Viviane Reding – Commissioner for Info Society and Media Shangai Speech (Jan 2006)

ICT are new opportunities for social inclusion, participation, business, growth and jobs in the EU and China

I am in China to meet my counterparts in the Chinese government in the area of Information Society and Media, as well as to visit European and Chinese companies working in these industries. And I am extremely impressed by what I have seen and learned so far, which confirms my belief that our deep commitment to cooperation with the Chinese government and research communities has a long future. Now the world's fourth largest economy (after the US , EU and Japan ), China plays a key role in the IT, telecom and media sectors.

As the first European Commissioner to be responsible for both the Information Society and  Media Policies - that is for infrastructure and content - I face the challenge - but also have the unique opportunity - to help to unleash the potential of two sectors which have become increasingly interdependent and have the capability to enrich one another.

I would like to share with you some ideas about how Europe intends to deal with this new world of digital convergence before presenting my views on EU – China cooperation in that fields.

Role of ICTs in EU economy and society

The economic performance of the euro area has so far not been as good as expected. In 2005 the euro-area GDP growth has been sluggish, notably on account of high oil prices. However, there are signs that a recovery is on the say. In 2006 GDP growth is forecast at 1.9% and is expected to go back to its potential in 2007.

Despite the expected recovery, it is clear that more needs to be done to achieve a better economic performance. In Europe we have two major challenges: globalisation and the ageing population.

Globalisation means that Europe is facing fierce competition from economies like China , India , US and Japan . Growth and jobs are being affected as European companies reorganise and often relocate some of their production activities abroad. Globalisation, however, should be regarded as an opportunity and not a threat. Trade liberalisation is largely beneficial to the maim trade partners. Having this in mind Europe must act further to introduce and implement structural reforms, maximising the benefits of globalisation while minimising the inevitable adjustment costs. This is the purpose of the so called Lisbon agenda of the EU, where the European Commission asks for more pro-active actions of its member states.

In the longer term, the ageing population poses additional challenges. The working-age population is expected to decline by 20% between 2004 and 2050. At the same time, the population of the over 65's will increase by 80%, leading to a rise in spending on pensions and health of some 8% of GDP over the coming decades.

Information and Communications Technologies play a vital role in Europe 's continuing modernisation. Advances in this sector help underpin innovation in all other sectors of the economy and are responsible for about 40% of overall productivity growth.

It is a highly innovative sector, responsible for more than a quarter of total effort in European R&D effort and capable of creating growth and jobs. Achieving the Lisbon strategy – that is, the goal Europe has set itself to create a competitive, sustainable and a socially inclusive Europe – largely depends on the take up of ICT across all sectors.

ICTs also play an essential role in managing change in industry and the service sector – from health to inclusion, from regional development to the protection of our environment and promotion of cultural diversity. They are crucial to meeting the rise in demand for health and social care and to modernise essential public and private services such as education, learning, security, energy, transport and environment.

Moreover, given the strategic importance of the sector, as acknowledged by the main players such as the EU, China or the US, it is vital for Europe to maintain a strong presence in the ICT sector to stay ahead as a global player.

The ICT revolution is influencing more and more aspects of life, yet it still does not reach all Europeans. For example, fewer than 50% of EU households have access to the internet. Also the take up of broadband has, even though increasing fast, not been satisfying. But high speed internet connections are crucial to access the new products and services marked by the ICT revolution. Currently broadband growth in Europe has attained an average of 70% per year in the past 3 years, reaching 9% of population (roughly 20% of households EU-wide). Deployment (availability) has advanced to reach more than 85% of EU15 population. Overall, over the last three years, the EU has started to catch up with its main competitors, such as the US where broadband take-up stood at 11.5% at the end of 2004, Japan , with a rate of 14.6% and South Korea with a rate of 26.8%. And, while we are speaking of comparisons, with China now second only to the US in terms of broadband subscribers (standing at 35 million) penetration rates are significant in the context of China 's population size and level of development.

