Ira Magaziner answers: - How can the Internet become a vehicle for trade if Big Brother is looking over everyone's shoulder? -How would this new policy affect other countries? How did trading partners respond to the President's proposals? -The Internet has worked without the government to date, why do we need to have it involved now? -How will the government enforce copyright? Which agencies are taking on enforcement roles for other major issues such as privacy and theft? -How could our government tax encrypted digital cash transactions if it wished to? -Would this be the time to reintroduce the idea of a national VAT on all goods and services with the revenues disbursed as a part of state and local revenue sharing?

The release of "A Framework for Global Electronic Commerce" marks the end of almost 18 months of work and research for Ira Magaziner, President Clinton's chief Internet policy advisor.

It also marks a beginning, by setting forth a policy President Clinton believes will allow the Internet to become a vibrant vehicle for international trade in the 21st Century.

Presidential advisor Ira Magaziner

The Magaziner paper supports the idea of private sector development of the Internet, a uniform legal code in cyberspace and the Internet as "a global free-trade zone."

Moreover, President Clinton has directed his cabinet secretaries to revise any of their own Internet policies and regulations if they are found not to be consistent with the Magaziner framework.

Principles supported in the Magaziner framework include:

• The private sector should lead the development of the Internet and electronic commerce.
• Government should avoid undue restrictions on electronic commerce.
• Where government is needed, it's aim should be to support and enforce a predictable, minimalist, consistent and simple legal environment for commerce.
• Governments should recognize the unique qualities of the Internet.
• Electronic commerce over the Internet should be facilitated on a global basis.

While much of the framework and its "hands-off" approach have been heralded in the Internet community, it is not without criticism.

The administration wants to create what is a called a "key recovery system" which would be used in any international transactions. The system would require users sending encrypted, or coded, messages overseas to provide a "key" -- a piece of code used to decrypt, or unscramble, coded messages – to a key recovery center, or KRC. Law enforcement officials could then subpoena a KRC and get a copy of a key to decrypt messages they believe may contain information on illegal activities.

Computer industry officials say a key recovery system would hurt their overseas sales and have criticized that portion of the framework.

Another controversial area of the framework deals with taxation. President Clinton has asked Charlene Barshefsky, U.S. Trade Representative, to petition the World Trade Organization to make the Internet a free-trade zone within 12 months. It's unclear if America's allies will go along with that plan.

And although the Administration has called for no new taxes for the Internet transactions, that doesn't mean local and state governments will not try to collect sales taxes already on the books. A debate has begun over whether it's even technically possible to collect such taxes and if such taxes would strangle electronic commerce in the cradle.

In any case, the work needed to actually build a global digital marketplace will involve thousands – if not millions – of people.

And determining how the principles laid down in the framework apply to such diverse areas as online pornography, taxation and copyright, involve thousands of conversations as well.

Ben T. Carmichael of Vallejo, CA asks:

The President has continued to press for the clipper chip or key to read encrypted transactions. How can the Internet become your described vibrant vehicle for trade if Big Brother is looking over everyone's shoulder?

Ira Magaziner responds:

This Administration is committed to supporting the continued growth of global electronic commerce and the development of the Internet as a robust commercial medium. Our framework lays out a series of principles and identifies policies which we believe support these objectives. At the same time, the Internet must be secure and reliable. If its users do not believe that their communications and data are safe from interception and modification, they are unlikely to use the Internet on a routine basis for commerce. While the Administration has evaluated a number of different strategies to achieve this end, it is incorrect to say that the President currently is pressing for "clipper chip" or "keys" to review encrypted transactions. The Administration, in partnership with industry, is taking steps to promote the development of a market driven public key infrastructure that will enable trust in encryption and provide the safeguards that users and society will need.

Jose Garza of Milwaukee, WI asks:

How would this new policy affect other countries, esp. Latin American countries? Can you also comment on how America's trading partners responded to the President's Internet proposals when you met with them earlier this month?

Ira Magaziner responds:

The recognition that the Internet is a truly global medium, transcending traditional borders, was a prime motivation for the development of the Framework. Electronic commerce will be facilitated by harmonized and transparent international rules that provide consumers and businesses worldwide with clarity about the prevailing commercial environment. Whether you are in Latin America, Europe, Asia or anywhere else in the world, you must feel confident about your rights within the medium.

As we have thought about these issues over the past year, we have been in contact with policy makers in foreign capitals, keeping them appraised of our work. Just last week, I concluded a trip leading a U.S. government delegation through several European and Asian capitals. Later this month, we will be meeting with governmental representatives from Asia and several countries in the Western Hemisphere. Based on our recently completed discussions and this upcoming agenda, I am optimistic about the prospects of achieving international agreement on the framework approach and several of its key elements by the year 2000.

