In a stunningly misguided move, the Biden Administration reversed longstanding U.S. digital trade policy last October. Not only does this decision threaten the rules-based international trade system, but also jeopardizes modern e-commerce and undermines decades of American-led innovation across the world.
U.S. Trade Representative Katherine Tai has been at the forefront of this policy shift, leaving many to wonder why. Why compromise the free flow of data across international borders? Why put America’s valuable intellectual property at risk? Unfortunately, those questions remain unanswered as Indo-Pacific Economic Framework (IPEF) negotiations collapsed and USTR also abandoned prioritization of digital trade. The next US President has the unique opportunity to reassert America’s leadership in shaping the rules of global commerce, which will be a boon to American industry – especially our job-creating small businesses.
This retreat from digital trade leadership runs counter to our national interest as it supports three million direct and indirect U.S. jobs and at least $2.6 trillion in GDP, according to the US Chamber of Commerce. It also accounts for 55% of US exports of traded services, totaling nearly $1 trillion in annual sales. Those numbers alone demonstrate the critical importance of digital trade is to business of every size.
But the impact isn’t limited to “Big Tech.” Effective digital trade rules are crucial across a wide range of business sectors, including advanced manufacturing, agriculture, and service-based industries like healthcare and hospitality increasingly rely on modern digital and connected technologies to deliver innovative products to a diverse global market.
Small and medium-sized enterprises (SMEs) are particularly vulnerable. Without the infrastructure and financial heft to fight discriminatory trade practices, they benefit the most from open digital trade by exporting their goods and services to the 95% of consumers beyond our borders according to the Global Data Alliance. Those numbers tell us that a fair and open digital trade environment is where these businesses thrive.
This shift in U.S. policy has opened the door for rival nations to place punitive regulations on cross-border data flows and install data localization mandates that could cripple e-commerce. Adversaries such as the People’s Republic of China are well-positioned to exploit these vulnerabilities, stifling U.S. innovation in emerging technologies like artificial intelligence that depend on the seamless transfer of data.
Ambassador Tai’s rationale for the change – that Congress is agnostic on the issue – is demonstrably false. In 2015, Congress passed the Trade Priorities and Accountability Act, followed in 2020 by the United States Mexico Canada Agreement Implementation Act, which Tai shepherded through the legislative process. Both were enacted with strong bipartisan support and preserved barrier-free treatment for digital trade, acknowledging that the open and seamless exchange of data is crucial to American success in the growing digital economy.
Tai’s office also suggested this move was designed to “give Congress room to regulate Big Tech firms,” amplifying Federal Trade Commission Chairwoman Lina Khan’s crusade against American technology leaders. With this green light from Biden, even allied nations in the European Union now openly pick winners and losers in the digital economy through heavy-handed laws like the Digital Markets Act, which explicitly targets American companies.
This radical departure in U.S. trade policy has earned bipartisan scorn from Members of Congress. Notably, Senate Finance Committee Chairman Ron Wyden (OR) and ALEC Alumna, Senator Marsha Blackburn (TN), who observed: “Further degrading of leadership on [digital trade] will allow for adversaries like China to write protectionist digital trade rules that undermine the rule of law, open up American businesses to additional intellectual property theft and harm millions of small businesses that are the lifeblood of the American economy.”
Legislative members of the American Legislative Exchange Council (ALEC), who collectively represent more than 60 million Americans, understand that their constituents and local businesses thrive in a fair digital marketplace. They depend on international commerce for their livelihoods. Last month, ALEC adopted a model resolution opposing the expansion of harmful digital trade barriers and supporting a level playing field for U.S. businesses.
America’s retreat from writing the global digital trade rules must be reversed to protect our businesses and innovators. That is the only way to prevent Beijing, which has no interest in protecting personal data or source code, from rewriting the rules for us.
