 Thank you. You're welcome to get your coffee cup refilled in the back. It is an early morning event in Washington. We recognize that fact. But I'm very pleased to welcome a panel of experts to continue the discussion. First, I thought Congressman Polis' remarks were quite enlightening and provocative. And we hope to continue that with the panel. We have four panelists. I will introduce them now. I'll turn to each of them for five minute of opening remarks. Then we'll continue on with a discussion among the panelists and with the audience. Jake Colvin is the Vice President of the National Foreign Trade Council. The National Foreign Trade Council is a large American organization, almost 100 years old with roughly 350 member companies that has always had its core mission of advancing the interests of globally engaged American companies. Jake is a key player on this panel because he was the leader in negotiating a statement on business priorities for the digital economy that is widely used. It was done in 2011. And the document is impressive in its depth and breadth of content, but also the degree to which it reflects a broad industry consensus on a very fast-moving issue. Having in my career previous to CSIS, I looked at a lot of coalition letters. And I can't remember another one that had both Citibank and godaddy.com as signatories. Somehow Jake managed that. And he's going to tell us how he did it. Next, Kenneth Smith Ramos. Kenneth Smith is the head of the trade office, NAFTA office for the Embassy of Mexico. Long career in the Mexican government. Much longer than it appears from his hairline. Kenneth was part of the negotiating team on the NAFTA and really started there and has worked with the Mexican government ever since. He now represents the Mexican Ministry of Commerce in Washington, D.C. and is a key voice on Mexican interests, commercial interests in the United States. But what we hope he covers as a panelist is how the partner economies in TPP, which have some similarities but are often quite diverse, are responding to the U.S. initiatives and other initiatives in this space in the digital economy. Next to Kenneth is Gary Horlick. Gary Horlick is one of the top trade lawyers based in Washington but really worldwide. He's had a very long productive career with a wide range of clients as a practicing trade lawyer. But he also has a very unique career in Washington in that he was both executive and legislative branch. He was the one time the International Trade Council for the Senate Finance Committee and also the Assistant Secretary of Commerce for Import Administration. So he's seen this in Washington for a long time. I invited Gary on this panel because Gary has been working digital issues since the days of dial-up and he is uniquely positioned to discuss this disconnect that has developed between a very fast-moving disruptive technology and relatively stable and somewhat inflexible trade rules. Finally, Johanna Shelton is the senior council for law and public affairs, public policy and government relations for Google. And Google has been in the forefront of these issues. Johanna has, as careers in Google go, she has an extensive one. She's been with the company since 2007, which is not many Google employees can probably say that, given the rate of growth of that particular company. But Johanna had a career in Washington, most of them in the U.S. House Committee on Energy and Commerce, but also working with the Federal Communications Commission and in private practice. So we have a very broad, diverse group of panelists to talk about this fast- evolving issue. I'd like to start by turning it over to Jake. Well, thank you, Scott. When Scott was at Procter & Gamble, he was the chair of our WTO Committee. It was always one of the top people that I turned to think thoughtfully about issues. And so I'm glad you've brought that thoughtful approach to CSIS and to the digital economy. TPP is exciting for us because it's the first time that we're looking at a trade agreement through the lens of how it can improve the global digital economy. And this is important to all of our member companies because of the importance of digital information to how they do business. So as we started thinking about this, one of the things that Scott mentioned that we did was in 2011 we convened a group of companies and associations to discuss a couple of things. The economic importance of information, digital information flows, problems that companies are facing and what I was sort of characterized as digital protectionism that's creeping around the world, and the potential to improve the global trading framework to foster open markets for information and digital technologies. And so as Scott alluded to, we came up with a six-page set of principles. And the basic idea behind those principles was to apply trade disciplines like transparency, like non-discrimination to information and internet-based services. And so among other things what it does is we call for the U.S. government to seek commitments on a range of issues, including sort of presuming the flow of information across borders. To prohibit local infrastructure server and investment requirements and to ensure that things like security and privacy rules aren't used as a disguised barrier to international trade. And so I'm really proud of the consensus that we were able to come up with. We had 10 associations signed on in addition to NFTC. It was everyone from the Chamber of Commerce to CCIA. And 11 companies also associated themselves with the principles, including City, Google, Microsoft, and Visa. And I think it has helped inform some of the commitments that you see being proposed in the TPP. I guess I would make maybe just a couple, three observations as I've had time to reflect on what we did with those principles. The first is as you look at the negotiations, I think it's clear that it's challenging to translate broad principles into specific commitments in the TPP. TPP provides the first lab really to work on some of these digital trade issues. I think it's cutting edges trade policy gets, and so you wouldn't be surprised that there's a heightened sense of wanting to get it right and thinking, and a need to think through important issues like privacy. The second is, is that thinking about the industries that drove the process, they were largely USICT internet and financial services companies. For me, they turn out to be the tip of the spear for companies that care about these issues. They were most active, I think initially informing policy solutions. But what I see is a growing appreciation among our broader membership for the importance of digital trade policies. Chevron is digitizing their oil fields. GE is monitoring smart power plants from across borders. Procter and Gamble uses the internet websites, Twitter, Facebook to connect with customers around the world. But I guess, and Congressman Paul has mentioned this, I think the real promise is that startups and small businesses can participate effectively in the global marketplace for the first time in history on a broad scale. And so I'll give you just