The Business Contribution to Development and Safe

United Nations Economic Commission for Europe (UNECE) Second International Forum on Trade Facilitation, 15 May 2003

Introduction

Thank you for the kind introduction and for inviting me at this forum.

I have been asked to speak about The Business Contribution to Development and

Safe Trade. This is a particularly important topic because expanding trade appears to be one of the few ways of growing a sluggish global . Benjamin Franklin, one of America’s founding fathers, stated: “No nation was ever ruined by trade”.

As everyone here is aware, the barriers to expanded trade are not just tariffs. The average post-Uruguay round tariff on industrial goods is only 3.8%. By contrast, a recent OECD study concluded that poor border procedures cost up to 15% of transaction value. Anything business can do to develop safe and efficient trade, therefore, is beneficial.

In 2002 the World Bank concluded that improved facilitation would increase trade in the Asia

Pacific region alone by €275 billion.

Nicholas Stern, the World Bank’s Chief Economist, noted: “Trade can be a powerful force for growth and poverty reduction. Countries that have increased the share of trade in their GDP have grown faster and reduced poverty more rapidly”.

The Twin Pillars of Business Support

The business contribution to development and safe trade is an enormous subject.

So I am going to focus on the two primary contributions of the industry.

These include: one, developing markets; and, two, creating a safe trading environment.

BR: 41714-3 2 Pillar I: Developing Markets

Related to developing markets, I would like to highlight three areas where we can help.

In particular: direct investment, help close the skills gap, supporting open standards and solution development.

First, Foreign Direct Investment: One of the most effective ways in which industry helps develop markets, particularly in developing countries, is through direct investment. This is about more than just cash infusions and jobs. There are substantial spill-over effects as well.

According to the OECD, these spill-over benefits include: transfer of and know-how, enterprise development, international trade integration, business sector competition, and capital formation. Moreover, these investments help local small and medium-sized enterprises, or SMEs, as they become suppliers and vendors, and enjoy the fruits of a better-trained population and expanded infrastructure. Although it is difficult to quantify these benefits, few people doubt the value of decisions such as that by Renault to invest an additional €230 million in a Russian production line, or Bayer’s €3 billion pledge for a new plant in China.

At Microsoft, we have committed €80 million for software research and manufacturing facilities in

China. In addition, we recently unveiled the European Microsoft Innovation Center. Located in Aachen, Germany, the Center will employ people from throughout Europe, and will complement the Microsoft Research Center in Cambridge, a UK facility that employs some 60 researchers from 16 countries.

Our “partner-centric strategy” is meant to stimulate a broad IT ecosystem that expands local skills development and high-tech investments. This promotes a healthy IT environment in which a range of companies are constantly striving to develop ever more exciting .

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Closing the skills gap: Kofi Annan eloquently said that “the main input is brainpower – the one commodity that is equally distributed throughout the human race.” Unfortunately, e-skills training is not equally distributed, leading to a serious skills gap. The skills gap exists everywhere, but is particularly problematic in developing countries and for SMEs.

Industry has long been working – often in conjunction with public authorities – to bridge the skills gap. For example, the technology industry and the European Commission have together formed the Career Space initiative to develop guidelines for schools on how best to teach IT skills.

Other initiatives include the WEF Digital Divide task force and the New Partnership for Africa’s development.

In addition to helping address the skills gap, industry also is trying to reduce trade burdens by promoting open standards. XML is particularly important because it provides a means of separating actual data from how it is presented to users. This means that the same data can be displayed on different devices, in different formats, without reprogramming, allowing access anytime, anywhere, on any device.

Let me give you an example of XML’s ability to enhance trade efficiency and security.

Most of you are familiar with the United Nations UNeDocs initiative. What you may not know is that this system maintains the core information on trade documents in a standardized, encoded format using XML. This allows any XML-enabled application to validate trade data against the

UNeDocs code requirements. The result is greater efficiency and security because the data are constantly being validated electronically, and the entire process is less subject to human error.

