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

19 February 1999


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 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)

                      By Jonathan Spalter


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

-- 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.


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

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

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.


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

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."


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.


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

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

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


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

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


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.

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