US needs to catch up to digital Europe: Chambers

The digitization of every aspect of life, from cars to clothing, is set to spark a revolution on par with the information technology transformation of the 1990s—and Europe could outpace the United States in innovation during this period of change, Cisco Systems chief John Chambers said Wednesday.

"You're going to see a digital Europe coming at us in the next year, and our country probably needs to catch up here," he said in an interview on CNBC's "Squawk Box." "It used to be a safety net when government moved slow. In today's world, if we don't move dramatically faster on everything from taxation to trade policy to intellectual property protection to immigration, we're going to fall behind."

France announced in February that it will digitize by partnering with Cisco to develop online networks and smart grids, bolster cybersecurity and train 200,000 people. Cisco will also invest $100 million in French tech start-ups.

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Chambers said France is one of the hottest countries for start-ups right now and German Chancellor Angela Merkel and British Prime Minister David Cameron are aggressively pursuing innovation initiatives.

"We've been optimistic about Europe for about four quarters, and we saw our business turn up in Europe literally four or five quarters ago from negative growth to mid-single digits to, last quarter, 7 percent," he said.

A country's ability to participate in the digital revolution will determine GDP growth and job creation, and every company will essentially become a technology company, Chambers said. This will create tremendous opportunities, but also presents challenges in terms of disruption.

"The speed of disruption will be brutal. Probably 40 percent of global enterprises won't exist 10 years from now," Chambers said. "Probably half the major players in high tech won't exist in a meaningful way in 10 years."

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Chambers spoke from Washington, D.C., where he and other technology executives are meeting congressional and executive branch leaders to discuss policy issues that affect U.S. innovation, including tax reform, trade and immigration.

The annual event is hosted by TechNet, a bipartisan networking group formed by Chambers, venture capitalist John Doerr and former Netscape CEO Jim Barksdale in 1997.

Chambers said he is cautiously optimistic the United States might make progress on international tax reform in the next 18 months in the face of international pressure.

"You see [the Organization for Economic Co-operation and Development] and countries like China and the U.K. and Ireland suddenly beginning to say, 'We're going to tax your intellectual property in Europe or in Asia if your own country doesn't move in a constructive way to deal with this,'" he said.

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