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Strengthening the Global Internet with a Digital Trade Agreement

November 19, 2020
5 min read
The Challenge: Rising Barriers to Digital Trade

The Challenge: Rising Barriers to Digital Trade

Around the world, governments are building digital walls by restricting the free flow of data, blocking online services and content, and fragmenting the Internet along national boundaries. The Chinese government was in the vanguard of this trend and has successfully pushed other governments to follow its lead in exerting greater top-down control over digital spaces. In 2020, Freedom House documented a tenth consecutive year of global decline in “internet freedom,”1 and the Office of the U.S. Trade Representative documented a growing list of barriers to digital trade.2

These digital trade barriers do not just harm giant tech companies: from cloud computing, to insurance, entertainment, architecture and design, service suppliers across the economy need to move data across borders. Meanwhile manufacturers, farmers, and small businesses of every kind depend on digital services to operate and compete; sometimes these services are available from a local firm, often they are international. For the United States, the world’s leading exporter of services, the commercial importance of an open, global Internet should be obvious. And authoritarian digital rules are not just bad for U.S. exporters: an Internet that is top-down, closed, and government-controlled hampers free speech and undermines the ability of governments and institutions to respond to global challenges with global coordination.

As international rules to govern the Internet are written in the coming years, the United States and its democratic allies must take the lead in creating a global framework that favors an open digital ecosystem.

The Solution: Negotiate a Digital Trade

Agreement Digital Trade Rules

To combat the rising tide of digital trade barriers and ensure a competitive global digital economy, the next administration should launch and lead negotiations toward a plurilateral digital trade agreement. The core of such an agreement should be high-standard rules on digital trade that allow businesses to operate globally and reach customers beyond their borders. Free trade agreements negotiated in the past ten years can serve as a model: they have included rules ensuring the free flow of data and prohibiting data-localization requirements, banning tariffs and discriminatory policies affecting foreign digital products, and protecting against unfair requirements to transfer source code or sensitive algorithms to governments.

Over the past three years, a growing group of members of the World Trade Organization (WTO) have been engaged in negotiations on digital trade rules. Many countries have engaged in good faith, but the participation of China, Russia, and other authoritarian governments makes a useful outcome unlikely. China, for one, has used the negotiations to advocate for its “Internet sovereignty” and oppose enforceable rules on core issues.3 These negotiations have, however, highlighted broad interest in defining rules to govern digital trade, and provided valuable information about various governments’ positions and priorities on key issues.

Digital Services Commitments

In addition to defining rules for digital trade, an agreement should also ensure that service suppliers across the economy—not just the firms we think of as tech companies—can access foreign markets and compete on a level playing field. Given that nearly every service industry is digitally enabled, it makes sense that digital trade negotiations should provide benefits across the services sector. Establishing a large open market for service suppliers from participating countries would help counteract the unfair advantages China provides to its own firms. Additionally, such breadth may be necessary to ensure that the outcome complies with the rules for plurilateral agreements under the WTO’s General Agreement on Trade in Services.

From 2013 to 2016, a group of 26 countries participated in negotiations toward a Trade in Services Agreement (TISA). While these negotiations stalled after President Donald Trump’s election, TISA can provide a useful foundation for further negotiations. It also provides a good starter list of countries that may be eager to engage in digital trade negotiations. These negotiations should be open to any government that shares a genuine interest in a free, fair, and global digital economy as well as a willingness to negotiate in good faith and abide by enforceable, high-standard rules. This inclusiveness will help ensure that any agreement expands the bloc of countries committed to liberal digital governance, rather than ceding large swaths of the globe to China’s influence.

Stumbling Blocks and Innovative

Approaches Any worthwhile negotiations take time, and this subject would be no exception. While these negotiations would avoid some of the trickiest areas in trade—such as agriculture and intellectual property— the intersection between data flows and data privacy has proven contentious in previous negotiations. This is one area where negotiators should aim to go further than past agreements and set baseline standards for the protection of consumers and their personal data. Ensuring data privacy among participating countries would help assuage some concerns about guaranteeing the free flow of information across borders. If Congress passes a federal data privacy law, the negotiators’ task will be significantly eased.

These negotiations also present an opportunity for the United States and its partners to innovate new approaches to transparency in trade negotiations. Trade negotiations have historically been conducted largely in secret, frustrating stakeholders that wish to provide input. This opacity may have eased negotiations, but it has made the politics of trade more difficult. Given the subject matter of digital trade negotiations, participants might wish to experiment with using digital technology to facilitate their transparency.

Conclusion

The United States and its democratic partners have a strong interest in an open, global information ecosystem that defaults toward free competition, the free exchange of ideas, and the free flow of data. The U.S. government needs to rediscover its leadership in advancing this vision, but it cannot do so alone. The United States and the European Union share democratic values and a commitment to market-based economics; if they are able to bridge their differences on digital trade, they could define a democratic model—and an alternative to China’s approach—for the many other governments that are weighing their options.

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Photo Credit: issaro prakalung / Shutterstock

Sam duPont is the deputy director of GMF Digital. He previously served as director for digital trade at the Office of the United States Trade Representative.


1 Adrian Shahbaz and Allie Funk, Freedom on the Net 2020: The Pandemic’s Digital Shadow, Freedom House, October 2020.

2 Office of the United States Trade Representative, Fact Sheet on the 2020 National Trade Estimate: Strong, Binding Rules to Advance Digital Trade, March 2020.

3 World Trade Organization, Joint Statement on Electronic Commerce: Communication From China, April 23, 2019.