Europe will lag behind the United States in the growth of electronic commerce until existing trade laws can be harmonised, a Paris conference has been told.

Michel Lacombe, president of Microsoft Europe, Middle East, Africa (EMEA), gave the continent only a 65% chance of bridging the e-commerce gap with the US by 2005.

"Most important is getting governments to do their job, and in the very short term they have to resolve the cross-border issues around e-commerce," he said.

EU lags US in doing e-business

The conference, organised by Microsoft Europe senior executives to look at European progress towards the Information Age, was told nearly 7,000 US companies were conducting business online in 1998 compared to 2,000 in the European Union.

Doug Wilson, Datamonitor "Europe is lagging"

Doug Wilson, a director with Datamonitor analysts, said under 10% of European citizens were connected to the Internet compared to 35% of Americans.

While recent growth rates in IT investment rivalled those of the US, this was mainly due to the cost of introducing the euro, he said.

"The euro is causing businesses not to get into e-commerce, a huge amount of IT budgets is having to be put into monetary union and the Year 2000 problem. A lot of other things have been put on hold."

Complex laws discourage online trade

John Frank, Microsoft's senior corporate attorney for the region, said the current debate in Brussels was over whether trade laws in the country of origin of e-shipments should apply or those in the country of reception.

"In the UK, small companies won't ship abroad because they don't want to take on another country's consumer protection laws and other regulations," he said.

"VAT (Value-Added Tax ) is a complicated mess in the physical world and now online," he added, referring to the different rates in EU countries engaged in e-commerce.

Blair's step back from key escrow

Mr Frank said government had a major role to play in funding IT skills training. He praised a Swedish tax breaks initiative which was boosting PC ownership and measures announced in the UK Budget.

"There is also a distinction between enabling and controlling legislation," he said.