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State Secretary, Mr. Kohsei UENO
Ministry of International Trade and Industry, Japan

Presentation: Principles of Realizing the Digital Economy

1. Introduction

Mr. Chairman, Distinguished Ministers, Ladies and Gentlemen,

I wish to extend my deep respects to the Government and people of the Federal Republic of Germany and the European Commission for their enormous efforts in holding this Ministerial Conference.

I also wish to express my gratitude for giving me the honor of speaking at this session, under the able chairmanship of Minister Wijers, Minister of Economic Affairs, Netherlands, and following two very distinguished speakers, Secretary Daley of the U.S., and Commissioner Monti of the EU.

2. Need for a Framework for the Digital Economy

The 21st century will be the age of the digital economy, with Electronic Commerce at its core. I am confident this will lead to economic structure reform through enhancing corporate productivity and streamlining of distribution, and, in turn, lead to upgrading the standard of living for the people.

Since the year before last, MITI has been undertaking a variety of Electronic Commerce pilot projects to support the technology and rule-making for this coming new age. Currently, 26 business-to-business pilot projects and 19 business-to-consumer pilot projects are already underway with the participation of consumers and a broad range of industries including the manufacturing, distribution, services, and credit card industries. Our plan is to ultimately have the participation of more than 350 enterprises and 500,000 consumers in these projects.

Furthermore, the business community has been taking the initiative in rule-making. The Electronic Commerce Promotion Council of Japan, comprised of enterprises taking part in the pilot projects, has been publicizing guidelines for certification authorities, model contracts for credit card settlement, guidelines for protection of personal data, and so forth.

Some observations have been gained through these pilot projects and private sector activities. Since Electronic Commerce is a new means of transaction, there may be cases where traditional laws for transactions and existing business practices may not be applicable as they stand, resulting in the need to develop new rules and an environment for ensuring the security of transactions and the interests of consumers.

"Rules," in this case, is used in the broad sense of the word, ranging from voluntary rules by the private sector to government regulations, and does not necessarily mean government regulations per se. We should rather be mindful that any hasty introduction of regulations has the possibility of impeding the technological innovation and innovative ideas of the private sector.

Moreover, various different types of transactions are conceivable in actual practice, for instance, closed transactions between specific enterprises, open transactions among many unspecified enterprises, and on-line shopping between an enterprise and consumers. We wish to study what new rules are best suited for this area, taking into consideration different types of transactions and by further expanding our pilot projects.

3. Five Principles Towards the Age of the Digital Economy

In this context, in May of this year, MITI made public a report entitled Towards the Age of the Digital Economy . This report describes the basic direction to be taken for government policy and how important policy challenges should be addressed. Let me take this opportunity to introduce the five principles.

4. Principle No 1 : Constructive Efforts and Swift Response to Change

The 1st principle is Making constructive efforts and swift response to change . The government should give a positive assessment to reforms brought about by Electronic Commerce and make clear its position of supporting private sector activities to the maximum extent.

Ever since the G7 advocated the Building of a Global Information Infrastructure in February of 1995, there has been rapid progress in the development and application of information and communications technology and systems in the private sector. Some even hold the view that the progress in the private sector currently outpaces the speed of response by the government.

If we are to realize a digital economy, it is essential for the government to be quick in policy development to avoid falling behind the speed of advances in technology, and thereby create an environment that would enable secure transactions among users.

The government itself also needs to act quickly to attain efficient administrative operations using information technology. In the case of MITI, 96% of patent applications are already being received by electronic means, and electronic means have been drastically incorporated for applications and procurement in other areas as well. In this way, constructive efforts are being made for realizing the so-called Electronic Government. Currently, this trend is spreading to other ministries and agencies as well.

5. Principle No. 2 : Resolution of Problems Through Technology and the Market

The 2nd principle is Resolving problems through technology and the market .

I have already mentioned the need for a framework towards realizing the digital economy. Here, I wish to stress that any new challenges that may arise should basically be solved primarily through technological means, competition in the marketplace, and new voluntary business practices in the private sector.

The results of pilot projects so far also indicate clearly that the market and technology contribute to problem-solving far more than we can imagine.

