Silicon Valley goes to Washington

Among the top benefits targeted by Valley lobbyists are further reductions in capital gains taxes.

By BBC News Online's Steve Schifferes in Silicon Valley

Silicon Valley has traditionally taken a libertarian approach to politics, hoping for the least possible government interference in the business of building companies.

But nevertheless it has also been dependent on government funding, particularly in the early stage when much technological research and development was driven by military spending during the Cold War.

And it has also tended to turn to the Federal government for help in times of crisis.

For example, in the l980s when the semi-conductor industry was threatened by cheaper chips from Japan, the industry secured tough new trade rules which limited Japanese imports and attempted to force Japan to open its own market to US competition.

Power of persuasion

In recent years, the Valley has taken to trying to educate political leaders on the importance of the new internet-driven economy.

John Chambers, the head of one of the Valley's biggest companies, Cisco Systems, says that Bill Clinton was the first Democratic President to "get it" on the new economy.

Now there is a new Republican administration in Washington, and hopes are high in the Valley that it will take more seriously the high-tech agenda.

And it is waiting anxiously to see if the interest rate cuts by the US central bank, the Fed, and the tax cuts proposed by President George W. Bush, will be enough to reverse the slowdown in the US economy.

Both Cisco's John Chambers and Hewlett-Packard's Carly Fiorina journeyed to Austin, Texas in December to warn the President-elect that the economic slowdown was faster, and more severe, than anyone had anticipated.

Education

Top of Silicon Valley's agenda is improving the US education system, particularly the teaching of maths and science.

In the past few years, the Valley's fast-growing labour market has not been able to find enough technically skilled workers in the United States.

So it has secured a generous visa programme from the Federal government that has brought in workers from overseas.

Thousands of Silicon Valley's workers are of Asian background.

Cisco predicts that the shortage of IT workers will spread worldwide, including a deficit of 1.6m in Europe.

It is planning to train many of those workers itself, through the creation of thousands of "Cisco academies," where the company supplies equipment in partnership with local education and training providers across the US, Europe, and Asia.

New trade deals

Trade is also of vital importance to Silicon Valley, with 30% of its total output now sold abroad.

In the economic downturn, maintaining access to overseas markets is vital for a company like Hewlett-Packard, which sells more than half its products outside the US.

Silicon Valley companies worked with the Clinton administration to open China's market to US goods, backing efforts to ensure that China would able to join the World Trade Organisation.

Now Hewlett-Packard is looking to President Bush to take the initiative on free trade, gaining authority from Congress to negotiate new trade deals and pushing forward plans for a Free Trade Area of the Americas.

Broadband and privacy

The high-tech industry also has its own specific agenda, according to Rick White, the head of Technet, an industry lobbying group, and a former Congressman for Seattle in the district where Microsoft is located.

He says that issues concerning internet privacy legislation will become more important, with the industry split over whether or not to introduce Federal legislation forcing companies to limit the amount of data they collect about their customers.

Hewlett-Packard has become the first company to endorse the tougher European standard of privacy, the so-called "safe harbour" provisions, and many smaller companies would welcome some kind of deal.

Obongo, the internet start-up that sells software to create e-wallets, says it has already configured its products to meet privacy standards, but is impatient that the industry cannot reach agreement on what those standards should be.

Tax breaks

Silicon Valley industries are also likely to want to gain some of the benefits of tax cuts, now that President Bush has proposed a $1.6bn reduction for ordinary citizens.

Among the top benefits targeted by Valley lobbyists are further reductions in capital gains taxes, making permanent a tax credit for research and development, and perhaps a temporary tax subsidy to encourage more companies to roll-out broadband cable services, especially in hard-to-reach areas.

Mr Bush's supporters in the Valley, like venture capitalist John Kamme, now have the ear of the White House, and they are confident that the new administration is far more tech-savvy than Mr Bush's father ever was.

But in the long run, everything will depend on Mr Bush getting the economy right. With big Silicon Valley companies now freezing hiring as their customers reduce capital spending, a restoration of economic confidence among firms and consumers is vital for both government and business.