William Wittmeyer of Menlo Park, CA asks:

Why do we need any government involvement? The Internet has worked without the government to date, why do we need to have it involved now? That is, can you make a compelling argument that government involvement will reduce risk, reduce costs, and provide economic benefit?

Ira Magaziner responds:

Commerce on the Internet could total tens of billions of dollars by the turn of the century. For this potential to be realized fully, governments must adopt a non-regulatory, market-oriented approach to electronic commerce, one that allows widespread competition and increased consumer choice to be the defining features of a global digital marketplace.

At the same time, government does have a legitimate role to play. Some governmental agreements may prove necessary to facilitate electronic commerce and protect consumers online. In these cases, governments should establish a predictable and simple legal environment based on a decentralized, contractual model of law rather than one based on top-down regulation. This may involve states as well as national governments. Where government intervention is necessary to facilitate electronic commerce, its goal should be to ensure competition, protect intellectual property and privacy, prevent fraud, foster transparency, support commercial transactions, and facilitate dispute resolution.

Theobald of Indianapolis, IN asks:

Will the Copyright Office have extended budget to investigate copyright infringements? Or, what actions will the Federal Government take to provide enforcement of copyright, and which agencies re talking on enforcement roles for other major issues such as privacy and theft?

Ira Magaziner responds:

This Administration believes that sound intellectual property rights protection is essential to ensure the free flow of electronic commerce. We are committed to maintaining vigorous intellectual property rights (IPR) protections in cyberspace while ensuring that the rich tradition of fair use is not compromised.

In order to achieve these goals, Commerce Secretary William Daley will be taking the lead on a series of initiatives designed to preserve strong copyright protections into a digital age. First, the Secretary will be leading the Administration effort to seek domestic and international ratification of the ground breaking IPR treaties which were agreed to by the United States and over 100 other countries last December at the World Intellectual Property Organization (WIPO) in Geneva, Switzerland. Secondly, he will work to ensure that the U.S. Patent and Trademark Office has adequate capabilities to perform its functions considering the new challenges of protecting intellectual property online. Secretary Daley also will work closely with Attorney General Janet Reno and others to ensure that plague of global piracy and theft of intellectual property is adequately addressed and managed by law enforcement officials across the world.

Steven Lavine of New Haven, CT asks:

Your proposal to make the Internet a tax-free, global ‘free trade zone' seems less driven by policy concerns than by necessity. Just as a technical inability to regulate pornography on the Internet drove the [Supreme] Court to strike down the CDA, it seems that the advent of strong encryption technologies and ‘digital cash' will make effective regulation of Internet commerce impossible. Does this concern ultimately underlie the conclusions reached in your report, and if not, how could our government tax encrypted digital cash transactions if it wished to?

Ira Magaziner responds:

It is true that the emergence of the Internet, a free flowing global communications medium, has led government officials across the world to reconsider many prevailing notions of policy and regulation. We need to think imaginatively to ensure that our policies facilitate the explosive growth of the Net rather than interfere with its development.

Electronic commerce faces particularly significant challenges where it intersects with existing regulatory schemes. We should not assume, for example, that the regulatory frameworks established over the past sixty years for telecommunications, radio and television fit the Internet. Regulation should be imposed only as a necessary means to achieve an important goal on which there is a broad consensus. Existing laws and regulations that may hinder electronic commerce should be reviewed and revised or eliminated to reflect the needs of the new electronic age.

As I mentioned earlier, it is critical for policy makers to recognize that the Internet creates a global marketplace. The legal framework supporting commercial transactions occurring on the Internet should be governed by consistent principles across state, national, and international borders that lead to predictable results regardless of the jurisdiction in which a particular buyer or seller resides.

M. A. Newman of Tuscon, AZ asks:

Would this be the time to reintroduce the idea of a national VAT on all goods and services with the revenues disbursed as a part of state and local revenue sharing? Perhaps this would pre-empt the attempts of states and localities to impose their own taxes on Internet transactions.

Ira Magaziner responds:

Although I would not be the best person to address the issue of national tax reform, I do believe that taxation of Internet transactions is one of the most serious issues that we must resolve in order for electronic commerce to reach its full potential. Our paper clearly states our belief that policy makers at the local, state, and national levels should not construct new taxation schemes unique to the Internet.

We firmly believe that governments should step back and work together before taxing the Net. Existing taxes should be applied in a fair and non-discriminatory manner. Through collaboration between governments and a coordinated effort, we can better understand how the medium is developing, where it is appropriate and reasonable to extend existing taxes into cyberspace, and the best means of doing so.

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