one example that's relevant to the TPP. The shirt that I'm wearing today is from a company called Proper Cloth. They're an online custom shirt manufacturer based in York City. They've got a showroom in SoHo. And so you go online and you design a shirt, you put in your measurements. And then two weeks later, you get a shirt that shipped from their facility in Malaysia. They've got five employees in New York, they support manufacturing in Malaysia, and they export to more than 20 countries. So this niche didn't exist 10 years ago. And the reason why it exists today is not just because these guys can hang a digital shingle on the web, but because of improved logistics services, payment and shipping services, and the online communities that have developed around Facebook, Twitter, blogs, message boards that help to validate the company and make me sort of see that their product is worth checking out. And so maybe just to close, the final reflection is that the principles that we developed were specific to fostering global flows of information and digital technologies. And that's really only part of the solution here. Fostering an open and secure global digital marketplace requires a whole suite of policies, not just on information, but also on logistics and shipping services, payment, retail, customs, mobility policies, intellectual property rights frameworks, appropriate intermediary liability protections. And so, you know, as a broader point, getting the entire TPP right is important for a number of reasons unrelated to the digital economy, but certainly because of the digital economy. So thank you. Thank you very much, Scott, for the invitation to participate in the CSIS event and have the opportunity to share with you and the participants a little bit of the viewpoints on from Mexico when it comes to the issue of negotiations and TPP in particular on the digital economy. Now, I would just like to frame the discussion very quickly on the importance that TPP has for Mexico. And this has to be put in the context of the importance that the trade has for Mexico. 70 percent of our GDP depends on international trade. We have trade agreements with 42 countries. And we are a country that for the last 25 years has engaged in an active program of trade liberalization. And nowadays, this type of trade liberalization goes beyond the classical just reduction of tariffs. We have to look at the disciplines that exist in international trade rules and how we can improve them, strengthen them and in a way modernize them to reflect the realities of how the economy has changed in particular from the time where we negotiated the NAFTA agreement. So that's where TPP and the digital economy discussions are very important. That's one element where we see TPP moving the needle ahead of where we are in terms of international trade rules. So I don't need to get into particular details on the importance of the digital economy in general, but for Mexico there's a clear recognition that the digital economy is essential for economic growth in the future for our country. And it's an area where we have a lot of opportunities. It is a key clear realization that the development of online businesses, the development of the internet, the services and the ability to strengthen supply chains is one of the key elements that is attractive for us in terms of strengthening our relationship within the NAFTA and with other countries in the world. So that is one of the key elements. And in Mexico since 2002 we launched a program called ProSoft in which we look to develop the IT sector. This has been a priority. And now under the Peña Nieto administration there's been the launching of a national digital strategy which aims to promote innovation, technology adoption and IT sector strengthening. We still have a lot of challenges in Mexico. It's a growing sector IT in which we have developed large clusters across the country from Monterrey, our traditional industrial center, but new clusters in the central states such as Queretaro and Jalisco where we're trying to develop our own version of Silicon Valley and of course around Mexico City. And the challenges that we face is that although we have for example over 40 million internet users, we still have very low penetration rates of around 35 percent. The same applies for a broadband penetration into Mexico. At the same time we are an attractive center for the development of software for design. Increasingly more and more companies are investing in Mexico and creating jobs and developing this supply chains and in terms of our strategy to try to see Mexico as a hub for exports to the rest of the world. So when it comes to the discussions in the TPP, I cannot speak on behalf of all of the other countries, but we know that it is just as it is for Mexico, it is a key element of the negotiations. The main principles that we follow in the discussions within the TPP, we're interested in promoting international principles that contribute to the development of the digital economy. And as this is reflected in our approach to international trade negotiations, we see TPP as a possibility, as I mentioned at the beginning, to upgrade the NAFTA, to really address issues that didn't exist when NAFTA was negotiating. And so some of the main topics that we're looking at and addressing is, on the one hand, prohibiting the discrimination in digital products and looking to eliminate all types of duties on content transmitted electronically. This is very important when we look at the trading goods and the reductions of tariffs that we've experienced over the years. We now see that the same has to apply on electronically transmitted goods. Also, the issue of the localization, the location of computing facilities and services. So looking at no requirements to set up service and computing facilities in the country where the services to be provided. And this is very important in terms of liberalizing and promoting the penetration of e-commerce and the ability to develop the IT sectors in the different members countries that participate in the TPP. Addressing, of course, the issue of cross-border data flows is very important in terms of how do we regulate and make sure that, while we take into consideration concerns that are very important for all of our countries on data privacy laws, that at the same time we promote an environment which allows for free cross-border data flows. And while there are different opinions and legal regimes in each of the TPP countries, these are some of the key elements that are guiding the discussions. For us, it's very important to look at the issue of how progress in the TPP can serve as a blueprint for the NAFTA upgrade that I was talking about, but also for some of the issues that Gary might discuss as well, which is what is happening in the multilateral scene, what happens in the WTO, where most of the agreements, as Congressman Paul has mentioned, were negotiated in the early 1990s and they also do not reflect the realities of the modern economy. And so hopefully with an optimistic view of how we can move the issue from the discussion in TPP, which