The information explosion is raising a difficult new set of trade issues as nations in Europe and elsewhere try to modernize their communications networks without letting the U.S. and Japanese telecommunications industries sweep them off their feet.
On one hand, the government-controlled and operated Postal Telephone & Telegraph systems abroad recognize they must open their monopoly structures wider to foreign suppliers to keep pace with the telecommunications advances in the United States and Japan. Yet some also are considering new protective moves, such as the taxation of computer data flowing across their borders, to shore up their own networks, say executives and government officials.
"The motivation isn't anti-Americanism," said one multinational banking executive. But they are determined not to see American firms dominate their computer and telecommunications industries. "They see the whole world of the future is turning on the ability to spit out microprocessors, and they don't want to depend on the United States," the banker said.
Some countries, including France and Brazil, may consider taxing the multibillion-dollar services industry in the next few years, executives say. Credit, banking, pharmaceuticals, insurance companies, data processing and manufacturing industries abroad would be affected.
"There is a growing movement of restrictions all over the world," said Ronald K. Shelp, vice president of American International Group Inc., a multinational insurance firm. "Lots of countries are concerned about the future and information technologies." If countries see the United States wielding an advantage, they construct a series of disincentives to let their technology catch up, he said.
"Underlying it all, governments wonder if the new information age will shrink their tax base," said Walter B. Wriston, consultant to Secretary of State George P. Shultz on international communications matters. "More often than not, governments all over the world react to these fears in the classic manner by attempting to regulate, tax and control the new technology."
Consequently, a cohesive policy concerning transborder data flows is emerging as a top priority, said Wriston, former chairman of Citicorp. "Since so much of the world's development will rest on keeping these circuits open, much more priority must be given to implementing American policy toward encouraging a free flow of information." Thus far, transborder data streams have not been interrupted, but unforeseen shifts in foreign telecommunications policy cause some companies to plan ahead in uneconomical ways.
One multinational bank was planning a new data network in Denmark, Switzerland, France and Germany, with a computer processing facility in London, said an executive who asked not to be identified.
"Somebody raised the question, will we be able to transmit information to London if the major transmitting node, France, says no?," he said. "In light of that uncertainty, they decided on a data collection and transmission point in every country -- that kind of planning is costly," he added.
Other expenses include building processing facilities in other countries instead of sending information to the United States for processing and back again. "The German law says data must be processed through a computer in Germany -- those kind of trade barriers concern us; it's an administrative cost," said Hugh Donaghue, vice president of Control Data Corp., a multinational data services provider. Other countries, such as Brazil and Canada, have similar requirements, executives say.
Twenty-six countries also are introducing legislation to impose new restrictions on the handling of computer data about individuals, and this may make it significantly harder for U.S. and other outside firms to do business in those countries, according to the Transnational Data Reporting Service Inc., a Springfield, Va., firm.
But real fears center on the taxation of information. "I do see there will be a move to tax data as it moves across the border . . . first in France, then Germany and Sweden," said one multinational corporation executive who asked not to be identified. Other corporate executives say Brazil has had the same idea.
"Taxing data or barring data leaving the country concerns companies that are information intensive," said Harry L. Freeman, executive vice president of American Express Co., which operates in about 130 countries. "We are hardly alone -- pharmaceuticals, manufacturing companies have become highly dependent and have taken for granted they can transmit data quite freely and inexpensively around the world."
The toughest political negotiation on transborder information flows and the service industries is yet to come this year, government and industry sources say.
The United States has proposed a voluntary declaration on information flows to the Organization for Economic Cooperation and Development (OECD), a Paris-based forum on trade and related matters that represents 24 countries, including Canada, Japan and the United States. "The U.S. is hoping to push through a data declaration," said Kathryn Hauser, director of telecommunications services in the Office of Services and Trade Policy Development at the U.S. Trade Representative's Office. The declaration, to be discussed in March, would note that few restrictions in information flows currently exist and that information flows are important, and would commit governments not to take actions limiting information flows, she said.
But the United States has been having trouble getting the OECD to look at the problem, said State Department officials who asked not to be named. "We have tried to have the OECD take a broader look at telecommunications regulation -- to get their economic and foreign ministries involved," said one official. "It has been a very frustrating experience -- there is absolute resistance to having the OECD look at the problem."
The data declaration "has gotten watered down, and is practically mush now. The political support is just not there," the official said. Consequently, the U.S. delegation may scrap the declaration of voluntary guidelines altogether and tackle information issues as they arise, other sources said.
At the same time, the United States is pushing for the General Agreement on Tariffs and Trade (GATT), the Geneva-based multilateral trade organization, to get involved in the area of information flow and the service industries. Negotiations on that issue are expected to start in the coming months.