce, or ecommerce, via the
    Internet will effect a revolution in the way people do business in the
    near future, according to USIA Chief Information Officer Jonathan
    Spalter.

    Spalter discussed the growth of electronic commerce, the Clinton
    administration strategy for dealing with it, and the implications for
    government and for the workplace, in a February 16 speech in Lyons,
    France, at a conference sponsored by the French Ministry of Labor.

    Following is the text of Spalter's remarks:

    (begin text)

             ELECTRONIC COMMERCE AND THE NEW ECONOMIC ERA
                          By Jonathan Spalter

    INTRODUCTION

    Good afternoon ladies and gentlemen. I'm delighted to be here and I
    want to thank the Institut National du Travail for hosting this event.

    I'm particularly delighted to be in Lyon, a city credited with being
    an economic pioneer in many areas, including the establishment of the
    first stock market in France -- in 1506. I wish I could say I've
    always known that, but I do my homework before giving speeches -- I
    hope accurately!

    I understand this audience is an interesting mix -- people selected
    from all parts of France representing labor unions, corporations, and
    public administrations. I think that is appropriate. For there is no
    question that if electronic commerce is to achieve its maximum
    potential, it will require the efforts and cooperation of all these
    groups as we move into what I believe will be the most exciting era of
    economic progress the world has ever witnessed.

    In my talk today I want to concentrate on three major aspects of this
    issue:

    -- First, the surge in ecommerce over the last few years, the
    implications of this trend, and my view of what lies ahead. I also
    will discuss U.S. policy positions.

    -- Second, the implications of ecommerce and the new economic era for
    government. I'll use as an example foreign affairs agencies since
    that's the area of government in which I work.

    -- Third, I'll talk about an area of particular interest, I believe,
    to the corporate and labor leaders here - and that is the effects of
    ecommerce, the Internet and globalization on the workplace.

    Since I am an American, I'm sure you'll understand if I boast a little
    about the progress being made in the United States in boosting
    ecommerce. There is a European jest, first attributed to your famous
    prime minister, Georges Clemenceau, which suggested that America is
    the only nation in history to have gone directly from barbarism to
    degeneration without the usual interval of civilization.

    Well, those who argue that we skipped civilization categorically could
    not make the same point about the technological and informational
    revolution. America is undergoing a massive change in its economic
    system affecting corporations and labor-management relations
    throughout the economy, and I know that is the case increasingly in
    France as well.

    THE SURGE OF ELECTRONIC COMMERCE

    First, I hope you will indulge me if I chart very briefly the profound
    change currently underway in virtually all the economies of the world
    as a result of the technological revolution through which we are
    living.

    A century ago, if you wanted to raise money for a business, you
    practically had to go door-to-door looking for someone to buy a stake.
    The rise of stock exchanges and other financial institutions helped
    establish national and limited international markets.

    But the Internet is creating a global market -- and not just a global
    market for capital -- but a global market for goods and services that
    will democratize economic activity as never before. As Vice President
    Gore has said, "Nearly everyone with a good idea and a little software
    can set up shop and become the corner store for the entire planet."

    "This promises to unleash a revolution in entrepreneurship and
    innovation," he continued, "a cascade of new products and services
    that today we can scarcely imagine. With the framework (electronic
    commerce) we are helping to make sure that commerce goes digital, that
    business goes global, and that ingenuity goes wild." The vice
    president did not mince words. He said that "we are on the verge of a
    revolution that is just as profound as the change in the economy that
    came with the industrial revolution."

    I don't want to clutter our dialogue with statistics. But let me just
    state a few; these are from a recent White House report titled, "A
    Framework for Global Electronic Commerce." In December 1995, fewer
    than 10 million people were using the Internet. Today, there are more
    than 140 million. Traffic on the Internet has been doubling every 100
    days. According to some estimates, during the first decade of the next
    century, over a billion people will be using the Internet worldwide.
    As we enter the next century, there will be few, if any, areas of
    international commerce that won't involve electronic transactions.