is undoubtedly the most important polar lateral or negotiation going on right now, worldwide, to the larger WTO multilateral arena. And one of the elements that are very important, that should be considered in terms of developing this network of countries and strengthening the digital economy, is how can we establish rules and international standards on all of the different issues affecting the digital economy that are relevant for its development. For example, I mentioned some of the key issues having to do with specific trade issues on customs duties, location of computing facilities, but there's issues related to electronic signatures and authentication, online consumer protection, and of course the issue of personal information protection. So these are some of the issues that are being addressed within the TPP. Mexico sees this as the most important negotiation going on right now and we believe that for our own development, the development of the IT sector and digital economy is a key element of our growth, the development plan for the future. Thank you. Thank you, Kevin. Gary. Thanks very much. I want to thank Scott for me. I want to thank Scott for me being here, not only for the obvious reason of inviting me, but a fascinating conversation I had with him, I think four years ago when he was at Procter & Gamble and we were discussing internet, he pointed out that Procter & Gamble was an internet company and I said, please explain, and he explained to me the depth to which Procter & Gamble, what is viewed as a manufacturing company in fact was deep into online relationships with its customers, with its suppliers, with its whole supply chain, with dreaming up new products, with advertising, and it's what the congressman said earlier, there's no divide any more between digital companies and manual goods companies. They're all internet companies now, and so which is part of the reason why there's so much, why this room is so full. The, and it's only going to get more so. The numbers are pretty clear, the projections, which are, I have no reason to doubt or that five billion people, five billion people in the world, will have broadband access by the end of this decade. Why? Mobile phones. Almost everyone's internet access will be by phones, but with smartphones which are not that expensive anymore in developing countries. This is not some pipe dream. You know when we're back here in 2020, it'll be at least five billion, that's most of the world will be connected. And they'll be using it for all the things that none of us will think of today. Because if you go back five years, we're doing things no one thought of. So TPP, you heard both from the congressman and the two prior speakers exactly why this is such an attractive thing for TPP countries. It eliminates distance. The Pacific Ocean is a really big ocean. If you grow up in Australia or Chile or Singapore or Malaysia, you grow up thinking, I'm really far away from everything and now you're not. So with no capital cost at all, as was pointed out, you can sit in your parents' garage or flat. They're paying for the broadband access. They're bringing you free food. You have free rent. And you can become a digital startup. And if you open the main Singapore newspaper on Sunday, every Sunday they list the new startups in Singapore and they're all internet. But it's not, I don't want to again go back to thinking it's just internet. There's a venue in New Zealand I think makes 300 cases a year. That's it. They're really good wines. They cost $100 a bottle. You cannot get Diageo to distribute your product if you only make 300 cases a year. You just, it was not a business. It's not a sustainable business model. Now with the internet, all 300 cases are sold in the U.S. It's not just e-commerce in the sense of I can go online and order a case and FedEx or UPS will get it to me. It's, I hear about it. You go online if you're a wine connoisseur and you hear about this you would never have heard of because 300 cases couldn't support the advertising budget. I won't beat this to death. We all know it. This has totally changed the economics of everything. If you're a TPP country other than the U.S., this is astonishingly attractive. You don't have to lose your entrepreneurs to the U.S. Remember, most, not most, a large chunk of internet companies in the U.S. were founded by non-U.S. origin people. Half of Google, right? A Russian, eBay, French, Skype, a Swede, and on and on and on. Silicon Valley is a monument to better immigration policy. So, if you're a country in the TPP area, you're looking at something that suddenly you're not competing with this behemoth the U.S. where you have to have huge amounts of capital to build a huge bricks and mortar factory, et cetera, et cetera. The economics we've been discussing are really attractive to smaller, distant countries that gives them opportunities they never had. So, in a normal trade negotiation, I'm the U.S. trade negotiator. I'm going to these countries and saying, lower your tariff on pork and my pork producers will wipe out your pork producers. That's not this negotiation for the internet. This is, does anyone here want an internet economy? Every TPP country says yes. And to finish it up, I don't want to overstay my time but we'll get more in questions. This is a trade negotiation. I'm going to overstay my time a little bit. So, you're not wiping out. You're giving everyone an opportunity to do things they couldn't do before and there are trade-offs. There's stuff in this agreement for everyone. So, you might think a country like Vietnam might be a little nervous about the internet. Probably is. But, if the U.S. does the right thing, Vietnam is going to have huge increase in exports of garments. I know that sounds 19th century but we're talking about 19th century trade negotiations here. And the potential increase in exports of garments and footwear from Vietnam suddenly makes signing this agreement which will have internet stuff attractive. So, there are, that's one reason why TPP is a perfect venue for this. You couldn't just go negotiate an internet agreement. Now, so, where are we now? Very briefly. There is language in the telecoms annex not just the telecoms agreement but the annex too. So, the 1994 telecoms annex to Gaetz which is very useful for the internet. I worked on it the only case which is dealt even vaguely with the internet dispute which was the telecoms dispute where that language proved very useful. There are reasons why the U.S. is worried of using it but the language is there. Free trade agreements have some language. Careers always held up as the exemplar. That was negotiated in 2007. And trust me, that's not the language you want in a current internet agreement. So, you don't just repeat that. So, TPP is a great opportunity to get it right. You have the right mix of countries. You want to negotiate an agreement includes developed and developing countries. It's a good test bed. So, you have the right mix of countries. You have the right mix of trade-offs. You get it right here. You take it into TTIP where Europe badly wants to catch up with