Digital Trade Safeguards: The Need for New Rules

The digitization of the global economy has arrived. Before the pandemic, digitally-traded goods and services were on the rise, but COVID-19 has driven digital transformation of the economy to new heights. More than 60% of U.S. services exports can now be delivered to customers overseas digitally, according to a report by the U.S. International Trade Commission. A recent Chamber study found that new digital tools are helping U.S. small businesses expand their international sales to an extent well beyond that captured in official U.S. statistics, with their exports surpassing $540 billion and supporting six million jobs in 2017. Companies engaged in business-to-business as well as business-to-consumer transactions that rely on digital technologies are more profitable and experience higher growth rates than their late-adopting competitors.

The United States is home to the most digitally competitive companies across a wide range of sectors. However, this envious position is actively being undermined as policymakers around the world move to regulate the digital economy more actively. While digital transformation has raised some legitimate policy questions, it has also given rise to mercantilist policies designed to limit data flows, impede foreign firms from taking advantage of market opportunities, and in some case outright target leading American firms.

As a result, completing the WTO Joint Statement Initiative (i.e., the ongoing
e-commerce negotiations) has become an urgent priority to lay the foundation for trade rules to safeguard digital trade flows. Some 80 countries are now engaged in this negotiation. However, the completion of this agreement outlining digital rules is unlikely in the near term.

While the United States must remain a leader within these WTO negotiations, the Chamber believes it is important to advance a series of bilateral and plurilateral agreements on digital trade with a coalition of like-minded countries that share our ambitions. Building on the model set out in the Digital Trade chapter of the USMCA and the U.S.-Japan Digital Trade Agreement, the United States should pursue similar arrangements with its existing trade agreement partners as well as other economies that recognize the importance of promoting digital commerce.

On a related note, it is imperative that WTO members affirm the continuation of the moratorium on customs duties on electronic transmissions, which has been extended to the next Ministerial Conference in 2021.

ACTION: The Chamber urges governments to secure an early and ambitious result in the WTO e-commerce negotiations but also seek new digital trade agreements—bilaterally and plurilaterally—with ambitious partners.