Original URL: http://www.theregister.co.uk/1999/10/19/ms_lobbies_senate_to_lean/

MS lobbies senate to lean on Europe, WTO

Concerned about piracy control and tax mitigation, apparently...

By Graham Lea

Posted in Business, 19th October 1999 07:31 GMT

It's becoming clearer what Microsoft and other major software developers want to achieve at the World Trade Organisation ministerial meeting in Seattle next month (related story). We now have the text of the presentation by Eric Koenig, Microsoft's senior federal government affairs manager, to the Senate Committee on Foreign Relations' subcommittee on European Affairs. Koenig spoke on behalf of Microsoft, and the BSA. He wanted the Senate subcommittee to persuade the EU to take a joint stance on the negotiations, especially with respect to e-commerce. Koenig is also co-chair of the WTO Seattle host committee. Strangely, he claimed that "More than 50 per cent of the revenues of ... Microsoft are generated by overseas sales". Yet in its 1999 Annual Report, Microsoft stated that US revenue is $13.7 billion (including OEM sales) and that non-US revenue is just $6 billion, with European sales amounting to a quarter of Microsoft's world revenue. Horses for courses, it would seem. Koenig then came to the nub of the matter: he wanted a favourable e-commerce regime. The WTO would need to become "more open, more transparent", presumably to make it easier for non-governmental organisations (like Microsoft acting through the BSA) to organise intensive lobbying for its own interests. Another Microsoft desire was to ensure that e-commerce is classified as goods, and not just a set of services. Here's the reason: 94 per cent of the world's exports of software are US sourced, and classifying software as a service could alter the tax regime, dramatically impacting software sales. The concern is that at present the EU takes the position that physically-delivered software is classified as a "good" by GATT, but the same software delivered electronically should be classified as an "electronic delivery", subject just to GATT obligations on trade in services. However, the WTO decided last year that there would be no customs duties on electronic transmissions, which is consistent. Microsoft's concern was that instead of assessing duties on the value of the medium, like the CD-ROM, duty would be on the value of the product - orders of magnitude higher, of course. Last week, the BSA mailed propaganda to members of the European Commission (probably a waste of time as they're all on getting-to-know-you junkets at the moment); the European Parliament (they're learning how to optimise their expenses); and heads of member states (who are unlikely to do anything about the BSA's concerns). Specifically, the BSA wants the EU to deny accession to EU candidate countries that have high piracy rates, and for public institutions in Europe to prohibit illegal software in their institutions. This is unlikley to influence Prodi's expansionist desires. There's a great deal at stake for US software companies so far as the WTO meeting in Seattle is concerned, and it will be interesting to see how successful Microsoft is on the diplomatic front. ®