the U.S. on the digital economy because the U.S. legal structure for the internet has been favorable. We have a stronger internet economy than Europe. And so, the idea is to give those protections worldwide to internet entrepreneurs. And then finally, or maybe in parallel, TISA, trade and services agreement which has a mix and multilateralize it. So, right now, I couldn't, you know, we don't want it done in ITU to be blunt. We tried that. We, you know, you're not going to do this FTA by FTA because then you have a patchwork of obligations. The internet is not very good with patchworks. I mean, technically, you know, and governments have a hard time catching up with this. So doing this, doing data protection country by country won't work. Just won't work. Just I'll finish up with governments. So governments always lag reality. There's nothing wrong with that or surprising. No internet company is on any ITAC. There are lots of reasons for that, but it tells you there's a lag. And there's nothing new about the internet. The internet, you know, universities were buzzing about this more than 50 years ago. I sent my first email when I was a college sophomore in 1965. So it was out there, but it didn't really hit Washington until really dial up and in the 1990s. And we've been catching up ever since. Everyone knows we have to deal with it. Everyone knows we have to get it right or we cut off our biggest single source of economic growth. And the same is true in TPP. So I'll leave it at that. Take question. Thank you, Gary. Johanna? Sure. First, thanks for having us here. I'm going to start with a little bit of where we are and where we see the internet right now and where it's headed. Gary touched on that a bit. And then some suggestions for how the trade world can reflect some of the robust vitality of the internet going forward. There are 2.5 billion people connected to the internet today. Even at that number, the internet, if it were a sector, the consumption and expenditures on the internet, if they were a sector, bigger than energy, bigger than ag, bigger than most of the traditional sectors that are out there in our economy. And that's today. Going forward, there are 7 billion people on the planet. So there are about more than 5 billion that do have cell phones, as Gary mentioned. We expect all those cell phones to be upgraded to smartphones at some point in the next few years. So let's think about the growth potential for commerce and transactions occurring through those smartphones. We see it at Google. One in four of our videos now on YouTube are mobile devices that are watching them. We have 1.5 million activations of Android devices a day. We've had 50 billion apps downloaded from Google Play. Many of those apps developers, by the way, are probably sitting in the TPP countries that are being discussed here in those garages that the congressman was talking about. At Google, more than half of our searches come in from outside the United States. And the interesting thing from where I sit is 20% of those searches have a local intent of some kind. They're trying to get to a restaurant, they're trying to get to something that is in your local community. So if you think about that, with more populations coming online in other countries around the world, how much the internet can just augment the already existing commerce and commercial sphere for the countries that are involved in TPP. So we see a very bright horizon coming down for the rest of the world in particular in places that we do think there is a lag, as Gary had talked about, and we need to reorient trade towards this information economy and towards the drivers of the information economy, many of which are things like knowledge and access to human capital and where those developers are that have really smart ideas. A lot of successful internet ventures are just really basic ideas done in a simple, easy, understandable way for consumers. And so we think that is going to occur anywhere in the world where you can again get internet access and reach that global marketplace. In terms of our suggestions going forward, we really focus on three areas in trade. One is e-commerce priorities, again to augment the commerce that is already occurring today. Second is an intellectual property regime that enables the digital economy to grow and thrive. And third is transparency. So I'm going to touch on those three pieces. In terms of the e-commerce priorities, there has been some recognition of the importance of having e-commerce as a focus within trade agreement texts, but we think there is much, much, much more that needs to occur. Nearly every modern business relies on cross-border information flows that's been discussed here by everyone and you'll hear it more and more going forward. Governments that actively encourage and protect cross-border information flows will benefit from increased investment in economic growth in their countries. That's a proven fact from Google and other companies' perspectives, and we just need to make sure that people understand that the way in which the global marketplace is occurring and the information economy is occurring that is actually crucial to having the open atmosphere for investment in your own country. McKinsey did a study that 75% of the internet's benefits are actually captured by companies in traditional industries. So we think more and more traditional industries like the Procter & Gambels and like others will realize that this baseline of cross-border information flows is essential to their ability to do commerce in the world today. We are concerned about the localization barriers that have also been mentioned by others, things like locating servers or data in particular countries requiring local sourcing, requiring technology transfers. That's not the way the internet functions. The internet is a very efficient, decentralized, distributed architecture, and when you try to put these digital protectionist barriers and it really doesn't work. So we hope that more people will understand that those things will fundamentally cut off their own users from participating in a very vibrant community on the internet. And so we think that despite the various tendencies that some countries may have, that we're going to get to a point where people realize that they can't disrupt the actual technical architecture of the internet. It's very important to us that intermediaries are not held liable legally for what users do with the platforms. This is a very well-understood concept in the United States legal framework and not as well-understood around the world. So we need to work on that as well. Although privacy has been mentioned, companies like mine and many others, all of the U.S. companies doing business online, care a lot about privacy and have extensive procedures set up to ensure the privacy and security of our user data. We need a workable global system of mutual recognition there and we think, again, that is just a function of the reality of the global marketplace that will be carried through as we go forward. In terms of intellectual property, Google strongly believes