    There are forecasts that while ecommerce represents only $2 billion of
    corporate buying on the Internet today, by the year 2002, it will
    represent almost $3 billion. And that's just in the United States.
    It's predicted that the fastest growth will be in business-to-business
    commerce. But business in general will expand exponentially. New
    products and services will be developed for this new form of trade and
    existing businesses will rethink the way they produce and market their
    goods and services.

    And it's not just a question of tangible products. With networks, as
    Louis Gernster, the chairman of IBM said recently, "we have the chance
    to deliver the best to the neediest; the best teachers to our most
    remote school districts or the forgotten enclaves of our inner cities;
    the skill of the finest physicians to patients in need without regard
    for physical proximity, and knowledge about the world to all the
    people in the world."

    According to the Clinton administration's Electronic Commerce Working
    Group, information technology in general accounted for one-third of
    the real growth of the U.S. domestic product during the 1995-97 time
    period. More than seven million people now work in this field,
    earning, on average, two-thirds more than other private sector
    workers.

    The prospects -- the potential -- as I know all of you know, are only
    barely imaginable to us today. Even the greatest intellects can barely
    comprehend how this nascent economic revolution will transform not
    only world economies, but societies in general. As the great French
    writer Albert Camus said, "To a man devoid of blinders, there is no
    finer sight than that of the intelligence at grips with a reality that
    transcends it." The Economist Magazine put it another way.
    Technological turning points, one contributor said, are extremely
    difficult for the human mind to spot, except in hindsight.

    But we have clearly seen some of the benefits of this new economic
    era, even though we cannot fully foresee how it will shape the future.
    You know I think it was Chou En-Lai who, when asked whether the French
    Revolution was a success, replied, "It's too soon to tell." Well, I
    don't think we will have to wait a couple of hundred years to render
    judgment on ecommerce and the information revolution.

    U.S. VIEWPOINT ON ECOMMERCE

    As the first U.S. president born after World War II -- born in the
    computer age -- President Clinton recognized from the beginning of his
    administration that the world is undergoing -- whether we like it or
    not -- a sea change as radical as any in history and that our
    obligation, our task, is to harness that change for the benefit of all
    -- not just for all Americans, not just for all the rich Western
    nations, but for all the peoples of the world.

    "If we establish an environment in which electronic commerce can grow
    and flourish," he said, "then every computer will be a window open to
    every business, large and small, everywhere in the world." The
    president stressed that ecommerce should rely on private-sector
    solutions and market-driven possibilities. It will not, and should
    not, be a government-run marketplace. The government's role should be
    minimal and over-regulation avoided, the president added. And he also
    stressed that the new electronic world must not become a digital
    divide, but must respect every society, be accessible to every
    community, and deliver benefits to all who participate.

    Last July, President Clinton outlined nine recommendations to guide
    American efforts with our partners to spur ecommerce. For those of you
    who might not be familiar with them, let me briefly run through them:

    -- The Internet should be a tariff-free environment whenever it is
    used to deliver products and services.

    -- Inflexible rules for electronic payments should be avoided in favor
    of case-by-case monitoring as payment systems evolve.

    -- Parties should be able to do business on the Internet under
    whatever terms they agree on. But the U.S. will work for an
    international uniform code to simplify and encourage ecommerce under
    consistent rules and rights.

    -- Intellectual property rights must be respected. The U.S. will work
    for international agreements that establish clear copyright and patent
    and trademark protection to safeguard against privacy and fraud.

    -- Privacy rights must be respected, but in a manner consistent with
    the promotion of business.

    -- There must be a set of uniform rules and rights and a modern,
    global telecommunications network that is accessible, affordable and
    that supports ecommerce.

    -- There should be no censorship of information on the Internet, but
    industry self-regulation should be encouraged.

    -- The marketplace should determine technical standards not least
    because technology is moving more rapidly than lawmakers can respond.
    Attempts by government to manage the Internet will only inhibit
    technological innovation.

