The Biden administration will end its support for proposals on data flows, data localization and source code being discussed in World Trade Organization negotiations on e-commerce to ensure sufficient “policy space” for the U.S. and others to assess their approaches to digital trade, Inside U.S. Trade has learned.
The U.S. will announce the decision at the WTO on Wednesday morning at a meeting of countries that are party to the joint statement initiative on e-commerce.
In a statement, Office of the U.S. Trade Representative spokesman Sam Michel noted that “many countries, including the United States, are examining their approaches to data and source code, and the impact of trade rules in these areas.”
“In order to provide enough policy space for those debates to unfold, the United States has removed its support for proposals that might prejudice or hinder those domestic policy considerations,” he added.
USTR believes the plurilateral initiative is important, however, and the U.S. “intends to remain an active participant in those talks,” Michel said.
The move – which followed consultations with Congress – marks a departure for the U.S. on digital trade sure to anger some tech companies and their backers in Congress.
The decision drew praise from Senate Finance Committee member Elizabeth Warren (D-MA), who has long contended that “Big Tech” companies are angling to use trade deals to pre-empt domestic regulations and international rules.
In a statement, she said “Big Tech lobbyists are trying to use trade deals to undermine the Biden administration’s efforts to promote competition, and it’s welcome news that [USTR] Ambassador Tai is rejecting that effort at the WTO.”
“We need to make clear that digital rules favoring Big Tech monopolies are a non-starter for the U.S. in any trade agreement, including IPEF,” she added, referring to the U.S.-led Indo-Pacific Economic Framework for Prosperity, which includes a digital trade component.
But Nigel Cory, associate director for trade policy at the Information Technology and Innovation Foundation, a think tank focused on technology policy that receives funding from a wide range of donors including major tech companies, blasted the decision.
“The United States’ decision to walk away from long-running negotiations on new, much needed digital trade rules is nonsensical,” he said in an email. “Data and digital technologies are the future of the U.S. economy – not steel, agriculture, or other traditional economic sectors. The United States is stepping away from good faith efforts to work with likeminded partners – Australia, Canada, Japan, Singapore, the United Kingdom, and many others – to develop new, high-standard rules for today’s digital economy.”
USTR, he charged, “doesn’t wanted balanced trade rules, but ones that allow countries to discriminate against U.S. tech firms. It’s truly misguided that USTR decided to withdraw from global efforts at the WTO in a response to the views of a few progressive congressional representatives, who otherwise tried and failed to pass to their own preferred competition policy in the democratic forum of the U.S. Congress.”
Cory said the provisions USTR will back away from in the e-commerce talks, covering data flows, data localization and source code, have larger implications. He contended that they are “in direct response to Chinese digital protectionism and authoritarianism, which the Biden administration is otherwise supposed to be counteracting in cooperation with likeminded trading partners. It also tells us all we need to know about what to expect on data and digital trade in the Indo-Pacific Economic Framework – nothing of substance.”
In August, Inside U.S. Trade reported that participants in the plurilateral negotiations on e-commerce – more than 80 overall, including China, the European Union and many other large economies – had largely agreed to provisions on a swath of digital trade-facilitating provisions but remained divided on thornier issues like privacy and cross-border data flows. The negotiations are being led by Japan, Australia and Singapore; the three have said they hope to achieve a “substantial conclusion” of the talks by the end of 2023.
An Aug. 4 text, however, showed that while a majority of the provisions were largely finished, a small number of key issues were still very much in play – including some on privacy, cross-border data flows, data localization and source code.
On cross-border data flows, participants as of August were not in agreement on how much or even whether to narrow a commitment to allowing such flows. The U.S. was backing the broadest option: “No [party/member] shall prohibit or restrict the cross-border transfer of information, including personal information, by electronic means, if this activity is for the conduct of the business of a covered person,” the text read. -- Dan Dupont (email@example.com)