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Chairman Stearns, Mr. Towns and Members of the
Subcommittee. I want to thank you for holding this important hearing on digital
trade issues. At AOL Time Warner, we believe that Congress and the
Administration, in partnership with the US business community, should commit
ourselves to advancing global economic prosperity and social progress through a
trade agenda that fosters the global electronic exchange of information and
commerce.
AOL Time Warner is the world’s leading
Internet-powered multi-media company, with a stable of brands including AOL,
Warner Bros, Warner Music Group, HBO, Time Warner Cable, Time Inc. and the
Turner Networks, including CNN.
In this, the Internet Century, consumers
worldwide are driving the demand for greater choice and convenience. The AOL
Time Warner company is committed to the proposition that new combinations of
skills, technology, and talents are essential to create the innovations that
will respond to this global demand. Our company is responding with new forms of
content and delivery platforms, innovative services that will make new consumer
devices work together seamlessly, and new means to "connect the dots"
to make technology easy-to-use for consumers. We intend to bring the power of
information and the promise of connection to more people around the world. Our
ability to achieve this goal depends upon working with you, your colleagues in
the Congress, and the Administration to frame the international trade
environment that will enable consumers to take full advantage of the Internet
revolution.
We believe that there are three powerful and
related trends that are fundamentally reshaping the global economy. The first is
the exponential growth in connectivity resulting from increased adoption of
information and communications technologies. The second is the convergence of
historically distinct communications systems and consumer devices. And the third
is the increasing use of electronic communications as a channel for connecting
consumers and companies and driving international business and social
communities. In the aggregate, these forces are accelerating the process known
as globalization, a process that I believe promises economic and social benefits
to consumers, workers and citizens worldwide.
Today, more than 300 million people are online.
By the year 2005, more than 1 billion people will be connected to the Internet,
more than 75 percent of them outside of North America. This technological
transformation is creating a networked global economy that is just beginning to
demonstrate that the Internet can be a powerful engine for individual
opportunity, economic prosperity and social progress.
Recently, a new study done by Caroline Freund of
the Federal Reserve Board and Diana Weinhold of the London School of Economics
determined just how big a difference the Web has made to trade. Looking at trade
flows among 56 countries from 1995 to 1999, for the first two years, they found
no impact from the Net. But starting in 1997, as Web usage accelerated, they
discovered that a 10 percent increase in the number of a nation's Web sites
would have led to a 1 percent rise in its trade flows in 1998 and 1999. The
impact was strongest for poorer countries -- suggesting that nations with fewer
initial trade links can reap larger relative gains from the Web, assuming they
have made basic infrastructure and technology investments.
The rapid growth of Internet usage in China also
demonstrates that the appetite for electronic networks as a tool for economic
reform and access to information extends well beyond the so-called developed
nations and is being embraced by nations and cultures that are not employing
traditional notions of "capitalism" and "democracy" in their
historic development.
And the benefits of electronic commerce and
digitized trade extend far beyond the immediate financial gain of the
participants. Perceived social and economic benefits of global electronic
networks include:
- stimulating new opportunities and investments
in emerging markets by reducing the costs and barriers to reaching
electronic consumers in developed markets;
- extending global electronic markets to all
nations and thus bringing the benefits of choice and network economies of
scope and scale to all consumers;
- providing people in historically underserved
nations and areas with increased access to education, health care and other
public services;
- promoting greater and more rapid access to
information for children of all ages and in all nations; and
- giving people everywhere the capability of
promoting their local industry and cultures without losing the benefits of
participation in the global economy.
These benefits create a win-win-win situation in
which the same set of actions – promoting increased digital communications and
trade – brings economic and social benefits to governments, industry and
individuals around the world. We have an obligation to act now to deliver on the
promise of these benefits, and to promote digitized trade-friendly policies with
our trading partners around the world.
We all know that adoption of the capability for
increased digital communications and trade around the world isn't going to
happen on its own. In fact, the opposite is true : absent affirmative action on
our part, global protectionism and fragmentation may take hold. If that proves
to be the case, the promise of economic opportunity and broader knowledge of the
world will pass too many by -- the social and economic repercussions of that
neglect will not only be felt in the developing world, we all will feel it.
