BILL GATES: Well, good morning. It’s a great pleasure to be here and talk about some of the things that are going to happen in trade in the years ahead. It’s a very dynamic field, partly because of the effect of technology, and particularly because of how trade will be done on the Internet. I think trade is a very important topic, because not only is it an important cause, but it’s one where some people intuitively don’t understand why trade is so valuable, and particularly what it means for our economy.

Now, Washington State is a real standout in this respect. One in four jobs here today are created by trade, and this state will continue to grow more trade dependent. Those are higher-paying jobs. They’re jobs that generate other jobs indirectly. And one of the ironies of the way they measure these things is actually our product, software, is not included in the trade figures. So any of the numbers you see actually understate what goes on in this state, particularly as the software industry has exploded. From Microsoft alone we have close to $10 billion of export sales that would be added in there. The reason is that so far software has been treated as a service, and so those merchandise figures don’t pull that in.

Another thing about software and exports that’s important to emphasize is that when you have a software company, they have huge fixed costs: the cost of developing a new product. If you have to employ 300 people to build that new version, you’re out that entire cost, no matter how many copies you sell. And yet you need to sell the product at a very low price in order to get the broad market and to be competitive.

And there’s only one answer for that, and that’s to sell it at incredibly high volume. And so having the volume that comes from the global market is what makes the software industry work. I don’t know of any software company that would be profitable if all they had was their sales in the United States. That’s because their costs wouldn’t go down. The marginal costs of those extra sales around the world are really quite modest. Even if you factor in the organizations that you have to build and the marketing, expenses that you have to put in, the marginal cost would probably be on the order of 20 to 25 percent.

And so having this open market that allows software companies to think of global volume, and therefore invest in building better products, it is the key to the incredible success the software business has had. And that’s partly why we were so involved in making the PC standard a worldwide standard. There were a lot of fun things we had to learn to do that. We had to learn about Chinese language, Japanese language, Arabic, and make sure that our software foundation made it easy to create these products for the world market.

Now just on local figures, VISIO gets over 40 percent of its sales from outside North America; Wall Data, over 32 percent; and Microsoft over 50 percent. It’s very typical when a software company gets started up that their international sales would be low at first as they take the time to build that international distribution. But because close to 50 percent of all PCs are sold outside the United States, you’d like to eventually get up to the point of selling 50 percent of your software outside the United States. The one thing that makes that a little difficult is that software piracy is substantially higher outside the United States than it is inside the United States. But the US Trade Representative and many others are hard at work trying to improve that situation, as well.

Well, I said that trade is going to be come more dynamic because of technology. And this is because the Internet creates a new communications medium that allows us to exchange information far more easily than ever before. And in the past, say you wanted to buy - oh, take a random product - buy some stones from around the world. How would you find all the available stones that might be out there? Well, there really wasn’t a good answer. You couldn’t really just pick up the phone and call everyone. And broadcast media like newspapers or TV weren’t suitable for a product like that, that’s not traded widely.

Well, now with the Internet it’s very easy to create a place that people go for any kind of product, and all the buyers and sellers can meet there. And it’s sort of the ideal capitalism. There’s no friction in the transaction, and you have complete visibility; that is starting to be a key with the Internet.

Now, there are products that this has always been the case for, things like stocks on the large exchanges or commodities like oil or steel where you can establish places that buyers and sellers go. But for the vast majority of products, and particularly if you get out into more custom products, and service type products, you haven’t had that, and the Internet is bringing that in.

The Internet is catching on in a very big way. I’ve got some numbers here that talk about the United States adoption rate. If we compare it to TV or radio, where it took 38 years for 50 million people to be using radio, 13 years for CDs; here we see four years to achieve the same thing with Internet usage. Worldwide we’ve got about 150 million people who are using the Internet now on a regular basis, and that’s up from 3 million just four years before that. So it’s not only incredible in terms of what it means, but the speed that it’s happening at is quite incredible. And this is all happening without some of the advances that are coming up in the next few years, things like speech recognition that will make these devices even easier to work with. And so it’s really explosive, and it does have a role to play in trade.

Electronic commerce is just one of the many applications. Staying in touch, getting customer support, learning about new things; all of those are facilitated by the Internet. But the press now is really focused on electronic commerce, because that’s one of the few ways people have proven they can make money on this new phenomenon. Here in this state we have Amazon.com that’s really not only the leader in their category, but they’ve become sort of the icon of electronic commerce. They have over six million customers. Their sales have been growing at quite unbelievable rates. And a lot of those customers are coming from outside the United States, coming from markets where they don’t have book superstores or the prices are regulated in some way that make it hard to get some of the more obscure titles. And so they’re doing a great business, making books and other products easily accessible to people around the world.

Electronic commerce, really there’s no end in sight. New products are being put on the Internet all the time. Yesterday there was news about a new company that’s doing drugstore products that Amazon invested in. And you name a product category, and I can tell you about ten start-ups that have been funded very, very well by the venture community to go out after that category. Then, of course, you have all the existing people in those categories, and, boy, we’d better get a website going. In some categories, such as stock trading, the Internet already represents about 40 percent of the volume out there. Now, in most other categories, it’s still very, very small. Even in, say, the book category that’s had that great visibility, it’s only about 3 or 4 percent. But nobody knows how far that can go, and certainly people investing in these stocks seem to have a lot of optimism about how far that can go.

But this is an international phenomenon. It’s a great facilitator of trade. Trade is all about allowing people to buy the best products, and the Internet comes in here. Dell Computer, who worked in close partnership with us and uses Microsoft technology for its websites, was a leader in getting out there on the Internet, because they saw it as an extension of their direct selling model.

