Information Technology Association of Canada

September, 1998

Maximizing the Benefits of Electronic Commerce

Electronic commerce is fundamentally changing the way business is conducted, the way services
are delivered and the way citizens interact. In response, governments around the world are
working to put in place policies aimed at fully maximizing the benefits of electronic commerce.
Among the critical factors in this work are:
• solid consumer confidence in new ways of doing business
• clear ground-rules for the digital marketplace
• enhanced information infrastructure.

The adoption of electronic means of transacting commercial activities hinges on consumer and
business trust. All parties must feel assured that the networks they use are secure and reliable,
that their transactions are safe and that they can verify important information about transactions
and transacting parties. Strategies to promote the growth and use of electronic commerce must,
therefore, include enforcement mechanisms to respond to misuses, effective means of redress and
public education.

Electronic commerce can flourish only if there is a predictable, fair, transparent and explicit legal
and regulatory framework for transactions. Most of the laws, regulations and commercial codes
that govern business were intended to address the paper world, and may need to be revised to
accommodate electronic commerce. In addition, the rules must reflect an awareness of the
international nature of electronic commerce and the resulting need for international
harmonization.

The ultimate success of electronic commerce will depend on broad and affordable access to the
information infrastructure, enabled by forward-looking telecommunications policy, ample network
infrastructure and bandwidth and support for targeted applications.

The Information Technology Association of Canada (ITAC) has contributed to consultations on a

wide range of matters related to the successful introduction of electronic commerce, which ITAC
defines very broadly to incorporate all value transactions involving the transfer of information,
products, services or payments via electronic networks. The current brief is presented for
consideration prior to
A Borderless World, the OECD ministerial conference in Ottawa in October 1998.

The discussion below is structured to correspond to the agenda of the OECD ministerial and to
Canada’s Electronic Commerce Strategy. ITAC’s positions flow from the following principles,

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which were outlined in our earlier brief, Overcoming Barriers to Electronic Commerce, and in
our Preliminary Statement of Private Sector Views:1

• Role of Government: The private sector will continue to lead in the development and
management of electronic commerce. However, government must move to ensure a policy
and regulatory climate that supports electronic commerce. Government should also act
aggressively as a model user of new technologies - both to improve service delivery and to
demonstrate the advantages of electronic commerce.
• Regulatory and Legal Framework: New regulations for electronic commerce will be most
effective if developed in conjunction with the private sector, with its lead role in the evolution
of new technologies. The private and public sectors should also work to promote the
development of pro-competitive international rules.
• Digital Signatures: Government should eliminate any legislative barriers to the use of digital
signature that may exist. If new legislation to recognize digital signatures is required, it should
be introduced by all participating jurisdictions, in accordance with an agreed timetable.
• Information Security and Encryption: Canada should not attempt to limit use, export or
import of cryptographic products. Furthermore, there should be no government-mandated key
recovery to force parties to place their cryptography keys in the hands of government agencies
or other entities.
• Privacy Protection: Privacy legislation should be 'light-handed' and based on OECD
guidelines. Beyond the levels set in legislation, industry and consumers should be left to
regulate themselves through the marketplace of available services.
• Copyright: International copyright harmonization will be necessary if Canada is to fully
engage the world market for our intellectual property. The federal government should
promote harmonization and enter into international agreements to protect Canadians'
intellectual property rights.
• Liability of Intermediaries: Internet service providers and other intermediaries that facilitate
electronic commerce, but have no reasonable grounds for knowing of infringing, illegal or
defamatory content placed on their systems, should be exempt from liability.
• Taxation: Fundamentally, electronic commerce should compete with traditional commerce on
a level playing field. Governments should not tax transactions in the digital world which
cannot be effectively taxed in the physical world.
• Skills Availability: Canada’s transformation into a knowledge-based economy, where
advanced information infrastructure is utilized by society to create and apply knowledge, will
require citizens that possess the necessary knowledge and skills.

