10 November 1997 Source: http://www.access.gpo.gov/su_docs/aces/aaces002.html ------------------------------------------------------------------------- [Congressional Record: November 8, 1997 (Senate)] [Page S12078-S12080] From the Congressional Record Online via GPO Access [wais.access.gpo.gov] [DOCID:cr08no97-148] KEEP HIGH TECHNOLOGY FREE FROM WASHINGTON INTERFERENCE Mr. ABRAHAM. Mr. President, I rise to urge my colleagues to join me in [[Page S12079]] fighting to ensure that our high technology industries, and the Internet in particular, remain as free as possible from Government regulation and taxation. America's high-technology, information age industries embody America's entrepreneurial spirit. In this sphere, initiative and inventiveness are joined as thousands of people work to create new ways of generating and transferring technology, information and commerce. The high technology sector is crucial to our economy, crucial to our workers and crucial to our way of life. It must remain as free as possible so that it may continue to grow, employing ever more Americans in good jobs, generating commerce and employment throughout our Nation and constantly reviving our spirit of independence and innovation. Mr. President, we first must keep in mind, in my view, that the hi- tech, information age industry is crucial to our economy. This industry is growing very quickly. A 1997 study by the Business Software Industry found that the American software industry has grown two and a half times faster than the overall economy from 1990 to 1996, and that software industry employment will grow 5.8 percent per year between now and 2005. In 1982, according to the Federal Trade Commission [FTC], computer products were found on the desks of only 5 percent of American workers; only 4 percent of American households contained personal computers. By 1992 the figures surged to 45 percent and 31 percent, respectively. Currently, 40 percent of American homes contain PCs. Between 1972 and 1992, research intensive industries grew an average of twice the rate of overall GDP growth, with computers, semiconductors and software leading the group. Hi-tech industries are serving as engines of economic expansion, creating many spin-off jobs. Economist Larry Kudlow reports that the hardware and software industries combined account for about one third of real economic growth. Overall, electronic commerce is expected to grow to $80 billion by the year 2000. The FTC reports that, from 1985 to 1995, the worldwide number of hardware vendors increased from 120 to 350, and the number of service providers--programmers, consultants, maintenance and systems operators--increased from 1,715 to 30,000. Not only hi-tech, but supporting hi-tech has become booming business. To judge the dynamism of this sector of our economy, and of the Internet in particular, we should consider the fact that the Internet grew from four linked sites in 1969 to become the first ubiquitous, interactive advanced communications network. 15 million households are now connected to the Internet, with 43 million expected by the year 2000. Mr. President, we all have benefited from this tremendous growth, and we will continue to benefit from the hi-tech industry, so long as we continue to allow it to expand and innovate. Affordable world-wide communications and information transfer have changed our world for the better. Consumers now have far more choices, and benefit from greater competition among sellers. Workers have seen their opportunities increase as well in our expanding economy. Perhaps most benefited has been American small business. During a time in which it is increasingly difficult to deal with Government bureaucracies, regulations and so forth, in one sector of our economy an individual can still work nights and weekends in his garage and end up running his own company. This sector offers minimal barriers to entry and a convenient, cost- effective distribution. That sector is, of course, that of high technology. Increased opportunity--to shop, to work, to start one's own business--has been supplemented by an overall increase in freedom thanks to the open availability of information on the Internet and the freeing up of new opportunities, for example through tele-commuting, to enrich our lives without sacrificing our careers. All of this is possible, Mr. President, because we have a vital, growing and free hi-tech industry in America. And our hi-tech industry has succeeded because in it Americans are able to respond quickly and efficiently to technical and marketing challenges, unencumbered by any preconceptions imposed by regulation relating to its development or from inappropriate Government charges on its business. We are a freer, more prosperous and more open country because of our free high technology industry. To the greatest extent possible, we should keep that industry free from Washington rules, regulations and taxes for the sake of our consumers, our small businesses and our workers. Mr. President, a number of issues have found their way before Congress that might severely affect our high technology sector. For example, Local Exchange Carriers [LECs] have contended that increasing Internet traffic could soon exceed the current phone system's capacity. To fund new infrastructure, the LECs have argued that a user fee should be paid by companies that provide Internet access. But this user fee could make consumers reluctant to use the Internet, particularly if it is not used to fund product improvements. What is more, access charges would only suppress Internet development, leaving us all with inadequate infrastructure. In response to this situation I joined with Senator Leahy to propose Senate Resolution 86, a nonbinding sense of the Senate resolution urging cooperation between Internet providers and the local phone companies. That resolution also calls for a rejection of access fees as a means of solving the dispute. Encryption also has been the subject of significant debate. More and more, Mr. President, businesses are encrypting electronic mail messages sent interoffice and intraoffice. These businesses seek to protect themselves against industrial espionage or recreational hackers. In addition, on-line commercial transactions, such as wiring money or purchasing and selling products, require encryption to ensure security. Currently, there are no limits on the strength of encryption products for domestic purposes. The same is true for importation. However, exportation of encryption is tightly