LegiStorm

Summary:

As the rules of global Internet develop and evolve, digital trade has risen in prominence on the global trade and economic agenda, but multilateral trade agreements have not kept pace with the complexities of the digital economy. The economic impact of the Internet was estimated to be $4.2 trillion in 2016, making it the equivalent of the fifth-largest national economy. According to one source, the volume of global data flows grew 45-fold from 2005 to 2014, faster than international trade or financial flows. Congress has an important role to play in shaping global digital trade policy, from oversight of agencies charged with regulating cross-border data flows to shaping and considering legislation to implement new trade rules and disciplines through ongoing trade negotiations, and also working with the executive branch to identify the right balance between digital trade and other policy objectives, including privacy and national security. Digital trade includes end-products like movies and video games and services such as email. Digital trade also enhances the productivity and overall competitiveness of an economy. According to the U.S. International Trade Commission, U.S. domestic and international digital trade added 3.4 - 4.8% ($517.1-$710.7 billion) to the U.S. gross domestic product (GDP) in 2011. The Department of Commerce found that in 2014, digitally delivered services accounted for more than half of U.S. services trade. The increase in digital trade also raises new challenges in U.S. trade policy, including how to best address new and emerging trade barriers. As with traditional trade barriers, digital trade constraints can be classified as tariff or nontariff barriers. In addition to high tariffs, barriers to digital trade may include localization requirements, cross border data flow limitations, intellectual property rights (IPR) infringement, unique standards or burdensome testing, filtering or blocking, and cybercrime exposure or state-directed theft of trade secrets. Digital trade issues often overlap and cut across policy areas, including IPR and national security; this raises questions for Congress as it weighs different policy objectives. The Organization for Economic Cooperation and Development (OECD) points out three potentially conflicting policy goals in the Internet economy: (1) enabling the Internet; (2) boosting or preserving competition within and outside the Internet; and (3) protecting privacy and consumers more generally. While no comprehensive agreement on digital trade exists in the World Trade Organization (WTO), other WTO agreements do cover some aspects of digital trade. Recent bilateral and plurilateral agreements have begun to address digital trade rules and barriers more explicitly. For example, the potential Trans-Pacific Partnership (TPP), Transatlantic Trade and Investment Partnership (T-TIP), and plurilateral Trade in Services Agreement (TiSA) are expected to address digital trade to varying degrees. Digital trade norms are also being discussed in forums such as the Group of 20 (G-20), the OECD, and the Asia-Pacific Economic Cooperation (APEC), providing the United States with multiple opportunities to engage in and shape global developments. With workers in the high-tech sector in every U.S. state and congressional district, Congress has an interest in ensuring the global rules and norms of the Internet economy are in line with U.S. laws and norms, and in establishing a U.S. trade policy on digital trade that advances U.S. interests.