1
Presented for discussion at the Summit on Electronic Commerce, co-hosted by ITAC and Industry
Canada on April 30, 1998.

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1. BUILDING TRUST

1.1 Protecting Personal Information

Vast amounts of increasingly sophisticated information will continue to be created as more and more
transactions are handled electronically, and it is critical that unauthorized use of such information be
controlled. Understandably, consumers want to know when and what personal information is
collected about them, to be able to choose whether or not to provide it, to have control over its
use, and to have effective channels for redress.

ITAC believes that the protection of personal information is a responsibility shared by business and
consumers. Consequently, an informed approach to the use of the information infrastructure is critical,
not only in the face of competing claims for new technologies and services, but also to the maintenance
of a healthy and intelligent civil society. In particular, consumers should be attentive to the following:
• the value of personal information
• the fundamental concepts, rights and responsibilities involved in safeguarding personal information
• the legislation, regulations and industry practices that exist to protect individuals and organizations
• that additional technological measures to protect personal information are available from providers
of electronic services, who will continue to develop and offer a range of sophisticated mechanisms
and options.

ITAC has long been active in discussions about policies that recognize business’s need to collect
and use personal information, and individuals’ need to be informed about how that information
will be used.2 The association will continue to be involved with government and other
stakeholders until a solution that addresses the legitimate concerns of all parties is in place.

ITAC believes that the impressive consensus of consumer, industry and government opinion that
was established during the development of the Canadian Standards Association (CSA) Model
Code for the Protection of Personal Information must be treated as a benchmark in the
development of light-handed, flexible privacy legislation.

2
ITAC was a member of the CSA technical committee that developed CAN/CSA-Q830-96 Model Code
for the Protection of Personal Information, and of subsequent working groups involved in developing
privacy legislation. ITAC also continues to be active in forums dealing with the privacy issue from an
international perspective, including the International Information Industry Congress, the World
Information Technology and Services Alliance, the International Organization for Standardization and, as
an active member of the Canadian Council for International Business, the OECD Business and Industry
Advisory Committee.

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ITAC is heartened by the approach being taken by the Uniform Law Conference of Canada
(ULCC) in preparing a model privacy law. The association recommends that upcoming federal
privacy legislation, to apply to the private sector, closely follow the ULCC model law, which
incorporates the CSA Model Code. Legislation based on the CSA Model Code will establish a
comprehensive framework within which industry and consumers will be able to regulate themselves
through the marketplace of available services.

Individuals will be able to choose from among competing information services and suppliers. Service
providers will, therefore, have a compelling business interest in protecting information security, as both
the personal information and the consumer trust engendered by service providers’ respect for the
information have considerable commercial value.

1.2 Ensuring Security of Communications

Understandably, individual and corporate consumers of electronic services demand assurance that
their communications and transactions are secure and private. To address this, a proper regulatory
framework for authentication, certification, digital signatures, and other technological and
administrative elements must be put in place. Such a framework must be international in scope to
support cross-border transactions.

1.2.1 Digital Signatures

Digital signatures are at the core of trusted electronic commerce in business-to-business

transactions, and in business-to-consumer trade. Parties wishing to conduct transactions
electronically require assurance that their own electronic signatures are valid for legal purposes,
that the electronic signatures, identities and related attributes of all other parties have been clearly
established and accepted (i.e., authenticated or certified), and that third parties, such as
certification agencies, are trusted and reliable.

Governments must address these requirements by eliminating legal barriers to the use of digital
signatures. If new legislation to recognize digital signatures is required, it should be introduced
by all participating jurisdictions in accordance with an agreed timetable. Governments should also
facilitate the development of reliable, private-sector certification agencies, and work together
towards a multinational framework for the recognition of such agencies.

Competition among companies providing electronic signature applications should be encouraged

through the adoption of standards that do not favour any one company or technology. Similarly,
standards, applications, and procedures should allow for technological innovation.

