Published
October 27, 2023
The administration’s policy reversal on digital trade this week was shrouded in little known acronyms, but the impact on American companies and the workers they employ will be swift and painful.
This past week the Office of the U.S. Trade Representative (USTR) announced it was abandoning the longstanding U.S. approach to digital trade rules. USTR officials in Geneva announced the U.S. withdrawal of its previous proposals on data flows, data localization, and source code being discussed in World Trade Organization (WTO) negotiations on e-commerce. A USTR spokesman stated that the move was made “to provide enough policy space” for debates about digital trade to unfold.
In reality, this move will directly harm American workers, invite unfair treatment of U.S. companies, and threaten our competitiveness. Unsurprisingly, it drew powerful bipartisan criticism from Congress and condemnation from the U.S. Chamber and a wide range of business groups.
Capitulating to Fringe Views: The move represents a capitulation to fringe views that misread what digital trade rules do. In reality, these rules form a breakwall against the rising tide of global digital protectionism, particularly the egregious digital measures imposed by authoritarian regimes.
Strong digital trade rules also prevent countries around the world from using regulation to lock out American companies and their workers from their markets. In no way do they impede fair regulation.
U.S. the Top Beneficiary: American businesses of all sizes and sectors have benefitted mightily from the digital trade revolution, and their leadership in harnessing data to create and transform products and services has made them the envy of the world. Among other things, these rules have:
- Opened international markets for American service providers, manufacturers, and agri-food companies that rely on the global reach of a range of U.S. services and technology providers to succeed;
- Helped small and medium-sized businesses to launch, grow, scale up, and access new markets; and
- Advanced the export of digital-delivered services, which in 2022 accounted for more than 67% of all U.S. services exports and 20% of all U.S. exports.
At Odds with the Law: The trade rules that make this possible — and that USTR is proposing to abandon — won overwhelming support in Congress when it approved the U.S.-Mexico-Canada Agreement (USMCA). In fact, 90% of the House and Senate voted for this agreement, which has been the law of the land for more than three years.
These same rules are enshrined in the U.S.-Japan Digital Trade Agreement. Between these two agreements, the digital trade rules that USTR abandoned this week have governed U.S. trade with three of our top four trading partners for years—benefitting many Americans and harming none.
Congressional Anger: Unsurprisingly, congressional leaders decried the move. Senate Finance Committee Chairman Ron Wyden (D-OR)—normally a staunch ally of the administration—called the move “a win for China, plain and simple… USTR’s unilateral decision to abandon any leverage against China’s digital expansionism, and to oppose policies championed by allies like Australia, Japan, the U.K. and Korea, directly contradicts its mission as delegated by Congress. It may be time to reconsider the degree of that delegation going forward.”
Senate Finance Ranking Member Crapo (R-ID) and eight other committee Republicans joined in a blistering statement, which reads in part: “Ambassador Tai makes clear in her speeches and through her actions that foreign countries are free to discriminate against U.S. companies and workers as long as these countries and USTR can concoct an excuse. Failing to stand up for America and against foreign discrimination—particularly from China—is contrary to the USTR mission.”
In a similar vein, Representatives Darin LaHood (R-IL) and Suzan DelBene (D-WA), Co-Chairs of the Digital Trade Caucus, slammed the move, stated that the was made “without the consent of Congress.”
This Isn’t Over: For the sake of the millions of American workers and the thousands of U.S. companies who benefit from digital trade, capitulating to foreign digital protectionism can never be acceptable. The U.S. Chamber is working with its members, other associations, and Congress to press the administration to change course.
About the authors
John G. Murphy
John Murphy directs the U.S. Chamber’s advocacy relating to international trade and investment policy and regularly represents the Chamber before Congress, the administration, foreign governments, and the World Trade Organization.