    -- Security must be guaranteed through allowing sophisticated
    encryption to protect data like credit card numbers or detailed
    contracts from being read during transactions. But national security
    also must be safeguarded by applying these rules sensibly so that
    potential terrorists cannot hide their work behind encryption
    technology.

    And may I add that the United States is grateful for the excellent
    cooperation we have had with France on fighting high tech crime and
    cyber terrorism and I note particularly the initiative undertaken
    under the Lyon umbrella (more detail?).

    In summary, the U.S. position is that ecommerce, and the Internet in
    general, should be left to develop as freely as possible so that the
    maximum benefits will be garnered and I know that there are many here
    in France who share that view. As legendary movie actress Mae West
    once said, "Too much of a good thing is wonderful."

    U.S. ACTION AND POLICY ON ECOMMERCE

    As far as my own country is concerned, the U.S. government already has
    taken a wide range of measures to help fulfill these goals. Let me
    name just a few:

    -- The Internet Tax Freedom Act places a three-year moratorium on new
    and discriminatory taxes on Internet commerce and creates a commission
    to develop a uniform system for the application of existing taxation
    of remote sales.

    -- The Digital Millennium Copyright Act ratifies several World
    Intellectual Property Organization (WIPO) treaties that protect
    copyrighted material online.

    -- The Children's Online Privacy Protection Act protects the privacy
    of young children on the Internet.

    -- The Government Paperwork Elimination Act encourages electronic
    filing and recordkeeping systems in the Federal government.

    And speaking of the Federal government, the president has issued
    instructions to the heads of all Federal departments and agencies
    directing them to implement the Framework for Global Electronic
    Commerce that I referred to earlier by undertaking a series of
    specific measures.

    I could go on. But the real challenge as far as this issue is
    concerned, is, of course not just national. It is to harmonize, as
    much as possible, the approach of all nations to the economic
    requirements of the future through the achievement of a series of
    bilateral and multilateral agreements. In June last year, President
    Clinton and Prime Minister Jospin committed the U.S. and French
    governments to open access to information. Bilateral agreements also
    have been made with a number of other countries.

    Multilaterally, last May WTO members agreed to continue the practice
    of not imposing customs duties on ecommerce transmissions. And last
    October, the OECD issued a joint declaration opposing discriminatory
    taxation imposed on the Internet and ecommerce. But much work remains
    to be done. In its meeting in Ottawa, the OECD called for further
    action to develop broad regulations for ecommerce, including for the
    protection of privacy.

    And that issue alone -- privacy -- has the potential for severely
    disrupting the flow of ecommerce if we do not reach the kind of
    understandings necessary to move forward. Which brings me to the
    somewhat different approach that the U.S. and our friends in Europe
    have on this matter. Let me be clear, both the nations of the EU and
    the United States are fully committed to the protection of privacy.
    But at this moment in time, our ideas about how to achieve this
    laudable goal are different.

    The EU Data Directive is a comprehensive top-down, regulatory program
    that controls every aspect of data collection and distribution. In
    contrast, the U.S. privacy protection regime is built from the bottom
    up and targeted to specific situations. Recently, the U.S. made a
    proposal for bridging the different systems in the U.S. and the EU --
    the so-called "safe harbor" proposal for U.S. companies that adhere to
    a set of principles that are mutually acceptable. I won't go into
    detail on all of this today. Perhaps we can discuss this during the
    question period if you would like. But let me just say that we have
    some way to go to reach an accommodation.

    THE IMPLICATIONS FOR GOVERNMENT

    As I mentioned earlier, I am the chief information officer at the U.S.
    Information Agency, which will be merged into the State Department
    this fall to create a new super foreign affairs agency. It has been
    obvious to me since I joined the Clinton administration that ecommerce
    and the new economic era pose profound challenges for government as
    well as business. So in the second part of my talk today, I'd like to
    discuss how ecommerce and the Internet in general is transforming
    government by using as an example the conduct of foreign affairs in
    general, and public diplomacy in particular.

    There are many factors that are transforming government in general and
    the conduct of foreign policy in particular, not least the end of the
    Cold War, that mammoth divide between East and West, and Eastern and
    Western Europe, that now, thankfully, is over. But two of the most
    important factors are economic.