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1.2.2 Encryption of Communications

The availability of effective tools to enhance information system security, such as encryption and
cryptographic key management technologies, is a pivotal prerequisite for acceptance and growth
of electronic commerce. The encryption industry can be expected to work with urgency to
deliver the level of encryption demanded by individuals and business to protect their information.
They should, of course, be free to do so without constraint by government regulation.

Cooperation among countries, based on the OECD Guidelines on Cryptography Policy, is

essential to ensure that cryptography policies do not act as obstacles to international trade.
Cryptography must no longer be considered solely as a tool for the intelligence community, but
also as a practical technology offering enormous benefit to consumers and business alike.

Given the technologies involved, it is unreasonable to expect carriers and internet service
providers to decrypt messages simply because they operate the ‘pipeline’. In the future, strong
encryption and decryption of real-time data will be under the ultimate control of the end-users,
rather than carriers or other service providers. The carrier will have no control over the user’s
choices, and no tools to decrypt. More importantly, there is no practical or feasible way to
identify, in real time, messages that have been encrypted. Nor is it practical or feasible to block
traffic that does not conform to a particular standard.

Governments should not attempt to limit use, export or import of cryptographic products. The
free exchange of these products is important, both to support a viable electronic commerce
infrastructure and to allow vendors of such products to compete successfully and globally. While
the introduction of new technologies may be opposed on the grounds that they can be used by
criminals, law-enforcement agencies must recognize that new technologies have also significantly
enhanced their ability to carry out their mandate.

1.2.3 Encryption of Stored Data

ITAC is of the view that, in the case of stored data, the same treatment should be accorded to
electronic data as currently is extended to physical data. Laws in most countries do not prescribe
standards for the storage of physical data, nor do they prohibit the coding of data to protect
against intruders. Treating electronic data differently would mean that law enforcement agencies
would have powers over electronic data that they do not have over physical data. The case has
not been made for such an extension of current powers.

The vast majority of individuals and organizations operate in compliance with the law, and
provide access to information when required by law. There is no reason to believe that they will
change their attitude toward the law simply because the information requested is stored using the
additional protection of encryption technology.

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If data is considered valuable, sound management practices will demand that it be stored, and that
the owners of the data have the ability to decrypt. However, due to outsourcing, data storage will
increasingly operate as a separate business where the entity that stores data will not own the data,
and will have no knowledge of the content of the data and no ability to decrypt.

1.2.4 Key Recovery

ITAC believes that any mandatory key-recovery regime - whether it involves trusted third-party
escrow or other features - would prove ineffective against sophisticated criminals. While the use
of such schemes may be of benefit against less-sophisticated criminals, these benefits must be
weighed against the direct costs of implementation and operation and the attendant decrease in
both security of communications and confidence in electronic commerce.

Government policies must instead find a sustainable balance between the need to ensure
confidentiality and integrity of sensitive data transmitted over public networks, and the need to
protect public safety. It is critical that government’s regulatory approach to encryption issues
reflect technological and economic realities in light of the rapid rate at which new technologies are
bringing new opportunities to consumers.

There should be no government-mandated key recovery to force individuals or corporations to

place their cryptography keys in the hands of government agencies or other entities. The
borderless nature of the internet means that any encryption restrictions imposed by one country
alone will only serve to encourage legitimate businesses (as well as illegitimate operations) to
relocate their operations elsewhere, to the detriment of domestic economies.

1.3 Ensuring Consumer Protection

Consumers using electronic commerce should be provided with the same protection as they have under
the laws and practices governing traditional commerce. For this to happen, governments must adopt
technology-neutral policies that facilitate electronic commerce, and the private sector must continue to
develop technological solutions and self-regulatory tools that offer consumers the protection they
require. In addition, business, government and consumer groups must work together to make
consumers more aware of their needs and responsibilities in this area, and of the options available to
them.

ITAC is a member of a working group of industry, government and consumer representatives that has
developed a consumer protection framework for electronic commerce in Canada.3 The association
fully supports the following principles, which were developed by the working group and are intended

3
Draft Principles of Consumer Protection for Electronic Commerce: A Canadian Framework, developed
by the Consumers and Electronic Commerce Working Group, Office of Consumer Affairs, Industry
Canada, August 1998.