that the U.S. government can do more to export the full United States legal framework around the world. We could require trading partners to provide for fair use or other pro-innovation limitations and exceptions that are needed for the digital economy. So fair use, as you know, is a way for new technologies and new creativity to occur provided that it's not displacing the marketability of the original copyrighted work. That's a very important principle for innovation and for new ideas like a search engine like other kinds of social networking and that kind of thing. It's a very important concept, again, in the United States legal framework that we hope gets exported more around the world. We also, it's important for us that there's meaningful safe harbors and through things like the Digital Millennium Copyright Act, we do see the United States government trying to make sure that those safe harbors so that there's a workable framework where there is infringement in the intellectual property space, it can come down in a very efficient way. And so that's been something that has worked very well for both the content side and the technology side and we think it will, again, be exported around the world. You know, we, as just sort of pausing on where we are in terms of intellectual property right now, 50% of the music industry's revenues are now coming in digitally, which not many people realize, I don't think. 40% of the video game revenue is coming in digitally, 30% of video and broadcasting is coming in digitally, and 20% of books are coming digitally. So we are, in terms of the projections on the trajectory, we really need to really focus on the intellectual property regime for the digital world, because that is where the revenue growth will occur, even for the creative industries as well. Third, on transparency. We're an internet company. We have a very much of an internet policy approach to things, which is an open collaborative environment to work things out in a consensus way. We, you know, from the multi-stakeholder forums that have resolved through, since the history of the internet from the 60s, that have resolved technical or other disputes, that is the way in which we, as a sector, understand how you work things out and resolve them. It's very open, it's very collaborative. We don't necessarily see the transparency in the trade space in a way that we're used to, and so that's something that we're working through, and we think that the US can lead in this and take more steps to have trade discussions more transparent for stakeholders, for other governments, and for users of the internet, which is an important piece here we can't forget about in these discussions. So you guys are more experts on that, and I look forward to how we can all work together on some of those priorities. Thank you. Thank you, and thank you to all the panelists. Before I open the floor to questions, are there any questions that panelists have for each other? Okay, we'll go to the audience. Once again, the same three rules apply. Wait for the microphone. You introduce yourself and identify your organization and ask a question. Don't make a statement. Thank you. There's a question in the back. Thank you. Hi, I'm Matt Schuall from Inside US Trade. I just wanted to ask a question probably most directed to Ken and Gary. You and the other panelists seem very keen on saying why all this digital economy stuff is so important, and we have to include in the TPP, and it benefits everybody, although Gary, you also acknowledged that some other TPP countries might not see it that way. So I guess the question I want to ask is why then has it become so controversial and such a difficult issue? I was talking about the Vietnam statement that you made. They'll benefit, well, right, okay. But they may be a little cautious, and they may also seek benefits in other areas. But so why has it become so difficult, especially with Australia and New Zealand, you know, basically Australia tabling a counter proposal and all of their concerns about this proposal on free data flows, especially center around privacy, which all of you kind of mentioned generally, but I was just hoping that you could maybe go into more detail and explain, you know, why then is it so controversial and why this privacy thing has become such a big deal? And also, Ken, if you could explain where Mexico comes down on that debate. Does it support a U.S. approach that's more data flow should be open except for, you know, very limited exceptions that have to do with privacy or does it support an Australian approach that's more, you know, countries should have the right to put in place barriers. To data flows as long as certain, you know, conditions are met. Thank you. Thanks a lot, Matt. I wouldn't want to speak on behalf of other countries that are negotiating the TPP or provide any details on anything that's going on in the actual negotiations for all these reasons. These negotiations are ongoing. What I can say to your overall question is that rather than saying which position we adopt, we obviously are pursuing and adhere to the Mexican position, which is to look for opportunities of strengthening the disciplines that exist in the international trade regime. We pointed in the previous, my previous intervention, we talked about some of the key principles that we pursue. We think that many countries, including Mexico, can benefit enormously from clear rules which guarantee some of these key principles in terms of eliminating any barriers that exist on electronically traded goods and services. This is something that we pursue actively. We pursue actively within that context of the TPP. And it is something that we believe will bring great benefits to Mexico. There is the recognition, of course, that there are aspects that are delicate in any negotiation. The issue of data privacy is very important. Mexico has approved a set of legal instruments to strengthen data privacy standards. We have approved key cyber protection, cyber security laws that aim precisely and ensuring the protection of personal information within the Mexican environment. We obviously want to have strong disciplines reflected in our international trade agreements. Let me start sort of big picture and get granular really fast. As Scott pointed out, the internet is very disruptive, which is a good thing in economic terms, by the way. We are much better off with the disruptions of the 200 years than living as subsistence farmers before then, burying our children, etc. So basically the world trading system is a good thing and people don't say that enough. So I just did. But that means when the internet appears, there are existing things already there and each country has existing laws. Fortunately for the U.S., the U.S. had existing laws. This is where Americans, this wasn't planned. It was an accident. We had fair use. Why did we have fair use? Well, Chancellor Kent probably wasn't thinking of the internet when he started thinking about this almost 200 years ago. And we have no protection from intermediary liability. Why? You all are in Washington because when Congress