Microsoft supports the UN system by allowing users to easily develop and process XML forms using Web services. These applications transform what was once a complex process to a simple, secure system that can be used virtually anywhere.

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Most importantly, simplifying this process expands opportunities for local SMEs to participate in the global economy, thus helping the growth of developing countries.

Finaly Solution Development: Technology can open markets and expand business opportunities, especially for SMEs in developing countries. For example, in Thailand,

Thaigem.com has grown to become the world’s largest online vendor of gemstones and jewelry, while in India, Everythingaboutwater.com offers the country’s first e-marketplace for water and water products.

Also, technology can enable development by facilitating trade and reducing trade burdens.

Consider just two examples. First, in Dubai, Microsoft assisted the Department of Ports and

Customs in developing the e-Mirsal Customs On-line Service. This web-based service uses the most up-to-date security technologies to deal with the paperwork generated annually by

20,000 importers and exporters, 450 clearance companies and over 70 banks and other financial institutions. The system allows importers to input customs data and calculate tariffs online, and provides guaranteed electronic duty payments.

Second, Czech Customs uses digital lines to form a secure private network linking offices.

Czech Customs also has added a public website that provides information about tariffs. Traders can also monitor the progress of their goods through the customs process online thanks to the

“Electronic Customs Declaration” project. Due to these changes, 80% of customs declarations are submitted electronically, and the Czech Republic has become the 1st Eastern European country connected to the EU New Computerized Transit System (NCTS)

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Pillar II: Creating a Safe Trading Environment

Let me turn now to the second pillar of industry support: the creation of a safe trading environment. Since the September 11 attacks it has become clearer than ever that criminals must not be allowed to use the global trading system to further their operations. To that end, industry is working to combat counterfeiters, improve system security, and promote harmonized supply chain security measures and export control regimes.

First, a few words about piracy and counterfeiters.

Piracy and Counterfeiting: Counterfeiters often run large-scale operations that support illegal sales around the world. These illegal sales reduce the economic incentive for companies to innovate, and harm consumer confidence by distributing flawed and poor quality replicas.

Currently, it is estimated that one in every three copies of software in use world-wide (36%) is an illegal copy representing a market value of over €10 billion. This compares to 34% for the EU and 63% for Eastern Europe.

The industry commits vast resources to the fight against piracy through awareness and education programs and by working with government regulators and law enforcement.

Safe and Trustworthy Computing: By creating secure technologies industry can promote safer trade and greater development. At Microsoft, we have recently launched our

“Trustworthy Computing” initiative to address concerns about system security.

“Trustworthy Computing is computing that is as available, reliable and secure as electricity, water services and telephony”. We are focusing on building trust in each of our products. Key investment areas include reliability, security, privacy, and business integrity.

Security is an industry wide issue and we are committed to work together with many 3rd parties on this key topic.

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One example is our work with the Universal Postal Union to enable the easy use of digital signatures that comply with local legislation in MS Office applications. This basic functionality is now available to the UPU’s 189 member countries that form the largest distribution network in the world.

Another way in which industry helps ensure a safe trading environment is by creating and promoting supply chain security measures. The industry is constantly working to address the numerous technical and legal issues involved in securing the movement of goods through global supply chains. From “smart” shipping containers that transfer remotely content information to port officials, to content tracking software, new technologies are helping customs officials gather and process all the data they need in a rapid and efficient manner.

Finally, let me close with a comment about export control regimes. In the post-September 11 world, many governments have imposed new obligations on international trade shipments.

Industry certainly agrees with the need for a safe trading system. At the same time, we remember the flawed attempts to control encryption technology in the 1990s, and we are concerned that many of these new rules are burdensome and impair companies’ ability to invest in developing countries. By working together we can find a solution that provides for secure trade while not impairing unduly the free flow of goods and services.

Conclusion

In conclusion, industry cannot answer all the big picture political and social questions raised by global trade and development. For that, the world turns in large part to many of you: our government leaders and policy makers.

But we can help markets develop and help create a safer trading environment … and play a key role in bringing the benefits of a global economy to those regions that need them most.