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to ensure that consumers enjoy the same level of consumer protection in electronic transactions as they
do in other forms of commerce. ITAC recommends that the principles be adopted and applied
consistently in all domestic and international jurisdictions.

1.3.1 Information Provision

• Consumers must be provided with clear and sufficient information to make an informed choice
about whether and how to make a purchase.

Information must be provided in a form that is clear and understandable to the consumer. Minimum
consumer information requirements for electronic commerce include: vendor identity, location and
reliability; fair and accurate description of product or service; terms and conditions of sale; level of
privacy protection; cancellation / return policies including any associated costs and warranties; that the
law of consumer jurisdiction will apply to transactions between vendors and consumers in Canada;
level of security of a transaction; complaint procedure; the types of payment that will be accepted, and
the implications of each in terms of extra charges and discounts; and any further information required
by existing federal and provincial laws.

Vendors must provide information to consumers confirming the transaction as soon as possible after
the transaction has been completed, and must provide additional (specified) information at the time of
delivery.

1.3.2 Contract Formation

• Vendors must take reasonable steps to ensure that the consumer’s acceptance of a contract is fully
informed and intentional.

Vendors must take reasonable steps to ensure that consumers are aware of their rights and obligations
under the contract before the consumer accepts the contract. Vendors must make clear what
constitutes an offer, and what constitutes acceptance of an offer, in the context of electronic
transactions.

1.3.3 Privacy

• Vendors must respect the privacy principles set out in the CSA Model Code for the Protection of
Personal Information and in any applicable federal or provincial law.

The principles address the following matters: accountability; identifying purposes; consent; limiting
collection; limiting use, disclosure, and retention; accuracy; safeguards; openness; individual access;
and challenging compliance.

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1.3.4 Security of Payment

• Vendors, financial institutions and communications suppliers that facilitate a transaction must ensure
that payment transactions are as secure as reasonably possible.

1.3.5 Redress

Consumers should have access to fair, timely, effective and affordable means of resolving problems
with a transaction.

Vendors should provide adequate resources for handling customer complaints in an efficient and
effective manner. Where internal mechanisms have failed to provide resolutions to a dispute, vendors
are encouraged to make available an affordable, external and impartial process for resolving disputes.

In transactions between vendors and consumers in Canada, the law of the jurisdiction in which the
consumer resides will apply. Government, business and consumer groups should work together to
develop appropriate standards for dispute resolution mechanisms for electronic commerce.

1.3.6 Consumer Awareness

• Government, business and consumer groups should promote consumer awareness about the safe
use of electronic commerce.

Consumer education and awareness initiatives should highlight those aspects of electronic commerce in
which consumers are most vulnerable. Consumers should be provided with advice on how to minimize
the risks entailed with electronic transactions.

Consumers should be made aware of their legal rights and obligations vis-à-vis vendors.
Consumers should be aware of their own responsibility to make use of available information and to act
prudently in light of that information. Consumers should have access to information identifying
disreputable entities and practices.

2. ESTABLISHING GROUND-RULES

2.1 Protecting Intellectual Property Rights

Competitive advantage in electronic commerce will be based on the ability to develop advanced
information products. For this to take place, creators, and owners of intellectual property rights must
be assured of fair compensation for use of works made available through new technologies. The
legislative framework for the exercise and protection of copyright and related rights must be made
adaptable to the rapid changes of the digital economy.

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International harmonization of intellectual property rights regimes is necessary, requiring governments
to negotiate international agreements to protect the rights of creators in the world marketplace. ITAC
recommends that all countries accede to the Copyright Treaty and the Performances and
Phonograms Treaty adopted by the World Intellectual Property Organization (WIPO) in
December 1996, and move to revive the WIPO process leading to an international database
treaty.