got interested in this, how did you get the internet? Dial up. Screech, remember? You were dialing up a phone company and believe me, phone companies had really good lobbyists in 1998. It wasn't because Google was out lobbying. They just dropped out of Stanford. And AT&T also had enough technological savvy to know it wouldn't always be copper wires. So they wrote the little bits in the 1998 law to make sure there was no secondary liability for them. They weren't doing it to create an internet. They just want to make sure no one sued them. So and thank you. So that's why the U.S. is such an advanced internet economy. We also have a lot of garages. But other countries don't have that legal structure. Not because they chose not to. This is all random. No one's thinking about any of this. So the internet appears and as Johanna said, this is not an internet. There's not an American internet and a Mexican internet. And technologically it wouldn't work and you wouldn't get the benefits. So countries really want the benefits and that's why I want to be clear. Vietnam included. They all want the benefits of the internet. If you ask them if they want to cut themselves off from the internet, there's a study of what happened when the internet was cut off in Egypt two years ago. And there's huge losses. And so you don't think of Egypt as a really advanced economy. It is, believe me. It's dependent on the internet. So when you get really down into the negotiations, yes, every country has existing laws. All countries negotiators automatically say, I'm not going to change my law. That's why you have a negotiation. So we haven't seen the end of TPP. And if you go down Johanna's list, a lot of the things she listed, Australia and or New Zealand, have been very helpful. Maybe even more helpful, dare I say it, than some parts of the U.S. government. Because there are existing business models here that are disrupted by the internet. So this is what happens in a trade negotiation. There's no surprise. And that's why, as I said at the beginning, there's enough tradeoffs in TPP that if the U.S. government really wants to take advantage of something where we're reaping enormous benefits, we're in a position in this negotiation to get a really good outcome that's not only good for the U.S., but for all the other countries. Thank you. Just in addition, another way to think about this the reason there's controversy is partly because of the disruption the internet creates, but this entering context is very different among the partners. Now that's the opportunity in TPP. But think about just one step away from the digital economy. Think about press freedom in the 12 countries represented at the negotiating table of the TPP. You have open societies like the United States. Strong historical protections on freedom of the press. At the other extreme, you have authoritarian states like Vietnam. In the middle, you have, Singapore is one of the most, if not the most open economy in the world, but maintains, because of its history and culture, maintains restrictions on the press. And you have everything in between. It's not surprising that you'd find that same legal context manifesting itself in an area that's as disruptive as the internet. So next question please. Yes ma'am. Thank you to the panel for an interesting discussion. My name is Shannon Gaffney and I'm with the U.S. International Trade Commission. And my question actually goes back to what the congressman reminded us. It seems that on the panel and all of us in this room have an urgency in getting this right on digital economy for TPP that we need it now, we need it in the future for the TTIP and other future agreements. And it has implications not just for digital companies but for those like Praktor and Gamble that we don't necessarily think of in that way. But he also reminded us that many members of congress don't have this on their agenda, that they're not thinking about it, that it's not a priority for them especially those that are not on the Ways and Means Committees. So my question is is there anything that we in this room should be doing or could be doing in order to raise the profile of TPP and other such trade agreements going forward for congress? I mean, you know, congress doesn't pay attention to anything until they have to. And so I think, you know, where we have focused and what we try to do is is make sure that we get the agreement right and then we go back to congress and say here's a really good agreement that you have to pay attention to now. I will say, you know, just having some informal conversations up on the Hill, there's a surprising amount of attention under the radar by staff, including by Chiefs of Staff in offices paid to trade issues generally. And, you know, I was surprised to hear from some of our colleagues on the Hill about how their members have run on a positive trade agenda recently in recent elections in ways that they might not have in the past. And so, you know, we had some conversations around the time that the sequestration went into effect and you start seeing representatives of districts even, you know, sort of around DC, which have been reliant heavily on government contracts to start thinking about well, we need alternate sources of business of revenue and so they start looking to international markets. I think there is a lot of interest on the Hill, but it's not going to manifest itself until they have something concrete to look at. Just to add, I mean, this is no different than any other trade agreement. If you look at the data of the last 15 U.S. big trade agreements, 12 of them passed by like 300 votes. Why? Because there were lots of gains for U.S. economic interests. And so I'm counsel for the U.S. cattle ranchers. If Japan is open on beef, TPP will be the largest U.S. by FTA ever. If Japan opens on beef, believe me, it's worth it to us. And so there are 725,000 cow-calf operations in America in every state. Yes, our senators would hear from us and there's no need to do that yet. But when it happens, it happens. That's why they passed by 300 votes. Let me be microscopic. Someone raised dairy. The U.S. dairy industry, which I don't work for, but I observe, U.S. dairy industry is very technologically advanced. We have a lot of water here. We have a lot of land. If you drive around, you see a lot of very happy cows, right? Okay. We are one of the world's biggest dairy exporters. And we will become the world's biggest dairy exporter. So the U.S. dairy industry is in favor of TPP. Obviously, they have concerns if it would, and think about it, if it were just a U.S. New Zealand FTA and eliminated all barriers, the U.S. dairy industry would get access to a market saturated with dairy of 4 million people and New Zealand would get access to a market of 310 million people. So the U.S. dairy industry is going to have concerns. That's why TPP works. So the U.S. dairy industry is looking at access to Japan, which is they haven't had much access to, to Canada. And all of a sudden, you start seeing it. So Australia and New Zealand say, hey, we can get access to the U.S. and Japan and