Short Circuiting the Government Regulator

Ronald Reagan used to say that "government's view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it."

The danger facing the new economy couldn't be stated any more simply or accurately. The new economy — defined by commerce conducted not in street markets or grandiose shopping malls, but in the global electronic marketplace — is still in its infancy. And in an amazing show of restraint, government involvement in its growth and development up to this point has been kept to a minimum.

But as the new economy continues to grow and dot-com companies begin to rival traditional brick and mortar businesses, the temptation for governments across the globe to inject themselves into this marketplace will become unbearable. Here rests the dilemma. If governments around the world begin to tax and regulate e-commerce, the result will be a mountain of regulations that will cripple the new economy. Instead of creating opportunity, they will smother it. Instead of fostering productivity, they will stifle it.

Yet as with any new endeavor, there are many issues that need to be resolved in order for this new "e-conomy" to really flourish. Consumers need to have a certain level of confidence that their transactions will be safe, that their private financial information will be secure and that their contracts will be honored and protected. Entrepreneurs need assurances that access to markets will be open, the playing field will be level and their intellectual property rights will be recognized and protected.

Stepping into the void is an international collection of business leaders from companies involved in the new e-conomy. They have come together under the banner of the Global Business Dialogue on Electronic Commerce (GBDe). The GBDe is working to strengthen international coordination in the development of policies that will promote electronic commerce for the benefit of businesses and consumers everywhere.

They believe that the implementation of private-sector, market-driven policies and procedures can create a practical, flexible, and effective framework for the Internet and electronic commerce. And just as important, they are hoping that by regulating themselves with e-commerce codes of conduct and electronic seals, they can short circuit government's desire to impose arduous and inflexible regulations that might handcuff future growth.

While most of the recent domestic attention has been focused on the issue of whether online purchases should be taxed or not – an issue I feel the Internet will eventually make moot for online and offline transactions – the GBDe has worked to forge a preliminary consensus on a wide range of e-commerce related issues. It has convened task forces to discuss issues ranging from authentication and security to liability and jurisdiction.

For example, the security of electronic transactions is vital for ensuring both business and consumer trust. To that end, they are urging governments to allow electronic signatures to have the same legal effect as handwritten signatures, and to eliminate the legal restrictions on the use and export of encryption technologies.

The GBDe also understands that building an infrastructure for e-commerce is vital, not only to make global e-commerce effective, but also to close the digital divide both between socioeconomic groups and between nations. In this area, they recognize that it is going to take a collaborative effort between the private sector and governments to create the proper climate to build the physical infrastructure over which this e-conomy will run, and to attract the needed investment.

Government's role should be to facilitate competition by eliminating any barriers to it, including ensuring fair interconnection rules, correcting unequal treatment and subsidies, and eliminating restrictions on foreign investment.

The creation and success of the GBDe is significant, because CEOs and board members of American companies with competitive and often divergent interests, such as America Online and Microsoft, have come together to flesh out and cement rules of engagement for the Information Age. They, along with representatives of such international corporations as DaimlerChrysler, Fujitsu Limited, Korea Telecom and Vivendi, have realized that their self-interest and the interests of an empowered global community are not mutually exclusive.

And once again, they have proven that the best minds in the world are not found in government. After all, if they were, business would hire them away.



The National Center for Policy Analysis is a public policy research institute founded in 1983 and internationally known for its studies on public policy issues. The NCPA is headquartered in Dallas, Texas, with an office in Washington, D.C.