Rationale for a new strategic initiative, i2010

The European Commission has placed economic growth and employment at the heart of its policy. Therefore in February 2005 the Commission, under President Barroso, relaunched the Lisbon Strategy. Our aim was to focus on growth and jobs, because up until then there had been many priorities. And too many priorities means there are no priorities.

In meeting these priorities – growth, jobs, investment and innovation - ICT is key. The latest EU25 data show that although ICT represents only 5% of the GDP, it drives 25% of overall growth and 40% of labour productivity growth. This sounds good but we could do better - the much higher US productivity growth was 60% derived from ICT.

A stronger ICT sector together with a wider and efficient use of ICT throughout the economy is a clear opportunity to help the EU to reinforce its global competitive position. It is for these reasons that I brought forward my new i2010 initiative. Adopted by the Commission in June 2005, i2010 was the first concrete action of the renewed Lisbon Strategy.

The starting point is that ICT can drive growth if a number of conditions are met:

- The first condition is a fast and accessible broadband infrastructure across the whole of Europe for citizens and for business: the European broadband market is growing fast and if present trends continue, within two years the EU will catch up with its competitors in terms take-up, if not in terms of speed.

- The second condition is to facilitate the development of new services and applications which are the bedrock of the new business opportunities emerging from web-services. A clear legal framework and actions to promote interoperability are needed for this purpose.

- The third condition is to increase investment in research and innovation in ICT. This is a prerequisite to ensure the competitiveness of the European ICT sector by maintaining leadership in both emerging fields and in areas where were are particularly strong such as embedded systems, mobile communications and micro and nanoelectronics.

- The fourth condition is to respond to users' increasing concern on the security of transactions and communications. The task is getting more and more complex with high capacity networks connected between each others. My priority in this respect is to get the different players - public authorities, industry and users - to work together to make security more effective.

The i2010 initiative

It addresses all these issues. It is a strategic framework that brings together all the relevant EU policy instruments: regulation, research and partnerships with the Member States, with industry and other stakeholders.

i2010 has three specific policy objectives:

- to create a “common information space”, based on the strengthening of an open and competitive single market for communication and media services;

- to ensure European technological leadership by encouraging private and public research and innovation in ICT;

- to promote a more inclusive information society in Europe , by better exploiting ICTs to improve our quality of life.

Investment in research: a key factor for growth

European media, computer and communications industries have a strong potential for growth. ICT research must become a major focus for investment both by private and public actors. This is why the European Commission has proposed to significantly increase investment in ICT research, and in the development of a digital economy. ICT research is Europe 's best bet for delivering sustained growth and skilled jobs. Reflecting its key role in Europe 's economic development, ICT research has been made the largest priority in terms of funding in the proposals for the EU's research programme for 2007-2013, the Seventh Framework Programme (FP7).

Currently, Europe represents around one third of the worldwide ICT market and 20% of world ICT supply. Europe is also a global leader in electronic communications.

Investment in research and innovation is crucial if the ICT sector is to continue delivering growth and jobs, since almost half of the productivity gains in our economies are explained by the impact of ICT on products, services and business processes. The i2010 initiative therefore proposes to increase significantly EU investment in ICT research. In China , as you know, the government has recognised this, and plans to strongly increase its spending on S&T R&D, including ICTs. The i2010 initiative notably supports technology platforms on future-oriented issues such as embedded systems, nano-electronics, robotics and mobile devices. These platforms enable the industry to join forces for research and deployment.

The need for an enabling Chinese business environment

The aim of my visit is to see my Chinese counterparts and industry players from both EU and China to discuss ways of promoting our bilateral relations and industrial co-operation. For the European business community present in China , a key element is of course trade and investment. Both need trust and confidence. Here, the multilateral track under the WTO is crucial.