Canada. Some Canadians want access to the U.S. market, which they haven't had, et cetera, et cetera. And suddenly a deal that would be impossible, bilaterally, becomes not only possible, but eagerly sought. And that's, if those deals occur, we haven't seen the final product, this thing passes by hundreds of votes without much, you know, there'll be, every, there's always complaining, people come to watch, I was born here. People come to Washington to complain. It's depressing. It's a first amendment right. It is. But to petition the Congress for redress of grievances, not to say they're doing a good job. Grievances, think about it, come and whine. I spent most of my career as a partner in a Los Angeles-based law firm. And going out there was great, because you could have 10% unemployment, but if the sun was shining, hey, let's go surfing. You know, not here. No matter how good things are, someone's whining. Is there a question in the back? I'm sorry. Hi. Oh, was there some? Well, Doug Palmer with Reuters. Just picking up on a point that the Congressmen made, and later today across town there's another discussion called Impact of Prism on Digital Trade. I just wondered, have those revelations made the TPP discussions more difficult? Is there more resistance to U.S. ideas and proposals as a result of that revelation? From Google's standpoint, we're obviously very focused on the transparency as it relates to us and have taken steps to with the Foreign Intelligence Surveillance Court to be able to be in a position where we can talk and reveal publicly in our transparency report the number of requests we get and the amount of accounts affected by that and we are awaiting the government's response. So I think we are very focused on that piece right now and and are hopeful that we'll be able to be more transparent about it. I'm speaking on that panel later on today. And so you can go Yeah, I guess I'll give you a preview, but I think it's I think it's it will have a short-term effect generally in that it makes negotiators more more deliberate about how they raise these issues with other countries. And I think it it necessitates more robust conversation about the impact of privacy and national security on digital trade. I think that was going to happen anyway, but this sort of clarifies the issue for negotiators. I think the major point here is that what's the alternative? And I don't think this is going to have a long-term impact or derail sort of improving the global framework for the digital economy. I mean, it can't. What are we going to do? We're going to non-trade data across borders with each other and handicap the greatest engine of growth that we've seen in ever. So I think I think it will sort itself out, but it will take some time to do that. Gentlemen and the standing at the back. Good morning. I'm George Lyle from Internews and a legal question. Is there still a distinction between internet companies and telecom companies? And if there is, at what point does the regular company like Mr. Horlick was saying become an internet company and thus a telecommunications company? The word telecommunications has different legal meanings in different documents. And that's actually a very important point. I'm not going to bother you with here. So the question of who has regulatory authority is, as you obviously know, very important. But use of the internet, you know, Procter and Gamble is an internet company. It may not be in the business of offering telecommunications services, but it's definitely an internet company. And so is everyone, but that's very different legally than whether you are a regulated telecommunications company. Hi, my name is Robins Pancake. I'm currently at the International Trade Commission. This question is mainly for Joanna and relates to SMEs. I presume Google is a pretty big company now. I presume that you have a lot of, you do a lot of business with SMEs mainly here, but also around the world. Gary mentioned the winery in New Zealand. That sounds like an SME to me and most of them are probably. But in the high tech space, do you think the TPP negotiations on digital trade do a sufficient job of enabling SMEs? And I don't happen to know whether there's a separate chapter on SMEs and the TPP, but to what extent in order to motivate and incentivize the SMEs, do we need to focus on them especially? Or is it just one of these, let many flowers bloom if we put the right landscape out there? That's a very perceptive question. In our view, if you get the overall foundations right for the digital economy, for the information to flow, for that it will have tremendous benefits for the SME environment, for the small and medium sized businesses. We really see a Google where we are in the sort of rise of micro-multinational, right? This notion that a person can be sitting anywhere in the world and design, develop, deliver at a fraction of the cost, a good or a product or a service or an idea to somebody else, somewhere else in the world. As an advertising platform, we see that every day in every country around the world. We have programs that are designed specifically to get more small and medium sized businesses online and to be participating more in this global marketplace. We have a program in down in Mexico we're working with the government down there where we've done research on our end that shows that only 8% of Mexican small and medium sized businesses have a website or have a web presence. So that's obviously a much lower number than we would want and I assume that Kenneth would want to. So we've been working with the government down there on really training sessions and getting companies. In the past year, we've got 50,000 more small and medium sized businesses in Mexico that have gone online which is a win-win for them, for the economy, for more participation in the online space. So again, the numbers are such and with more internet access around the world which is also a piece that Google takes very seriously and is looking on doing more ways in which we can help bring affordable internet access to some of the most remote regions in the world including in the TPP partners like the balloon project we just launched with New Zealand. So we, you know, not all of these will be successful but we really recognize that that is a piece of the puzzle as well. So it's a really important question you raise. It is undisputed that small and medium sized businesses that are online have twice as much exports as the non-online ones. So again, it's a win-win. If I may add something, precisely for the reasons that Joanna mentioned is the fact that within Mexico's national digital strategy launched under this administration there's a strong emphasis on SMEs. One has to understand that over 90% of the businesses in Mexico are micro or small enterprises. So that is really the strongest, the nucleus of our economic activity. So across different government programs there's an emphasis on strengthening them. In fact, we created a National Institute for Entrepreneurship that specializes on creating opportunities, access to capital, human capital development, et cetera