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U.S. Leads Global E-Commerce,
But Lags in Global Expansion
While the United States leads the world in e-commerce initiatives, it lags significantly in global expansion, according to a new study released Wednesday.
The study, "Connecting the e-Dots" conducted by Andersen Consulting, revealed that the United States has generated 67 percent of global business-to-business e-commerce (B2B) revenues and 76 percent of global business-to-consumer (B2C) e-commerce revenues compared to Europe, which is responsible for 14 percent of B2B and B2C revenues. But nearly twice as many European firms have used e-commerce to expand the reach of their enterprises geographically.
Citing language and regulations as barriers, only one third of the 60 U.S. executives surveyed said they believed it was necessary to adapt their Web sites to reflect regional language and culture differences. Andersen interviewed more than 600 executives from 16 countries. The survey also found a decline in the number of U.S. firms aiming for international expansion of their commerce initiatives
One reason for the European expansion comes from the expertise that European firms have in international trade. With multiple cultures and languages, European firms regularly adapt to the demands of different countries.
Despite the lag in global expansion, the U.S. companies showed significant leads over their European counterparts. European companies use e-commerce to a lesser degree than companies in the United States, and they use it across a narrower range of functions. But 60 percent of European executives said they envision Europe as a global e-commerce hub. Europe has taken steps to push the rollout of e-commerce initiatives through the e-Europe directive. But Andersen’s study identifies two major factors that would likely stunt the growth of e-commerce in Europe: the shortage of skilled workers and a legal and business climate less favorable to entrepreneurs than in the United States.
EU Officials Still Grousing Over FSC
Continuing the long-standing dispute between the United State and the European Union, EU Trade Commissioner Pascal Lamy criticized recent congressional amendments to legislation modifying Foreign Sales Corporation tax breaks H.R. 4986. The legislation updates the 1984 Foreign Sales Corporations (FSC) tax break, which allows U.S. exporters to set up foreign subsidiaries with U.S. tax benefits. The changes were proposed and passed by the House Ways and Means Committee in July in response to a World Trade Organization ruling that the tax break be modified by Oct. 1.
The European Union filed a complaint with the WTO and the trade organization found that the FSC represented an unfair subsidy for U.S. companies. If changes to the FSC are not made by the October deadline, the United States could face retaliatory measures from the European Union.
In a letter last week to Deputy Treasury Secretary Stuart Eizenstat, Lamy noted that the proposed changes are unacceptable. As it stands, all goods that are produced in the United States sold abroad qualify for the tax break. Under the proposed modification, income generated by sales outside of the United States from goods manufactured with more than half of its materials from the United States would be tax-free. But the European Commission says the proposal would still amount to an unfair subsidy for U.S. exporters — a violation of World Trade Organization rules —because the only way to benefit from the tax break would be to export. Though the WTO does recognize each country's ability to have its own independent tax code, its rules bar countries from granting export subsidies.
"As long as such preferential treatment for exports continues to be the objective of any U.S. proposals, it is frankly hard to see how a WTO-compatible measure can emerge," Lamy wrote.
U.S. companies argue that they are at a disadvantage without FSC tax break because they would suffer from double taxation without it. But the FSC dilemma could pose sizeable problems for high-tech companies, which are increasingly reliant on exports, should a trade dispute emerge.
A European Commission official said last week that if the proposed changes to H.R. 4986 are signed into law, the Commission would file another challenge with the WTO. The WTO already sided with the Commission last February when it required the United States to modify the FSC. Yet officials at the Commission declined to offer any specific suggestions for how the FSC should be amended. Indian Prime Minister Visit Touts Tech Issues
Hoping to further capitalize on a visit with President Clinton last March, Indian Prime Minister Atal Behari Vajpayee will pay a reciprocal visit to the United States this week, with high-tech issues topping his agenda.
Though Vajpayee was initially scheduled to visit New York, Washington, DC, and San Francisco, the trip has been cut short due to health concerns of the Prime Minister. The trip will only include visits to New York and Washington.
Vajpayee will traveling with a business delegation, many of whom are lobbying the prime minister to press for easing the cap on H-1B visas, which allow U.S. companies to hire foreign skilled workers. Satyam Computers Chairman Ramalinga Raju, who will be among the Indian delegation, told Agence France Presse, "The easing of H-1B work visas is the most important item on the agenda. The information technology industry is dependent on free exchange of professionals."
The Indo-U.S. Business Summit, an event sponsored by the Confederation of Indian Industry (CII) in New York, will be a key focus for the business communities. Tarun Das, head of the confederation told the Times of India that the summit would focus on major Indo-U.S. initiatives in the infrastructure and financial sectors.
While in Washington, the National Association of Manufacturers plans to host a reception for the delegation in an effort to attract West Coast high-tech industry leaders to compensate for the shortened schedule and cancellation of the prime minister’s visit to San Francisco.
But U.S. policy will not be the only topic on the table for discussion. India’s own infrastructure and its policies will be discussed as well. "U.S. multinationals looking to establish a business in India want some improvement in infrastructure, reduction in bureaucratic interference and quick responses from the government," Raju said.
ISPs Responsible For Content?
Internet service providers (ISPs) may soon face heavy scrutiny over the content that flows over their networks if a new order from a German state official is any indication.
Dusseldorf District Government President Jurgen Bussow ordered that ISPs based in the German state North Rhine-Westphalia are responsible for scanning their servers for illegal content, namely racist materials that are illegal to publish. Bussow also has informed Federal Communications Commission and U.S.- based ISPs informing them of the law, the Industry Standard reports. Bussow also threatened to "block access to entire providers" if ISPs do not cooperate.
- by Maureen Sirhal
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