    The world has altered dramatically over the last decade economically
    and technologically, a process that is now referred to in one word,
    globalization. Globalization has simply changed the context in which
    governments operate because of a whole range of factors -- larger and
    larger trading blocs and rapidly accelerating free trade; the
    internationalization of crime and population movements; the
    liberalization of communications as old national communications
    monopolies vanish into history; the worldwide reach of capital and
    financial markets; the increasing influence of regional and
    international organizations; and so on.

    Ecommerce and globalization are posing significant challenges to
    nation states, where central governments are increasingly retrenching
    in the face of a new birth of grassroots democracy, decentralization
    and localism. There are profound implications here not only for the
    field I'm in -- public diplomacy -- but for all governmental
    activities and for all businesses. The stakes, as I'm sure all of you
    know, are high. What Vice President Gore has called the Global
    Information Infrastructure is key to our continued prosperity in the
    twenty-first century, and to spreading the good life to all those
    peoples around the world who, so far, have had little access to it.

    Second, there is the information revolution itself, of which
    globalization is both a cause and a consequence. It is driven by
    dramatic improvements in telecommunications, exponential increases in
    computing power at lower and lower cost, and the development of
    electronic and information networks of global reach, most evidently of
    course worldwide broadcast networks and the Internet. This information
    revolution is bulldozing away barriers of physical distance,
    eradicating meaningful borders, and creating communities of all types
    across national frontiers -- creating, in effect, global
    neighborhoods.

    All of this is not only changing the way foreign policy and diplomacy
    is conducted, it is reshaping the very nature of government itself.
    Simply put, as I said at the outset, there are very few purely
    domestic policy issues anymore. Domestic policy and foreign policy are
    increasingly converging and the implications for all of us -- business
    as well as government -- in nations across the planet are profound.

    At USIA, we have had to revolutionize the way we conduct public
    diplomacy just to keep up with the surge of the Internet, ecommerce
    and the technological revolution in general. Ten years ago, USIA
    wired, and sometimes, mailed information to U.S. embassies around the
    world, those great outposts of U.S. foreign policy that themselves
    must undergo massive change to meet the challenges of a new world. But
    now we conduct public diplomacy in new and unconventional ways -- not
    just to elites and governments overseas through our embassies, but
    directly and to nongovernmental organizations, interested publics, and
    targeted communities. We have employed the new tools of the
    information age -- websites, videoconferences, speaker programs using
    high-tech media, electronic as well as print publications, and even
    email.

    And far from excluding nongovernmental organizations and others from
    the process, as has happened so often in the past when secrecy was the
    watchword for the conduct of diplomacy, we have actively encouraged
    their participation even when their views were not always in sync with
    those of the U.S. government. agencies. The challenge that most of you
    face I know is different, but is in all probability no less radical in
    scope.

    A REVOLUTION IN THE WORKPLACE

    But it is not just a matter of transforming our approach to those with
    whom we communicate outside the agency or corporation in which we
    work, it also is necessary to transform it from within. In this regard
    I believe we have barely begun to make the changes necessary in the
    workplace that will equip it for the needs of the twenty-first
    century.

    So in this final part of my talk, let me describe what we have done
    and what we are attempting to do in the U.S. Federal government. I
    think this will be particularly interesting to those of you in the
    audience who represent labor unions and corporations.

    When President Clinton came into office, he realized that it was not
    only business that must adapt to the new economic environment of the
    Internet and ecommerce, but also government. Government, like
    corporations before they downsized, was not so much top heavy as
    middle-management heavy. That system had some merit before the
    Internet and the global revolution, but no longer.

    The Clinton administration embarked on a policy of reinventing
    government for the new economic era and adopted two major initiatives
    to reform a government that had change little in decades. The first
    was a vast reduction in the workforce of the Federal government of
    more than a quarter million employees. To help ensure that layoffs
    would be minimal and that older middle managers would retire rather
    than younger, frontline workers, the administration offered targeted
    buyouts to reduce the workforce.