2.2 Establishing the Proper Regulatory and Legal Framework

Parties wishing to conduct transactions using electronic commerce should be free to do so.
However, all parties to an electronic contract must feel that their obligations and duties are clearly
spelled out, that all disclosures have been made, that issues such as warranties and liabilities have
been clearly addressed, that questions of jurisdiction and dispute resolution are resolved and that
avenues for dispute resolution are clear.

Government must adjust existing commercial regulations to respond to these requirements, but in
a manner that neither hampers innovation nor unduly disadvantages conventional commerce. 4 As
these issues must be dealt with at the international level as well as domestically, government
should promote the development of pro-competitive international rules that will promote
electronic commerce by assuring participants of a stable and predictable legal framework. New
legislation should subsequently set out the circumstances under which a country’s domestic courts
may assume jurisdiction in disputes, and address the enforcement of foreign judgments.

2.3 Defining Appropriate Taxation Principles

As the flow of electronic commerce continues to increase, so does its attractiveness as a potential
source of tax revenue. ITAC understands government’s need to collect taxes to support delivery
of services, but stresses that assessing special taxes on electronic transactions will have the effect
of stifling business expansion and job growth, and thus the tax revenue they generate.

Fundamentally, electronic commerce should compete with traditional commerce on a level playing
field. Tax systems should not interfere unduly with the operation of the market economy.
Clearly, there will need to be a fundamental review of tax policies and laws, which have their
origins in traditional commerce. Taxation of electronic commerce should:
• be consistent with the principles of international taxation

4
As noted by the Hon. Anne McLellan, Canada’s Minister of Justice, at the Summit on Electronic
Commerce in April 1998, the legal framework must be comprehensive, cutting across all sectors and all
levels of government. The Minister went on to note that the federal government has proposed
adjustments to federal legislation to, for example, create equivalency in the use of electronic and
traditional signatures and provide for phase-in by individual departments as they become more
comfortable with new ways of providing government services electronically. (Summit proceedings are
available at ITAC’s website: http://www.itac.ca.)

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• be neutral with regard to other forms of commerce
• be consistent across tax jurisdictions
• avoid double taxation
• minimize compliance costs
• be simpler to administer and easier to understand.

Governments must recognize that a number of issues that have been identified as problems in
relation to electronic commerce are also problematic in the physical world. These include records,
audit trails, and authentication of signatures. The electronic environment also presents challenges
for rules governing transfer pricing, tax administration and compliance and the assignment of
consumption taxes.

Tax obligations must be clear, transparent and predictable, enabling the parties to focus on the
transaction itself, rather than on the environment within which it is being conducted.
Furthermore, government must clarify how existing taxation concepts apply to persons engaged in
electronic commerce (e.g., excise taxes on communications services, and consumption taxes such
as value-added and sales taxes).

Issues of tax jurisdiction need to be resolved on an international basis, in consultation with

industry. Countries should resist the temptation to impose their own taxes, instead focusing
attention on the development of global taxation agreements and a framework for identifying
equitable and enforceable approaches to taxation of electronic commerce. Where cross-border
electronic transactions occur, or where goods or services are delivered electronically, there is a
risk that tax regimes will conflict and taxpayers will be subjected to double taxation.

2.4 Facilitating International Trade and Market Access

No single country has the capacity to develop all the goods, services, capital, and technology that
its citizens need and demand. All must, as a result, rely on trade and investment from other
countries. The driving force for all market-access negotiations for the information and
communication technology sector must be the enabling effect that comes from the availability of
those products and services in nations at all stages of development. Furthermore, the applicability
of existing international trade rules to digital goods and services must be clarified if electronic
commerce is to expand globally.

2.4.1 Trade in Goods

Coverage of the Information Technology Agreement (ITA), negotiated through the World Trade
Organization, needs to be expanded if consumers and business in all parts of the world are to
benefit from the availability of the full range of physical goods that support electronic commerce.

