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Harbour: the European eDimension

Today's seminar could not be better timed. Next week, a special European Council will be addressing the crucial need for the European Union to take up the challenge presented by the knowledge economy. The European Parliament is just starting its second reading of the Electronic Commerce Directive, which will provide the platform for barrier free electronic trading across the EU. This morning, I will give an overview of E-commerce development in Europe, and the challenges now facing policymakers. I will also tell you about the Conservative approach to boosting E-Commerce activity at a European level, complementing the actions of our Westminster team. The Conservatives are playing a leading policy making role within our Centre Right Group (EPP/ED) in the Parliament, in making sure that our Open Market agenda is delivered successfully.

E-commerce going to be of great importance to Europe's global competitiveness. Big progress has been made towards a true Internal Market - in market opening, in uniform product standards, in eliminating trading barriers. We have an excellent climate in which to encourage cross border e-commerce activities. E-commerce offers a huge opportunity to finally complete the internal market, by allowing market forces to operate in levelling market barriers, exposing high tax, high cost economies and making protectionist practises (such as unnecessary advertising restrictions) completely transparent.

Given its importance, it is a concern that Europe lags significantly behind the U.S.A. in the development of electronic commerce. Within the EU there are very significant variations in E-Commerce activity - with the Nordic countries, and Benelux being the leaders in PC use per household. In translating this into Internet activity, the Nordic countries lead is even more pronounced. Recent studies suggest that Spain and Ireland are among the leaders in their economic and business climate for e-commerce. There appears to be no in-built factor within Europe stopping the growth of e-commerce - which suggests that, as in the U.S.A, we should not flirt with market intervention, but allow market forces to work.

Companies operating in e-commerce would like the security of a legal framework within their activities can develop. Since 1997, the Commission has been moving ahead with framework directives in crucial areas such as electronic signatures and copyright. The Commission has followed the right approach - ensuring market openness by preventing member states from blocking cross border transactions. At the same time, business participation will be encouraged - especially smaller companies. Consumer protection will generate trust and confidence. There will be special provisions for internet service providers. The legislation is 'technology neutral' - thus being flexible enough to encompass future developments in a fast moving market place. It also requires member states to encourage self-regulation for consumer protection and redress - the right approach given the immense change ahead in retailing and consumer services.

The e-commerce Directive, which embraces all these provisions, has now been agreed by the Member States and is just starting its Second reading in the European Parliament. We intend to push forward quickly, with minimum changes, to secure approval by mid 2000. This will send out a strong signal that the Conservatives wish to encourage e-commerce and are prepared to move quickly to help end uncertainty for consumers and investors.

But there is much more to be done if Europe is really going to take advantage of the knowledge economy. Europe needs the economic infrastructure to encourage entrepreneurs to exploit the power of e-commerce. It needs the communications infrastructure to deliver widespread, low cost access to the Internet for businesses and private consumers. It needs a new approach by public authorities to the use of electronic information. It needs the right training and skills base on which new industries can be developed.

The Commission has produced an e-Europe strategy that claims to address these issues, but this document is a rather unfocussed collection of undeveloped promises. In reality, the major area that the European Governments must address is the tax and business climate to stimulate new, internet based businesses. We are promised yet another new 'initiative' for the Lisbon summit. A very welcome impact of e-commerce is that it is forcing Governments to address the well-known problems of the European labour market and the reasons why its job creation has been so poor:-

· High social costs of employment

· Inflexibility imposed by excessive employment regulation

· High cost of company start ups and high penalties for failure

· Excessive taxes on capital gains, particularly stock options, discouraging new entrepreneurs from taking risks

We shall push strongly for these issues to be properly addressed, and will press our own ideas for encouraging e-business start-ups. For example, we should encourage e-businesses to register their companies, and take on employees, in any EU country that offers the most advantageous conditions. A market driven approach would soon have governments competing with each other in encouraging e-business. This could be stimulated by a start-up scoreboard giving fledgling entrepreneurs all the facts needed to make their decision.