In a world of increasing connection, our own
economic and social well being is inextricably tied to the economic and social
progress of other nations and peoples. A stable world order, characterized by
peace and prosperity, demands that we respond to the universal yearning for
economic opportunity and social connection.
The Framework for a Global Networked Society
At AOL Time Warner, we support a basic framework
for a networked global society, to bring the benefits of economic and social
connectivity, including economic prosperity, increased knowledge and expanded
trade, to everyone. That framework should include:
- A recognition that current WTO obligations,
rules, disciplines and commitments should apply to e-commerce and
acknowledgement that electronically delivered goods and services should
receive no less favorable treatment under trade rules and commitments than
like products delivered in physical form.
- An understanding that universal and affordable
access for consumers to basic and valued-added communications services is
critical to expanding the reach of electronic economic opportunity.
- An appreciation that all aspects of the
e-commerce value chain must be free from trade barriers in order to prevent
the weakest link from breaking the benefits of the chain.
- A new approach to content development and
protection that safeguards the interests of the artists, while promoting the
development of local content and providing consumers with the widest array
of choice.
- A commitment that no man, woman or child is
left behind in the Internet age. The age where economic and social
"divides " should be put behind us. The Internet offers us a new
opportunity to extend economic opportunity to more people, and we, as the
champions of opportunity and freedom, should grab the historic opportunity
presented to us by this remarkable new technology.
The Key Issues We Must Tackle to Create the
Global Networked Society
There are six key sets of issues that we must
collectively tackle to ensure the creation of a global networked society.
First, and most important, is a lowering of
telecommunications costs. Consumers
cannot gain access to the benefits of electronic trade in commerce and ideas
unless they can afford access to the basic means of connection. Affordability
can best be assured through privatization and competition in telecommunications,
a structure that requires independent regulation of historic monopolies to
assure cost-based consumer pricing and interconnection rates. Just as important
is the pricing structure used. Research, as well as common sense, tells us that
metered pricing of Internet use is the enemy of Internet adoption and usage; if
people are "watching the clock" while they are online, fearful of
large metered monthly phone bills, they will spend less time online or won't go
online at all. For that reason, we support pro-competitive telecommunications
policy throughout the globe that will result in affordable pricing for Internet
access to all end users.
Second, the market for information technology
products and services must be more open and accessible.
Ideally, we would like to see the greatest variety of information and
communications devices and services available to the broadest possible audience.
Particular emphasis should be on lowering tariffs on high technology goods and
software so that more people in more countries can afford the technology they
need to get online and companies can build the state-of -the art networks needed
to bring the benefits of the Internet to all.
Third, we advocate clear and effective protection
for intellectual property rights.
Widespread investment in computer software and the other cultural products and
services that will drive Internet adoption and use worldwide requires that those
essential ingredients to a networked global economy be protected. At the same
time, network operators cannot be crippled with liability for the unknowing
transmission of infringing materials. Intellectual property concerns can only be
addressed on a global basis -- In some countries, we have made great strides in
protecting intellectual property and balancing the rights and obligations of
content owners and online distributors. An extension of this balance of
protections in more countries, to more people, will power local cultural
industries and will bring a new creative spirit to the non-English speaking
Internet community worldwide.
Fourth, we support the free flow of goods and
services across a range of sectors that make up the e-commerce value chain.
This begins with lower tariffs on the goods and services that form the building
blocks of the Internet architecture, and include reducing barriers to
advertising, financial services and internet billing and payments, distribution
of content – including movies and music, express delivery services and customs
modernization. We must address these "barriers" to e-commerce in a
holistic and comprehensive fashion. Without such a commitment, even one weak
link in the e-commerce value chain can undermine the potentially explosive
growth of e-commerce and productivity enhancement, new job creation and expanded
consumer choice and opportunity.
Fifth, to ensure that tax policy does not impede
the tremendous growth of e-commerce, governments around the world need to
identify a tax collection system that maintains market neutrality while still
addressing governments’ legitimate need to fund public services.
