How the Biden Administration’s reversal on digital trade threatens American workers and businesses
It’s difficult to think of anything that is not serviced online. Across products and industries including technology, transportation, entertainment, health, banking, and design, the digital revolution has transformed much of the economy. Giving a whole new meaning to the production and delivery of goods and services, the digital revolution has also significantly impacted international trade, with the bulk of U.S. exports being digitally tradeable.
Digital trade embraces a universe of tools that help companies do business. For small businesses, it’s essential to find customers overseas, navigate the maze of ports and customs, and get paid quickly and safely. All these operations depend on the ability to move data across borders instantly.
For bigger companies, digital trade helps them operate as a single firm in global markets. U.S. telecommunications and information and communication technology (ICT) services – as well as business-to-business or B2B operations like manufacturing and wholesaling – have also become digital-forward industries.
How critical is digital trade to the U.S. economy?
According to the latest U.S. Chamber of Commerce report, The Digital Trade Revolution, digitally tradable exports supported three million direct and indirect U.S. jobs in 2022 alone. Wage growth for digital jobs generally exceeds that for all jobs. The digital economy is expanding nearly three times as rapidly as the economy at large, and the global e-commerce market is expected to total $6.3 trillion in 2024.
Undergirding this transformation are strong digital trade rules that support American growth and innovation, creating high-paying jobs across all these industries. These digital trade protections have promoted growth, prosperity, and dynamism across industries. Digital trade and the strong rules that promote it represent a key pillar of America’s role as an economic leader in a competitive global environment.
But current U.S. policy is abandoning that leadership position. In an abrupt policy change by the Biden Administration last October, the Office of the U.S. Trade Representative (USTR) dropped its support for digital trade rules on data flows, data localization, and source code being discussed by the World Trade Organization. Officials wrongly claim that these digital trade rules only benefit big technology firms and disregard that Congress has enshrined them in US law.
U.S. Trade Representative Katherine Tai has been actively pushing this anti-growth agenda, dropping these longstanding digital trade protections at the expense of U.S. businesses and consumers, leading to what will be devastating impacts on the entire American economy.
Critical consequences
Most at risk are American small business exporters. 92 percent of small businesses that export rely on digital tools. This includes digital advertising, digital tools associated with payment collection, and international shipments. Notably, digital trade allows for smaller exporters and larger firms to prosper together. Services shared among small and large businesses are using digital tools to create a mutually beneficial trade ecosystem.
And because antiquated, burdensome, complex, and costly customs make it difficult for U.S. businesses to compete, digital trade agreements would allow for more modern approaches, including cross-border data flows.
Policy pushback
Both Democratic and Republican members of Congress agree, arguing the Biden Administration must stop jeopardizing growth facilitated by digital trade. Historically, digital trade rules have had broad bipartisan support across different administrations. In 2020, 90 percent of the U.S. House and Senate voted in favor of the United States-Mexico-Canada Agreement (USMCA), which included gold-standard digital trade provisions.
Scores of members of Congress have lodged objections with USTR in letters and hearings. The business community has rallied with near unanimity. Of note, a coalition of over 40 American associations and businesses – led by the U.S. Chamber of Commerce – called on the Biden Administration to stand up for American businesses and workers by reasserting U.S. leadership in digital trade.
Is America prepared to reassert dominance?
Lawmakers on both sides of the aisle and businesses of all sizes have argued that one of the most concerning parts of this withdrawal from supporting digital trade rules is the threat of foreign competition. Without strong digital trade rules to block the discriminatory treatment of American companies in foreign markets, U.S. businesses’ access to international markets and their intellectual property that is embedded in digital goods and services are at risk.
But it’s not too late to reverse this reversal. U.S. leaders need to understand that maintaining a strong digital trade policy can secure opportunities for American workers, consumers, and companies of all sectors and sizes, and forsaking this will hand our foreign competitors a huge advantage.
For a list of the sources used in this article, please contact the editor.
John Murphy
John Murphy is the Senior Vice President and Head of International at the U.S. Chamber of Commerce, the world’s largest business organization. For all the people across the businesses the Chamber represents, the Chamber is a trusted advocate, partner, and network, helping them improve society and people’s lives.