    The plan was supported by all the major Federal unions and already has
    achieved its goal of more than a quarter million reduction with few
    layoffs. The U.S. Federal government is now the smallest size it has
    been since the Kennedy administration and layering -- redundant,
    multiple levels of management -- has been slashed.

    The second initiative was intended to revolutionize labor relations
    within the Federal government. For decades, Federal labor relations
    had resembled those in the old private sector -- with management on
    one side of the table, unions on the other, and constant tugs of war
    to win one-sided victories.

    With the unions' agreement, President Clinton and Vice President Gore
    suggested a new approach -- a system of labor-management partnership
    councils to replace old-style collective bargaining, an idea pioneered
    in the private sector.

    No collective bargaining rights were abrogated. Unions and employees
    were offered partnership in decisionmaking as an encouragement to
    forge a new system of labor relations, the essence of which was the
    empowerment of frontline employees, the reduction of bureaucratic
    rules and regulations, and performance appraisal based on results. The
    new system promised a win-win situation for both management and unions
    and -- the government's customers.

    A national partnership council was established to encourage agency
    managements and unions to move toward the new approach. I will tell
    you now that progress has been uneven. In some agencies, the new
    system has been embraced and appears to be working well. In others,
    there has been resistance, sometimes from unions, sometimes from
    management and sometimes from both.

    Perhaps, this is an issue you will want to look at further. I
    understand most, or all of you, will be coming to the United States
    next month. I am not intimately familiar with the situation at all
    Federal agencies in this regard, but I do know that our Department of
    Labor took the lead within the Federal government on encouraging this
    new system of labor relations for the twenty-first century.

    The bureau I lead was one of the first to be established during the
    reinvention era. It was created in 1994 as a reinvented, federal
    workplace with far fewer managers and supervisors, organization of the
    workforce into self-directed teams, empowerment of frontline
    employees, introduction of new era workplace policies such as
    telecommuting and flextime, and a minimum of bureaucratic regulations
    within the bounds of the law.

    Currently, we are in process of establishing a labor-management
    council which will be composed of employee representatives that the
    employees themselves will elect, and representatives from management.
    I am confident that the best ideas to promote a fairer and more
    efficient workplace adapted for the new economic era will be adopted
    by our council -- whether or not those ideas emanate from management
    or employees.

    But we have much further to go. For whether we are discussing
    government or corporations, given the history of the last few years,
    one point should be abundantly clear. No one can be confident that the
    workplace of today -- even the reinvented workplace of today -- will
    be structured for the new era, an era in which ecommerce, the
    Internet, and the global economy in general will transform our world
    beyond our imagination. And it will transform all our institutions --
    governmental as well as corporate.

    As far as the labor market in general is concerned, it is clear that
    the Internet and ecommerce already has driven major changes. There is
    a large and growing demand for programmers, systems analysts, computer
    scientists and engineers, even in foreign affairs agencies like mine.
    And new job categories, such as digital commerce specialists, are
    being created. Workers with information technology skills are in
    demand in economies all over the world.

    As ecommerce proliferates, the composition of the workforce required
    to produce and deliver products will shift even more dramatically than
    we have seen so far. And so will the workplace. A premium will be
    placed on those workplaces that are organized with maximum
    flexibility, with structures that can change in a week, or even a day.
    Bureaucratic work organizations will give way to flexible cells, or
    teams, that cross the once rigid lines of production and the once
    Berlin wall-like separation between manager and employee. Training and
    retraining will be a constant for any organization that wishes to
    survive.

    CONCLUSION

    As we move forward into what I believe will be an exciting chapter in
    the history of man on this planet, I have no doubt that the future
    will belong to those who are dissatisfied with the present, who
    stretch the limits of the possible, and whose imagination is infinite.
    As Robert Kennedy said more than three decades ago, "Some men see
    things as they are and say why. I dream of things that never were and
    say why not." Thank you all very much and now I invite you to begin a
    dialogue. I'd be delighted to take questions or entertain comments.

    (end text)