To ensure that these interests are balanced, tax systems should not create
market distortions, discourage transacting business on the Internet or impose
greater administrative burdens on one type of supplier than on another. The goal
should be to achieve a simple, efficient, and fair tax regime appropriate to a
new global networked economy—a system that promotes rather than stifles free
trade.
Sixth, we must be as committed to the free flow
of information and ideas as we are to the free flow of commerce.
Economic, social and political innovation is the product of the exchange of
ideas and information. Human progress is measured not just by commerce and
technology, but by innovation in the systems for economic opportunity and
personal expression and understanding. We in this country will benefit by an
openness to greater information from and understanding of the rest of the world,
just as the remainder of the world will benefit by a greater understanding of
the principles of freedom and opportunity we enjoy here. We recognize that
traditional notions of national security and, protection of children among
others, may provide a justification for national regulation in this area. And we
believe that private sector commitments to battle child pornography, share ideas
on the security of critical infrastructures and fostering local cultural
diversity can assist public administrations in advancing national objectives in
those areas. But we would urge that limitations on the free flow of information
and ideas, just like limitations on the free flow of goods and services, should
be adopted only after careful consideration, lest the social or economic
benefits of human exchange not just on a local but also a global level be lost
or mitigated.
Finally, consumer confidence in the online medium
must be enhanced. Here we believe that
industry has and should continue to play a leadership role in developing and
promulgating standards and practices that will enhance consumer confidence in
the online medium. Online users continue to be concerned about the privacy and
security of their personal information and about the integrity of online
transactions. Global business organizations, such as the Global Business
Dialogue on Electronic Commerce, recognize that our online business depends on
the confidence of consumers. We, and other electronic commerce businesses, have
adopted world class data collection and consumer protection practices, and we
are working collaboratively with governments to ensure that consumer concerns
are being appropriately addressed.
The Process for Achieving a Global Networked
Society
These are what I believe are the essentials of a
digital trade agenda. Let me now briefly outline how we might collectively
advance this agenda.
We believe that America’s digital trade agenda
can best be pursued through a multilateral, regional and bilateral approach.
This includes pursuing initiatives through the WTO, including a possible new
round of trade negotiations, and through regional venues such as the Free Trade
Agreement of the Americas and APEC. Digital trade can also be advanced through
bilateral initiatives.
We are encouraged that the President has included
a number of the components of our digital trade program in his 2001 Trade
Agenda. We urge the US government to pursue them in a comprehensive, holistic
way that brings together all the critical elements needed to advance global
e-commerce and trade. But merely articulating priorities and securing
congressional guidance on those priorities will not be enough.
AOL Time Warner believes strongly that our
ability as a nation to advance the digital trade agenda outlined above depends
upon the President’s having Trade Promotion Authority from the Congress.
Absent a unified national commitment to a shared trade agenda, and the necessary
governance mechanism to assure that the President can advance that agenda with
confidence and authority, we risk losing a national opportunity of great import.
We believe the time has come for the Congress and the President to collaborate
closely to define trade negotiation objectives of our country and to ensure a
mechanism to secure congressional approval of trade agreements that advance our
trade objectives. Trade Promotion Authority provides such a tool.
TPA is much more than simply a legal tool. It is
a demonstration of a shared commitment of the two branches of the US government
responsible for the conduct of commerce and trade that America is ready to
approach the rest of the world with a firm commitment to markets in commerce and
ideas and to deliver to American consumers, farmers and businesses the economic
and social benefits of a networked global economy.
It is equally essential that Congress continue
its commitment to China’s accession to the World Trade Organization.
Recognizing China’s importance to the growth and development of the global
economy is an essential step to bringing about the global networked economic
system that I have outlined above. We recognize that the process of WTO
accession for China has proven to have taken longer than originally
contemplated; we recognize that there have been significant developments in our
relationship with China other than those relating to trade; but inclusion of
China into the world’s trading regime remains a critical component of bringing
about the full economic and social benefits of global economic and social
integration.
The task of advancing a vision of digitized trade
for our nation and for the world is daunting, but the opportunity -- to bring
additional opportunity, prosperity and knowledge to more people -- is well worth
the effort. We look forward to working with you to achieve this important goal.
Thank you.
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