The new companies will need access to capital. There appears to be no proven need for market intervention at this stage, as there appears to be more capital available than good ideas on offer. The development of the Single European Market for financial services will bring about more dynamism and competition in the capital market. Unlike the Commission, which is toying with the idea of publicly backed funding, we see only a limited role for central intervention.

We would also like to develop a tax incentive framework that would encourage large companies to spin off e-commerce start ups, using their existing human and financial resources. There are many middle managers who would leap at the chance of developing a new business idea, and becoming their own boss. Spin off companies, with the risks being underwritten by the strength of their parent, would have the chance to grow quickly. They would also encourage the development of entrepreneurial skills and practical knowledge within their feeder company and help its competitiveness in the new information driven economy.

Governments also have a key role in market development as purchasers of e-commerce services. They should be encouraging 'best practice' and ensuring that their procurement systems are open to smaller, innovative companies.

Although open markets will be the prime enabler of e-commerce, the existing European grant instruments - regional and social funds - can be targeted to help e-commerce ventures. In both rural and urban communities, e-commerce will provide powerful tools to tackle unemployment - by encouraging new business ideas, by giving fast and cheap access to market information, by developing networks of entrepreneurs and job seekers. In many cases, e-commerce will help to reinvent old business models and transform large, slow moving industries. People with existing skills can be encouraged to develop niche products for targeted customers and market them globally.

The other key element to address is infrastructure. Low cost, widely available, broad band electronic communications will be an essential foundation for a powerful e-economy. The European Commission has published a bold plan for a single, open, electronic communications market, integrating fixed-line services, cable, digital television, and mobile. This structure, to be in place by mid 2000, would offer service providers open licensing and market entry opportunities across the EU. A key aspect of the proposals would be access to the local loop in every market, opening competition for services to every connected household.

The EU is already significantly ahead of the US in mobile telephones. 3rd generation mobile technology will bring internet access to consumers at a much lower capital cost than a fixed computer based (or TV based) system.

EU governments must encourage fast mobile internet growth by facilitating common standards and rules. They should be re-investing license fees or auction proceeds in repositioning public service operations in the radio spectrum and encouraging fast infrastructure investment and wide spectrum availability. Competition rules must allow global players to develop across one, barrier free, European market. The speedy growth of internet mobiles will also encourage new providers of simple, fast, useful data for phone users - based on travel, news, business and general information services, integrated with other services such as geographical data. These are areas where new European companies can gain a global lead.

In thinking about the developing market, we must also be considering the implications for society as a whole of the widespread availability of information technology. Education must increasingly equip young people to be active on-line consumers and to develop the skills to work in the new information companies. Retraining and reskilling will be needed in existing organizations in public and private sectors. The information society offers big benefits for the less fortunate and the less mobile - disabled people, and the elderly, for example. There will be very significant security and privacy issues to be addressed. The European Commission, and member governments, are now working on many ideas to help the spread of information society benefits - and some of them would be worthy candidates for reinvestment of licence fees, as they would further stimulate adoption of e-services. But the priority, at this stage, must be to drive forward market adoption of the new technology.

I have summarised the key aspects of the European scene for electronic commerce. The Conservative team in the European Parliament has taken a special interest in this area, and has raised the political profile of the issue across the Parliament. There is a big policy agenda to work through. Following the Electronic Signatures and E-commerce directives, there will be the Copyright Directive, the Distance Selling Directive and the Directive setting up a Single Financial Services Market, including Internet selling. We will be heavily involved in Electronic Communications liberalisation, both in the strategy and detailed legislation. The stimulus to Business start-ups will also be a focus of attention. Industry practitioners are invited to keep closely in touch with us to ensure that we have your views.

You have seen today a united Conservative approach, in Europe and Westminster, focused on meeting and mastering a key challenge for all of us. We firmly believe that a market-based, light-touch approach will be the way forward. E-Commerce represents a huge opportunity to enhance the power of markets to provide real benefits for customers across, to stimulate business activity and economic growth. The Conservative team will work together quickly and effectively to make sure that this opportunity is fully realised.

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