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Given the pace of technological change and convergence, it is fundamental to the notion of global
free trade that there be a process through which countries can offer further products to be
liberalized. It is hoped that talks towards phase 2 of the ITA will expand coverage to new
product areas. Firm international commitments to remove non-tariff barriers to trade will also be
required.

2.4.2 Trade in Services

Despite the General Agreement on Trade in Services (GATS) Agreement on Basic

Telecommunications, reached in February 1997 under the auspices of the World Trade
Organization, a number of important issues must be resolved before there can be effective
competition in many telecommunications markets. Most important is the need to ensure greater
liberalization in more countries. Only 72 countries made commitments in February 1997, and the
level of liberalization represented by those commitments varied greatly.

In addition, competitively priced facilities and appropriate terms of service, among other issues,
must be finalized in order that competitors can sustainably enter markets. This will result in
effective competition, which will benefit consumers through increased choice and lower prices,
and ultimately in improved access to the information infrastructure that supports electronic
commerce. It is critical that upcoming WTO services negotiations treat electronic commerce in a
way that is least burdensome to business.

2.4.3 Protection of Investment

As information and communication technology continues to evolve from a manufacturing to a

services sector, the lack of a credible multilateral framework for investment rules is of increasing
concern. Where we have succeeded on the goods side to reach, through the ITA, broad
agreement on the benefits of tariff-free trade in goods, the industry is still faced with significant
restrictions on the investment side in many of the fastest-growing nations in the world.

The infrastructure for global electronic commerce will require massive investment, both domestic
and foreign. The elimination of investment barriers that hinder the evolution of the information
infrastructure must be a high priority. Common barriers to foreign investment include lack of
national treatment, screening of foreign investment and domestic manufacturing and other
performance requirements. ITAC believes that such barriers must be eliminated.

2.4.4 Mobility of Personnel

Much of the overseas investment by the Canadian information and communication technology
industry is in the area of joint ventures, strategic alliances, and partnerships. There, investors
need to be assured that they can transfer key executive, managerial and specialist personnel to
assist in their foreign operations. In addition, ITAC believes that governments should move

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towards a broad international agreement to facilitate free movement of individuals and companies
offering professional services in information and communication technology.

3. ENHANCING THE INFORMATION INFRASTRUCTURE

3.1 Improving Access to the Information Infrastructure

ITAC believes that an open marketplace will provide most consumers with access to the
information infrastructure that supports electronic commerce. Available technologies already
provide access to an excellent range of information services through public switched telephone
networks, basic cable service and satellite and wireless technologies.

The convergence of these services, along with effective facilities-based local competition, will
significantly increase access to information services offered electronically. Increased access to
new services, such as the internet, will result in higher degrees of familiarity and confidence in
open networks and in more widespread use of electronic commerce.

As a result of the February 1997 GATS agreement, telecommunications markets worldwide are
opening to competition. While the private sector will work with government to ensure that
consumers receive the benefits of competition as soon as possible, companies must also respond
aggressively to the new opportunities for innovation - by continuing to invest and take risks.

Competition based on quality, innovation and price is only possible where existing and new
entrants to the marketplace of facilities and services are granted equal opportunities to compete.
The elimination of regulatory, technical, and other barriers that hinder or prevent competition
must be considered a top priority.
Competition can be relied on to bring about deployment of new access technologies that will in
turn result in superior levels of services to rural and remote areas and to members of other
disadvantaged communities. ITAC is, however, supportive of transitional efforts to make services
available in such circumstances, and initiatives to support communities working to make advanced
technologies available to residents at central locations.5

3.2 Defining Internet Governance

Electronic commerce is an extraordinarily dynamic force, with the potential to create a huge
amount of positive change. For the most part, government’s regulatory response to the internet
and other new media has been to allow the private sector to continue to innovate and offer new
electronic services. This positive stance should continue, as unnecessary regulation should not be
allowed to hobble that potential.