For instance, the PICS (Platform for Internet Content Selection), a mechanism that enables the recipient to filter information on the Internet in accordance with the level that he chooses, is one of the effective technological solutions in dealing with the distribution of harmful contents such as pornography and violence. It should be taken note, of course, that the current criminal law is obviously applicable to illegal contents even on the Internet.

6. Principle: No. 3 : Security and Trust

The 3rd principle is Ensuring security and trust for the healthy development of the digital economy.

The key to addressing this challenge is also, first and foremost, technology and the marketplace. When these are found to be insufficient, however, legal systems may become necessary. Let me touch upon some issues that are considered to be of particular importance.

Firstly, it is important to ensure trust and confidence in the authentication system which verifies the authenticity of a counterpart in an Electronic Commerce transaction. Our position at the present moment based on Japan s experience so far is that while there is a need to establish minimum criteria for certification authorities, for the time being, rather than having the government directly regulate the certification authorities, we believe it is more desirable to have private enterprises establish their own criteria and create an environment conducive to compliance with those criteria through the voluntary efforts of private enterprises. The government on its part

would like to support their efforts to create the necessary environment.

Once such an environment is put in place, I am confident the direct parties to a transaction will be able to select and use the certification authority that best meet their needs, following the market principle and based on the disclosure of information regarding the operation of certification authorities.

Consumer protection in Electronic Commerce transactions will be assured basically by the application of laws currently in place for the mail order business. Further consideration may need to be given including a study of a legal framework for the return of goods within a certain period of time as well as on how to deal with unwanted e-mail advertising.

The protection of personal data and privacy also needs to attach importance to appropriately reflecting the prevailing practices in transactions in each area as well as the level of protection of data in circulation, mainly through voluntary guidelines and technology. In the case of very sensitive personal data, however, protection by a regulatory framework may be required. Japan is currently studying the possibility of a legislation for the protection of personal credit information held by financial institutions.

An area that clearly requires a legal framework is the protection of intellectual property rights. In particular, in order to prevent free-riders in the investment in contents which would become easier with the progress in digitization and networking, we intend to promote the development and dissemination of rights management technology, embark upon a review of relevant laws, and also actively take part in discussions at the WIPO.

7. Principle No. 4 : Participation of Small and Medium Enterprises

The 4th principle is Promoting the participation of Small and Medium Enterprises (SMEs) and all citizens .

In the age of the digital economy, SMEs and local industries with scarce management resources will be presented with a greater possibility of finding business opportunities through the use of Electronic Commerce. On the other hand, however, there is a need to take note of the fact that any delay in introducing Electronic Commerce transactions will further widen the gap between SMEs and large companies. Moreover, even for the elderly, for instance, the use of information technology will provide a good opportunity to broaden the scope and diversity in their lives.

From this viewpoint, it is important for the government to create an environment that will enable all companies and individuals to secure access to the digital economy, for instance, by making improvements in the computer network environment in the schools and by providing support for education and training to enable workers to acquire knowledge and technical skills for making full use of information technology.

While I am responsible for economic affairs, as a politician, I wish to stress, in particular, that it is incumbent upon us to enrich education for our children both at home and at school.

8. Principle No. 5 : International Coordination

The 5th and last principle is Efforts for international coordination . There is a need to promote close exchange of information and policy coordination among all countries, recognizing the global nature of the digital economy.

If we are to ensure the effectiveness of policies taken to address the variety of challenges I have outlined above, it is essential to promote policy coordination among all countries, making use of the OECD and other international fora.

Besides the above-mentioned challenges, various issues are emerging including, for instance, the question of taxation raised by the U.S. and Europe. This is an area that includes issues which require international coordination such as the question of tariffs on digital content transactions on the network.

9. Conclusion

Japan, Europe, the United States, the countries of Asia, and others have already begun to address the issue of Electronic Commerce transactions. A number of projects similar to the pilot projects in Japan have also been started. Japan wishes to have a close exchange of views with countries that have such projects underway, and any proposal for a joint pilot project will be highly welcomed.

Lastly, I again urge all of you to promote international coordination for building a new framework for realizing the digital economy of the 21st century, and wish to conclude my speech praying for the fruitful and successful conclusion of this Ministerial Conference.

Mr. Chairman, Distinguished Ministers, Ladies and Gentlemen,

I thank for your attention.

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