controlled. Many in the law enforcement community are concerned about the proliferation of strong encryption products, particularly should they fall into the hands of criminals. But this technology already exists, Mr. President. We will not make ourselves safer by exposing businesses to industrial espionage, sabotage and the loss of commerce. That is why I supported Senator Burns' bill to maintain business' right to develop and use strong encryption. As important as restrictions on development, Mr. President, have been proposals to tax commerce on the Internet. Over the last 2 years, several States and localities have passed or interpreted laws to permit taxation of Internet sales and use. The result, Mr. President, would be double taxation of Internet commerce and a stifling of Internet use. S. 442, recently voted out of the Commerce Committee, will stop this trend by imposing a 6-year moratorium on subnational taxes on communications or transactions that occur through the Internet or online service, and access or use of the Internet or online services. This moratorium would apply to all Internet and interactive computer services, but not to property, income or business license taxes. In essence, it prohibits sales and use taxes unless the retailer has a physical presence in the taxing State. It would keep Government from piling on taxes that will strangle the infant Internet commerce industry in its cradle. It also will allow the States to come up with a rational system by which to tax Internet commerce. Another area in which governmental action has threatened our hi-tech, information age industry has been immigration. I am proud that we pushed back efforts during the last Congress to radically reduce the numbers of immigrants coming legally into this country. I firmly believe that immigration is the American way, and because I know that legal immigration is crucial to our hi-tech industry. For example, 40 percent of Cypress Semiconductor's top-level management is foreign-born. Chief Financial Officer Manny Hernandez is from the Philippines, vice president of research and development Tony Alvarez is from Cuba. And this immigrant-driven company employs 1,800 people in the United States. [[Page S12080]] Immigrants give America an entrepreneurial edge. In 1995 12 percent of the ``Inc.'' 500--a compilation of the fastest growing corporations in America--were started by immigrants. They also give us an edge in innovation. Immigrants make up nearly a third of all Ph.D.'s involved with research and development in science and engineering--the basis for innovation and economic growth. Immigrants also fill needed roles, particularly in the engineering field. The CATO Institute reports that over 40 percent of our engineering Ph.D.'s are foreign-born, yet the unemployment rate in that field is only 1.7 percent. Clearly there is a gap in engineering in America that is being filled by immigrants. I am pleased, then, Mr. President, that we did not close the door on immigrants seeking to come to this country to make a contribution and seek a better life. And I hope we will continue to keep the door open, so that we may live up to our heritage as a nation of immigrants, and so that we may continue to prosper. Finally, Mr. President, abusive class action lawsuits have caused significant harm to high technology companies, as they have to much of the American economy. Some suits, alleging malfeasance on the part of company directors, have been brought within hours after a drop in a company's stock price. Not long ago, this body successfully overrode the President's veto of legislation to reform securities litigation in this country. That bill will provide that discovery be stayed whenever a motion to dismiss is pending in a securities action. Discovery costs have been estimated to account for 80 percent of the costs of defending a lawsuit in this kind of action, and that is too much, particularly when the suit may be dismissed as without merit. The bill also would create a modified system of proportionate liability, such that each codefendant in a securities action is generally responsible for only the share of damages that defendant caused. This should prevent companies from being joined to a lawsuit solely because of their deep pockets. In addition, under this legislation, plaintiffs now must state facts with particularly, and state facts that give rise to a strong inference of intent on the part of the defendant. This should end the too-common practice of filing cases on the basis of few or no hard, relevant facts. Finally, the bill contains a safe harbor provision protecting forward-looking predictive statements from liability. Mr. President, we must go further, particularly in the area of legal reform, to protect our hi-tech industry from unwarranted interference. S. 1260, which I have cosponsored, would limit the conduct of securities class actions under State law. But even this is not enough. Hi-tech and other companies are hit with all sorts of abusive lawsuits, not just securities litigation. That is why I am working for broader litigation reforms. I offered an amendment last Congress that would have expanded the joint and several liability provision of the product liability bill to cover all civil lawsuits. I also have introduced my own bill to protect small businesses from frivolous lawsuits. And I am working with Senator McConnell to provide needed reforms to our civil justice system. It is my belief that we can make substantial progress in this area in the near future. Finally, Mr. President, I would just like to note that, while antitrust laws must apply to new industries as they have to the old, we should not allow antitrust laws to become an excuse for excessive regulation. Hi-tech is a dynamic sphere of economic activity. Over- zealous Government regulation from Washington, by whatever means, will only hurt consumers, producers and workers. I think most hi-tech CEOs would agree that producers and consumers in the free market economy-- not bureaucrats and politicians in Washington--should determine winners and losers in the high tech industry. Frivolous lawsuits, unnecessary regulation and onerous taxation. Mr. President, all these actions threaten our high technology, information age industry. It is my hope that we can work together to lessen the chance that they will be imposed on an industry that is central to our economic well-being. Mr. KYL addressed the Chair. The PRESIDING OFFICER. The Senator from Arizona [Mr. Kyl], is recognized. ____________________