for SMEs. And within the national digital strategy many institutes in Mexico, such as the Mexican Institute for Competitiveness have estimated, for example, in terms of the availability of cloud technology, for example, could reduce fixed costs between 1% and 5% for SMEs. And if you look at it in over time with programs such as the one Joanna mentioned working with Google and other major companies in developing opportunities on the internet for SMEs, there could be an increase in Mexican jobs of up to 300,000. And these are conservative estimates of how much you could incorporate SMEs into economic activity through the internet because there's a bit of a myth out there we have to deal with it in Mexico that when you talk about the digital economy, the web, you're talking about a developed country issue that you need to have certain basic skill sets or investments or ability to transfer data in ways that are not available to small and medium-sized enterprises and this could be nothing further from the truth when you see the opportunities that can be created for small enterprises and the opportunities of how internet access itself leads directly to large increases in GDP growth in countries and for a country of 90% of SMEs, well you see the connection there naturally and that's how we are approaching the issue in Mexico. I would note, sorry, I saw a presentation by eBay that 99% of their SME business users export, which is astonishingly more than the average. I think the average U.S. you know business exports like 1% of them export mostly the large ones and anyone who's worked on this in government knows how much effort goes into relatively few results and then an electronic net on the internet platform suddenly everyone does. But by the way in the U.S. only 58% of small businesses have a web presence too so we have more work we need to do here too. Even though three of us up here represent large companies we're all very excited about small companies so let me add to the mix. Growth potential. You know I think the best way to support small businesses through the TPP is to enable a guarantee a cluster of services. So you need cloud services, financial services, shipping services, you need Facebook, eBay, PayPal, DHL and Salesforce all to be able to operate seamlessly across the platform because all of those things help small businesses export. And I mean I think the exciting thing about it is that it helps change the narrative about trade in other countries. You've generally seen trade as perceived as a big threat and small opportunity for small businesses and you know as the congressmen and others up here have suggested that's different now and just maybe one example that's not exactly relevant to the TPP we've been, I've had an opportunity to go and talk with a couple of startups from emerging markets and one of them was a gentleman named Obina Kizzi who started walking out.com which is Nigeria's version of Travelocity and so he was on CNBC a couple of years ago and a venture capitalist from New York saw him and so you think about Nigeria and you have certain qualms about sending money over to Nigeria given all the spam that you receive. But so he went to the internet and checked out his profile and linked in and got introduced to him through a sort of other folks on LinkedIn and you know that was in part what gave him the confidence to contact this guy and invest in his company and you know that's that is a new is a relatively recent thing. Yeah it's interesting what there are several disruptive technologies that are helping SMEs. It's the web, it's social media, it's the platforms like eBay, it's the existence of small package delivery firms that are global. That didn't happen 20 years ago and payment systems and the financial the financials infrastructure that supports it. So all those are key components that certainly in the trade facilitation chapter but the financial services chapter as well of TPP will all support this SME development which is going on right sort of out of sight but going on daily. So one final question side of the room. Yes sir. Hi I'm Scott Thompson from Samsung. Thanks for everything today. You've talked a lot about the challenges and opportunities of TPP and our companies started to weigh that and in general for a lot of the reasons you've talked about things that on balance this is going to work out and that's colloquializing but in general that's where we end up and that's going to mean on the margins at least we sell more smartphones and TVs and everything else that we do but as the trade guy among other things part of my job is to say well yes but we want to make sure it works out and so I am curious for your take one of two items chapters within the negotiations that at least have the potential to derail or sidetrack the talks in a way that would be harmful to the information technology industry that we're talking about here today or put another way where should a multinational company concentrate its efforts to make sure that we get across the finish line in a couple of different parts of the of the talks. Thank you. I think one area that it's essential to get right is intellectual property rights protection and so there are two dual challenges there and the first is that effective protection enforcement mechanisms are critical to innovators and to the success of certainly of American innovation and I think it's important to acknowledge new challenges to IP protection and digital age and that's why you see negotiators talking about things like trade secret protection. At the same time I think it's also as has already been mentioned important to construct a framework in a way that permits the digital economy to function and so I think getting that right is there's a lot of attention on that already but including from a number of our member companies and so I think that will be essential. I would echo that I think really paying attention to you is the intellectual property framework modern and for the digital environment. I will point out as it relates to Korea that the most you know that things like YouTube the most watch YouTube video of all time as you guys may know is Gangnam style and that resulted in eight million dollars of in advertising deals. So I think they're you know the benefit that can flow to places like your country is tremendous if we get the balance on intellectual property protection right. For a company like Samsung free advice worth what you pay for it but in the negotiation itself those are important. I would focus on doing business ones particularly trade facilitation or supply chain that's going to have the biggest dollar impact you're going to get you're going to get the tariff reductions anyhow you have to worry about the phase outs but you'll get them. That's the beauty of FTA so it's making sure that your supply chains work and that's one where there's less attention and make sure you're not hit by the whatever bizarre stuff is done for on state-owned enterprises because it's going to be a patchwork. With that let me thank you all for attending today and please join me in thanking our panel.