Former Associate Manager, International Policy, U.S. Chamber of Commerce
Senior Vice President for International Policy
March 01, 2023
The AFL-CIO recently offered recommendations to the administration on how to extend its worker-centered approach to digital trade. The report claims the U.S. digital trade agenda has prioritized big technology firms at the expense of workers, consumers, and society, and that current U.S. digital trade policies encourage harmful activities.
These charges are unfounded. On the contrary, digital trade is critical to the success and growth of the American economy, a recent U.S. Chamber study found, and American workers have benefitted tremendously as the digital economy has generated high-wage jobs, innovative products, and market opportunities at home and abroad. Considering the benefits of digital trade:
Companies of all sectors and sizes are benefiting from digital trade. One of the chief claims in the AFL-CIO’s report is that large technology companies are the main beneficiaries of digital trade. Ask almost any company operating in today’s economy, and they are likely to disagree.
Industries of all sectors and sizes have reaped benefits of digital innovation. The U.S. Chamber study, entitled The Digital Trade Revolution: How U.S. Workers and Companies Can Benefit from a Digital Trade Agreement, found that a diverse range of firms, from transportation, warehousing, and agriculture to arts and entertainment have been empowered to seize new market opportunities abroad as a result of advances and investments in new digital technologies.
Services, which make up a majority of digital exports and the majority of U.S. jobs, have experienced strong growth in the U.S., but the potential for further expansion internationally is vast. U.S. digital exports — often called ICT-enabled or potentially ICT-enabled services in government reports — have more than doubled in the past 10 years, making it one of the country’s fastest growing export sectors, unleashing new opportunities for huge numbers of workers. More than 20 million Americans work in the business and professional services sector, a majority of which can be traded digitally.
Digital trade is transformative for small business exporters. Digital tools are allowing more small business exporters to expand their reach to international markets. Consider:
- First, digital advertising plays an overlooked but critical role in allowing U.S. small businesses to economically reach potential foreign customers in a targeted fashion. Small businesses simply had no such tools in the pre-internet era: Print advertising in newspapers or direct mail were never feasible options for U.S. small businesses trying to tap even nearby and familiar markets such as Canada or Europe.
- Second, modern digital tools are revolutionizing payment collection, cited by small business exporters as a top challenge. Uncertainty around international payment collection was a principal brake on small business exports even a few years ago, but such risks and foreign exchange complexities can now be managed in a cost-effective manner by digital payment services.
- Third, international shipment firms, including express delivery companies, today provide comprehensive services that handle customs clearance procedures and costs for small business owners who lack the expertise and time to tackle the minutiae of such matters. The evidence supports the view that online channels reduce transaction costs associated with international trade significantly.
Another U.S. Chamber report, entitled Growing Small Business Exports: How Technology Strengthens American Trade, uncovered some surprising findings. Based on a national survey of more than 3,800 small businesses and a related economic analysis, the report produced a new estimate that 9% of U.S. small businesses currently export goods or services, a figure considerably higher than indicated by official statistics. The report estimated that small business exports supported more than 6 million U.S. jobs. Small businesses that export have been expanding the overseas markets they serve, the report found, from an average of seven countries in 2016 to 10 countries in 2018.
Digital trade supports millions of good American jobs. The AFL-CIO asserts that digital trade does nothing but spawn low-wage jobs abroad — a dubious charge belied by the benefits foreign governments are securing via digital trade — but somehow fails to see the millions of excellent jobs it’s creating here at home. The digital economyhas proven a huge and growing source of employment in the U.S. with 7.7 million jobs and counting in all 50 states. The number of digital economy jobs has grown at an average rate of 2.7% over the last decade, compared to 1.6% for all jobs, and the digital economy has experienced wage growth of 5.9%, compared to 4.2%. As the U.S. Chamber’s Digital Trade Revolution explains:
“Jobs tied to the digital economy can be found in nearly every sector, and their number is growing at a faster rate than that of overall job growth over the last decade. These jobs pay well, and compensation growth for digital jobs exceeds that for all jobs generally.”
Should digital trade continue to prosper, the U.S. economy is poised to create many good, highly-compensated jobs right here at home.
Data flows sustain growth in almost every sector. The cross-border transfer of data underpins the U.S. and the global economy. No company, regardless of sector, can do business, let alone engage in international trade, without the ability to transfer data.
The AFL-CIO expresses concern in its report that “unfettered cross-border data flows” put worker and consumer privacy at risk. The group also maintains that data localization policies can not only be justified but should be authorized. Specifically, the report says:
“Governments should have the ability to require that individuals’ sensitive personal information… or data related to certain sectors… be kept onshore to ensure it is subject to strong and enforceable privacy standards and effective government oversight.”
However, contrary to these assertions, the ability to transfer data across borders does not impede data protection, nor do data localization policies guarantee privacy. How data is protected is more consequential than where it is stored, and mandating local storage of data is often counterproductive to data protection. In fact, it serves as a barrier to trade and poses a threat to economic growth and new market opportunities for American businesses.
Further, concerns that these principles are “rigid restrictions on the measures governments can adopt to promote legitimate public policy interests” are unfounded. Enshrining the commitments to protect cross-border data flows and prevent mandated data localization in trade agreements does not preclude policymakers in the U.S., or other governments, from passing robust federal privacy legislation, something the U.S. Chamber has pressed for.
The effort to “preserve robust public policy space” in digital trade agreements is code for making those agreements toothless and unenforceable. And given the U.S. role as a leading digital innovator, American workers and companies stand to gain tremendously from the continued ability to move data across national borders — and much to lose should digital protectionism spread. As the U.S. Chamber advocates in its Digital Trade Priorities, these policies can work hand in hand to uphold high standards in privacy, while at the same time promoting trade and innovation.
Ensuring high standard commitments: The “sweeping nature of these commitments” in U.S. agreements with Canada and Mexico or Japan alarms the AFL-CIO. What is, in fact, truly alarming is the number of onerous digital regulations cropping up from governments around the globe. A study by the Information Technology & Innovation Foundation found that “the number of data-localization measures in force around the world has more than doubled in four years. In 2017, 35 countries had implemented 67 such barriers. Now, 62 countries have imposed 144 restrictions— and dozens more are under consideration.” The experience of U.S. Chamber member companies affirms this trend and its widespread nature.
Many of those measures discriminate against U.S. companies. Others offer little to no flexibility to account for evolution in the digital economy. These provisions not only harm industry’s ability to do business but will result in lost jobs for American workers both at home and overseas.
American leadership on digital trade has resulted in high-standard digital provisions found in global pacts. Rather than facilitating an “unregulated status quo,” digital trade binds countries to principles that support a growing, innovative, and competitive economy. In fact, as the U.S. Chamber has written, these very commitments protect American workers and companies from harmful and discriminatory rules that target the U.S. economy more than any other.
U.S. workers, consumers, and industry have reaped the benefits of digital trade, proving that when offered the opportunity to compete on the global stage, American dynamism flourishes time and again. A worker-centered digital agenda should support that strength rather than stifle it.
About the authors
Mary Kate Carter
John G. Murphy
John Murphy directs the U.S. Chamber’s advocacy relating to international trade and investment policy.