Well, they’ve gone around the world and put up these websites. It’s kind of interesting. When they put up their website to France, they turned it on, it was late at night. Fifteen minutes later, somebody had bought a computer. They hadn’t run a single ad, and it makes you wonder was that guy sitting there -- (laughter) -- for months just trying to connect to their website, ready to buy that computer, who knows?

Well, then a month later they turned on their website in Germany, and once again, fifteen minutes later, somebody had bought a computer.

So, there’s a lot of interest out there. I think people underestimate the degree to which markets have not been well mediated. You know, your ability to go in and look at the options, look at the prices, compare things, see what other people think about things. It’s been hard to do that without this kind of capability.

So it’s going to cause a rapid increase in world trade, particularly in things like services, where the matching of buyers and the sellers, and the collaboration between them was not easy to do until the Internet came along.

So who’s on-line, who’s really taking advantage of this? Well, of the 150 million active users, about 87 million, a little over half are in North America. It’s a big number. In fact, whenever I travel around the world, political leaders have said to me, "Jeez, what did you guys do? I mean, how do we catch up?" We are certainly the envy of the world, not only in terms of having the companies that are leading the way in this, but also because people understand the efficiency it’s providing to all these industries in the United States.

And the answers of how this happened here are many. Part of it has to do with the dynamic nature of our economy, that new companies are encouraged, and there’s lots of investment in them. Part of it is the way that the Internet came into US universities and almost became a standard tool, so that all those graduates are really advocates for using this. And then there’s a critical mass phenomenon: people who use the Internet like to tell other people, "Hey, get an electronic mail account, try it out." And so once it gets going, it really spreads.

You can see that in other geographies, even Europe, it’s not as widely used. There’s quite a variation across Europe. The Nordic countries are very similar to the US in their usage pattern, and then some of the other countries get down to as little as 10 percent of the households have PCs. That’s a very low number today. Sweden, the US, Australia, Canada are right at about 50 percent of all households with PCs. And that number’s been going up very substantially in the last couple years as the price has come down.

There’s a term I use to talk about people who use the Internet, and that’s web lifestyle. The reason I use the term there is you don’t just decide to use the Internet for one thing, just because you want to buy books or do your banking or your taxes or electronic mail; it’s a set of things that draws you in. And once somebody’s doing it, they don’t go back, they don’t switch the other way. In fact, they increase the number of things they do. They plan their day. They can schedule their appointments that way, they can collaborate on trading documents that way across the Internet. And so it really is a lifestyle where you take it for granted. You get your news or stock data there. And that’s really what people are coming to take for granted many, many times a day.

There’s an analogy of this that I talk about a lot in the book I have coming out next month, which is about the web workstyle, that is, people who inside their company have decided that paper forms are going to go away, and they’re really going to get all the critical information onto the computer, and so that’s part of this as well.

Of course, Computers are still a bit hard to use, and we’re very early in this. In fact, just to make sure we have a real sense of where people are in all this, we sometimes go out and just talk to average people about what do they think about technology. And I’ve actually brought along a few video clips that show us that we still have a lot of work to do, even though people are very excited about this. So let’s go ahead and take a look at that.

(Video presentation.)

(Applause.)

BILL GATES: So we still have a long ways to go - (laughter) - to make things a bit simpler and easier to get to. But the rate of progress is quite fantastic. In fact, even though the innovation over the last twenty years has been quite rapid, I can say with great confidence that the next twenty years, that innovation will be even more rapid. Partly the high level of investment, partly the growth of the market, and it’s a wonderful thing and certainly a global phenomenon.

What do we need to have electronic commerce really provide its full potential? Well, we need to make sure that the trade across borders is very straightforward. We need to make sure there are not taxes that discriminate against this type of trade. We need to make sure that intellectual property rights are protected. We need to make sure there’s an alignment of some of the rules about how things are done.

Back before the Internet, each country could have a very different view of certain ways that business was done. Now, there’s a need to really look at alignment. And it’s great to see the US and the European Community are already beginning some of this discussion.

We need high-speed communications, and you need a technology called encryption that can protect the information, and make sure that nobody’s breaking into it.

I think electronic commerce will be a very important element of the upcoming world trade talks. Certainly we view these talks as quite important. We’re very strongly in favor of restoring fast track authority for the President. I think most of the people here appreciate what a fundamental element that is in order for us to really show our good faith and a commitment to this next world trade round. And hopefully by the time the meeting opens up here, the Congress will give that to the President so things can get off to a very good start.

I want to congratulate the Washington Council for International Trade. I think you’re a great advocate for a very key cause, and having this ministerial round here will really allow you to get the world out in an even better way. It will highlight the great companies here, large and small, which make this a leading trade region.

Also, the role the Council plays in terms of continuing education, helping to make sure that a broad set of people understand why free trade is so beneficial; I think that’s a really key goal that the Council has. Part of that is a little bit of fundraising that’s being done to have a teacher seminar, and about $100,000 is being raised. Microsoft is getting involved in that, as are many of the other local companies. So it’s something of importance there.

Well, looking ahead, there are going to be a lot of tough trade issues. It’s great to get this new round opening up, and so that some of those can be solved early on a global basis. The Internet is really going to accelerate world trade and generate some new issues there, so I really want to make sure we all work together to ensure that trade gets the support it needs, including this next round.

So, thank you all for your work, and let’s continue the successful track record you’ve built today. Thank you.

(Applause.)