5
ITAC is represented on the National Advisory Committee for the Community Access Program.

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Government should not attempt to inhibit the dynamic interaction among people using new media
such as the internet, which creates a multitude of learning and information exchange
opportunities. There is also the practical matter of regulating, since the internet was designed
specifically to circumvent roadblocks, whether those were hardware failures or legislative
restrictions. It is therefore unlikely that cultural content quotas or other regulatory controls can
effectively be applied.

ITAC recommends that regulators refrain from introducing rules that apply to new media alone.
We believe undesirable content, such as pornography and hate material, is already well covered by
existing laws. Certainly, internet service providers and other intermediaries that facilitate
electronic commerce, but have no reasonable grounds for knowing of infringing, illegal or
defamatory content placed on their systems by third parties, should be exempt from liability in
respect of such content.

Furthermore, regulators should not try to control foreign content in the new media. Canadian
content producers demonstrate daily that they are among the best in the world, and government
will do more good by focusing on promoting the home-grown work rather than by attempting to
limit access to foreign content.

3.3 Setting International Standards

A seamless network of information infrastructure facilities will be a critical component in ensuring

open access for all users and providers of electronic commerce services. This will require that
facilities interoperate, regardless of supplier. ITAC believes that such interoperability can most
effectively be achieved through reliance on the market.

It will be, after all, in a company’s best interest to provide interoperability as an important feature
to prospective customers. The need for interoperable technical specifications can be limited to the
information necessary to achieve interoperability, allowing suppliers to develop products with
distinguishing features. International efforts to set such technical specifications should be
industry-driven.

3.4 Ensuring Availability and Development of the Necessary Skills

The advancement of electronic commerce will bring tremendous domestic social and economic
benefits and international market opportunities - but only if companies can recruit, train and retain
the workers necessary to maintain growth. Studies suggest that the supply of qualified workers to
sustain this growth does not exist and that the information and communication technology
industry will face a serious human resource shortage in coming years.

Widespread adoption of electronic commerce requires development of digital literacy and skills by
both business and consumers. A sufficient number of skilled professionals must also be available
to, for example, design and manage electronic-commerce sites and systems. In addition to the

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direct and indirect employment impacts, there are the enabling effects, particularly as the
information infrastructure evolves into a delivery system for electronic commerce. Among the
mechanisms for ensuring that these needs are met are a rapid introduction of innovative
technology-based learning tools into homes, businesses and classrooms and reinforcement of a
culture of life-long learning.

ITAC applauds recent federal government initiatives to enhance the capacity of institutions to
support the acquisition of skills and to assist individuals faced with financial obstacles to skills
acquisition. These initiatives include: the Canada Foundation for Innovation; the Canada
Millennium Scholarship Foundation; improvements to student loan programs; permitting tax-free
RRSP withdrawals for lifelong learning; the extension of education credits for part-time study;
and the Canadian Education Savings Grant.

However, the skills gap is a global issue that will require ongoing vigilance and fiscal support to
overcome. ITAC encourages government to seek additional means to provide tax relief for
individuals striving to develop new skills for the knowledge-based economy. For example,
government should consider providing tax relief, either in the form of a tax credit, or through full
income deductibility, for all education costs - books, travel and so on, in addition to tuition fees -
incurred by individuals.

Government should also consider allowing some form of tax relief for individuals’ investment in
information and communication technology products and services. Such relief could take a
variety of forms - tax credits for purchases by families with students, depreciation deductions
from computing employment income, sales tax waivers or income tax deductions.

In Canada, tax relief would lower the affordability bar and move the country forward to becoming
the most connected nation in the world by:
• improving the skills level among young Canadians, thereby contributing to competitiveness and
economic growth over the longer term
• lowering the barriers faced by those with low incomes - the potential ‘have-nots’ of the
knowledge-based economy
• stimulating the Canadian information and communication technology industry, increasing tax
revenues from corporate profits and expanding the platform for competition in global markets.