I was struck by the list of remaining obstacles mentioned in the 2005 position paper issued by the European Chamber of Commerce in China . European industry is investing heavily in China and is a growing source of technology transfer and employment for China . But it faces a number of difficulties in the Information Society sector. For example, in the area of so-called VAS (“value added services”) in China, over 16,000 licences have been issued, of which only four have been issued to foreign invested companies. And this is not for a lack of interest by foreign companies. Rather it is a result of a licence application process which is far more burdensome than most other countries; and an overly restrictive interpretation of which VAS services can be provided.

So-called “basic” services, too, are difficult for foreign companies to enter, owing to restrictive regulations. This is linked not only to the ceilings set by the Chinese government for foreign organisations but also a range of additional restrictions on the choice of Chinese partners for “basic” services.

EU companies also have concerns about standards development in China: they are not allowed to be full members of Chinese standardisation organisations; standards are sometimes used to create technical trade barriers by adding on – sometimes unnecessarily - Chinese characteristics to internationally developed standards; IPR agreements of international standards are rarely implemented – notably in the area of mobile handsets; and type approval of foreign products is sometimes held up by delays in introducing specifications.

The industry is also concerned about draft legislation for software procurement, and about the lack of transparency in the roadmap for the introduction of third generation mobile services.

Four years after China 's WTO accession China has made enormous strides and foreign companies are making huge investments. But legal certainty is not sufficient in some ICT areas, and this needs to change.

I have raised such issues during the different meetings I have had with my different Chinese interlocutors. In particular, I said to my interlocutors that EU follows closely the IPR issues in the IT and telecom industries in China and that EU wants to work with the Chinese government to solve IPR issues smoothly; and that the EU expects the Chinese government to maintain its commitments to WTO rules and to the WTO spirit.

More than twenty five years ago China launched itself on the path of a more shared prosperity, and of a more influential position in the world. We must not lose this momentum. I hope that gradually the Chinese government will continue the liberalising of China 's economy and opening up important sectors to investors. The start is impressive, with parts of China 's ICT market being highly competitive. But this needs to be extended to other parts.

The EU-China Summit in September 2005 addressed some of these issues. A Joint Statement underlined that both sides recognise the vital importance of transparency in commercial decision making, robust corporate governance, and effective implementation of intellectual property and safeguarding the interest of consumers in creating a positive business environment for continued economic growth and individual prosperity.

I would like to highlight that on that occasion, China and the EU agreed to deepen the dialogue on intellectual property rights and in particular welcomed the recently established intellectual property rights working group.

The EU is willing to increase its cooperation on research and its support in the area of dialogue on future-oriented Information Society and media services. This includes notably mobile services and infrastructure beyond 3G, electronic networks security, RFIDs and digital content.

The EU-China Summits are a good opportunity to take stock of both political and practical issues of concern to the business community and it is therefore crucial that the business voice is heard loud and clear when setting the policy priorities for EU-China relations of the future. It is now important that we work on implementing the recommendations and ensure proper follow-up.

Conclusion

Ladies and gentlemen,

Both the EU and China participated actively in the process of the World Summit on Information Society steered by the Geneva Summit in December 2003 and concluded by the Tunis Summit in November 2005.

Governments agreed that there should be no governmental oversight on the day-to-day managing of the internet. At the same time they agreed to work on a new internet governance model, including a wide dialogue between governments and with industry and civil society stakeholders.

In my view, the outcome of the WSIS set out a sound basis for an Information Society for all, firmly anchored in the UN's human rights provisions and respectful of the fundamental freedoms, notably the freedom of information.

The WSIS outcome should be a starting point for the emergence of an inclusive, global Information Society putting Citizens at the Centre of the e-Strategies . This is crucial for the prosperity of our world, and represents huge economic opportunities for all countries as information and communication technologies increasingly drive growth and jobs.

This is also crucial for its stability and offers to every citizens in the world new perspectives for realizing their potential and to be part of the decisions which affect their life.

The EU-China co-operation is an important contribution to these objectives and I would like to invite industry and all other stakeholders to be part of this effort.

Thank you very much for your attention."