Remarks by Secretary of Commerce William M. Daley

4TH CHINA INTERNATIONAL ELECTRONIC COMMERCE SUMMIT

April 7, 2000

Beijing, China

[As Prepared For Delivery]

This is my first visit in the new century to Beijing. I think there is some important symbolism that a Commerce Secretary begins the century in China at an E-Commerce event.

Three years ago, when I became Secretary -- back when everything was just a business, not an e-business -- no one could have imagined how big, or important the Internet would become. In America, we are now in the middle of the longest economic expansion in our history. And one third of that growth can be attributed to information technologies.

Now, many economists believe our economy can grow an additional one percent a year -- on a sustained basis. It is because productivity gains from these technologies have rippled through to the entire economy.

I believe as the Internet gives people all kinds of possibilities beyond their borders -- the world needs the billion people of China in the world trading system. And the Chinese people need to be part of the system, so they can fully enjoy the benefits of an Internet-driven economy.

So after I leave here and go back to Washington, I plan to come right back to China -- one week from today. This time, I will bring with me several members of the United States Congress. These are the people who really run our country. They will vote the week of May 22, on whether America should grant China permanent normal trade relations with China.

For 20 years, our Congress has annually been renewing it -- but this would make it permanent, enabling China's entry into the World Trade Organization. To be honest, the members I will bring here are uncertain how they will vote. No question, they all want to strengthen the ties between our nations. But they are uncertain if this is the best way, or time, to do it.

And they want to see China for themselves. As I told Premier Zhu, they will be looking for concrete results. They want to know that our business relationship is improving and that businesses in their districts back home can increase exports.

When I speak to Americans about the vote, I explain that as America is seeing a new Internet-driven economy, so is China.

I understand about 10 percent of families in Beijing own computers. I hear that, and I think -- great. But how much more there is to do to make communications cheaper and better so we can get to the other 90 percent. This is the reason the second largest market in the world for PCs next year will be China.

The members of Congress with me next week will not think China has to do everything the way America does things. Just as when Premier Zhu came to our country, Americans did not always see things his way -- although they became a big fan of his.

But obviously there are things we can learn from each other -- especially when it comes to the Internet. Today, I just want to point out three areas that I think have been important to America's Internet success.

First, is efficient capital markets. Why is it that there are so many Internet companies springing up in America? Because our innovative people have brilliant ideas, start companies, and find venture capitalists who help put these ideas into practice. And the venture capitalists are interested because if the start-ups show signs of success, they can take the firms public, and make 10, 20, or even 100 times their investment.

As we saw this week, the stock market is a very tough place. Stocks can go up and down at Internet speed. But we have found there is no more efficient way of allocating capital to people who will use it profitably that the public markets.

Countries have tried many other ways: central planning, family connections, regional competition. But look at all those Internet companies -- more importantly, look at all those wonderful ideas that they have implemented so quickly. It is due to the efficiency of our capital markets. And these capital markets function best, if people all over the world can participate freely in them.

Second, our success has been due to minimal government regulation. I firmly believe government should play an important role in creating an environment for businesses to thrive, and to do so in a way that reflects the best values of our society.

But too much government interference is counterproductive. What makes the Internet the Internet are its ability to change rapidly and its borderless nature. Both are totally foreign to government bureaucracy, whose entire existence is based on borders.

Knowing this, three years ago when President Clinton came out with our first statement on policies for the Internet, he said: let the private sector lead. Let the private sector develop solutions that protect the public interest and can adapt to rapidly changing technology. That way government would not mess things up. When he said that, it was revolutionary in some corners of the world. The fact the Internet is growing as rapidly as it is, the fact companies are assuming a new level of public responsibility -- proves the President was right.

Of course, some areas demand government regulation. Governments need strong rules to protect intellectual property; and to go after hackers who want to disrupt the Internet; or who would cheat consumers online. But even then governments need to work with the private sector to identify solutions that protect the public, but allow the Internet to prosper.

Government has a different role in other areas. In America, the number one concern of consumers online is privacy. They want their privacy be protected. Some subjects are so sensitive -- like medical and financial records -- we need to have laws in place. But for the most part, we protect privacy through self-regulation.

And government's role regarding content is also different. Parents want to be able to control what their kids are doing on the Net. So our industry has created tools to allow them to control access to certain websites. But we leave it up to the parents, not the government. We want to empower people to control their own communications, not have the government make choices for them.

And let's face it: the Internet's main product is information. Now, there can be more freedom of expression, there can be more contact between all kinds of people, with all kinds of views than our world has ever seen. Will some people abuse this freedom of information? A few, which is why we need some regulation. But most people -- including, I am sure, most Chinese people -- will use the tremendous power of the Internet to create new products and new services that will benefit themselves and their clients. Government should encourage this empowerment, not try to limit it.

Third, and finally, America's success with the Internet has been fueled by a very innovative, and risk taking business culture. I know we share this culture, because so many of our Internet entrepreneurs are Americans of Chinese descent. Their remarkable success comes from their great Chinese heritage.

Many Americans -- including Chinese Americans -- want to share their experience and invest their capital in China. This is an excellent opportunity for both our nations -- as cooperation can only bring us closer together.

Of course, some people in China are like the American members of Congress I will bring over next week -- a little skeptical.

Some Chinese tell me it would not be good for China, if American firms brought their capital here. You tell me -- if someone wants to loan you a couple of million dollars so that you can provide a service people want -- how is that a bad deal?

Some Chinese think it would be better for China to develop its own technology, than for us to bring ours over. My answer is that China should not spend time trying to copy technologies that already exist. It would be far better off devoting its considerable talents to developing the next generation of technologies.

Let me conclude by saying, I am excited about the possibilities of the Internet. I am excited about the possibilities of China entering the world trading system.

You know, when Richard Nixon first went to China, global telecommunications was just beginning. And more people saw the pictures and heard his words than on any occasion in the history of the world. And he paraphrased Abraham Lincoln: He said: "what we say here, would not long be remembered. What we do here can change the world."

It is 30 years later. For 20 of these years, America has granted normal trade relations with China. For 14 of these years, China has tried to enter the World Trade Organization.

Now, in a new Internet era, the fastest growing communication tool ever invented, we also enter a new relationship. And after all the speeches, and all the discussions, and all the debates -- it is our turn to act. What is important is what we do.

I cannot predict what China will do. I don't know what choices China will make. But in our country, President Clinton wants us to make the right choice, to give China entry into the World Trade Organization, so that the great promise of the new Internet age will be there for a new China. Thank you very much.