4. MAXIMIZING THE BENEFITS

4.1 Enabling Economic Development Across All Sectors

New information and communication technologies are transforming capital and knowledge into
global electronic commodities. Canada and other industrialized countries are in the process of

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refashioning economies from those based on abundant natural resources to those based on the
creation and application of human knowledge for commercial and social benefit.

This shift has broad implications for all sectors of the economy. Small and medium-sized
enterprises (SMEs) will thrive if they understand and adapt to the fact that the knowledge-based
economy allows even small enterprises to ‘go global’. With knowledge as the main asset, SMEs
are no longer reliant on physical presence to be global players.

In fact, the knowledge-based economy allows SMEs to use their smaller size as a competitive
advantage. They are agile enough to apply their knowledge to maximum advantage, and are less
likely to be encumbered by traditional structures that might impede productivity. Government
should note that ease of use and minimal regulation - two of the positive features of electronic
commerce - are especially attractive to SMEs.

4.2 Facilitating Social Cohesion

The full potential of electronic commerce will only be realized through its widespread adoption by
business, consumers, and the public sector. In addition to the obvious economic benefits, the
availability and use of information networks can also create the potential for an ‘electronic
commons’ that will foster social cohesion and link citizens around the world.

A clear understanding of the needs of a wide range of users will be required, however, if countries
are to stimulate innovation and exploit the technological potential of electronic commerce to
enhance development. There will also need to be a deeper understanding of the impact of
electronic commerce on economic growth, business productivity, international trade and
employment.

In developed nations of the world, the private sector should lead in the management and
development of electronic commerce, with government playing a limited, facilitating role. Where
government involvement is required, its aims should be to support a consistent and simple legal
environment for electronic commerce, and to enforce laws and regulations preventing unfair
competition.

In developing nations, government, international organizations and the private sector should work
together to develop a sound research base for understanding and measuring the impacts of
electronic commerce and organizational change upon societies and economies. The private sector
should lead in investing in and building the global infrastructure and services, with the support of
international organizations and national governments.

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4.3 Government as a Model User of Electronic Commerce

Governments must also act as model users of electronic commerce moving quickly to adopt new
technologies as a means both to improve the efficiency and effectiveness of service delivery, and
to demonstrate the advantages of electronic commerce.

The Canadian government has shown leadership in using technology to conduct its business. This
role must continue, as technology holds tremendous potential for the government to enhance the
efficiency and effectiveness of its service delivery and to demonstrate to Canadians the advantages
of the strategic application of technology, thereby, advancing the objective of branding ‘a
connected Canada’ to the world.

5. Concluding Statement

Electronic commerce is a powerful tool for economic growth and a key platform for the global
knowledge-based economy, promising to transform all sectors of the economy and contribute to
the prosperity of people around the world. Governments that encourage the adoption of
electronic commerce, by providing a policy framework that facilitates a seamless global electronic
marketplace, will stimulate the growth of innovative industries and challenging jobs. ITAC will be
pleased to work with government to ensure that this promise is achieved - in Canada and globally.

6. RELATED ITAC BRIEFS

The following ITAC submissions to the federal government provide additional background for the
positions stated in the current brief, and also reflect the range of ITAC interests in electronic
commerce and a knowledge-based Canada.

• A Cryptography Policy Framework for Electronic Commerce (April 1998)

• The Protection of Personal Information (March 1998)

• Database Protection (December 1997)

• Overcoming Barriers to Electronic Commerce (November 1997)

• Toward a Broader View of Convergence (November 1996)

• Access, Universal Service and Affordability and Awareness on the Emerging Information
Infrastructure (March 1995)

• A Copy is a Copy: Copyright Issues and the Emerging Information Infrastructure (February
1995)

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• Privacy Issues And The Emerging Information Infrastructure (November 1994)

• The Canadian Information Infrastructure: An Agenda for Action (June, 1994)

• A Knowledge-Based Canada: The New National Dream (January 1993)

© 1998 Information Technology Association of Canada.

This document may be freely reproduced with appropriate attribution.

For further information, contact us by telephone (905) 602-8345 or by e-mail at info@itac.ca

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