Chambers of commerce say USTR backtracking on digital trade, risking digital protectionism

The Arizona Chamber of Commerce & Industry and the U.S. Chamber of Commerce joined more than 150 state and local chambers, including 13 from Arizona, in calling on the White House to reverse course and support digital trade rules approved by Congress in previous trade agreements.

“Digital trade supports more than three million American jobs. Companies in diverse fields including services, manufacturing, arts and entertainment, and agri-business increasingly rely on the digital economy to find customers, sell goods and services, manage operations, coordinate research and development, strengthen compliance, and ensure secure payments,” the letter says.

“Over the years, the U.S. and its allies have negotiated agreements—including the United States-Mexico-Canada Agreement (USMCA)—to support mutually beneficial cross-border data flows and to defend against digital protectionism. These agreements protect American companies from unfair treatment.”

Reversing course at WTO

The U.S. Trade Representative at a meeting of the World Trade Organization last fall reversed previously held U.S. policy positions on digital trade, a move seen as a win for activists and policymakers who call for a heavier regulatory hand over the tech industry.

The U.S. had previously called for policies that encouraged the free, cross-border flow of data used by the private sector, and that would prevent countries from requiring firms to transfer software source codes or from discriminating against U.S.-made digital goods.

USTR Katherine Tai at the WTO meeting reversed course, however.

Opponents on the Hill

Business groups and some on Capitol Hill have expressed deep skepticism over USTR’s moves, including Senate Finance Committee Chairman Ron Wyden (D-OR).

“USTR’s decision to walk away from the negotiating table in Geneva is a win for China, plain and simple,” Wyden said last October following USTR’s announcement. “In addition to abandoning our democratic allies in these negotiations, USTR is leaving a vacuum that China—an active participant in these negotiations–will be more than pleased to fill. USTR’s action today is a win for the Chinese government’s efforts to have unlimited access to U.S. data, a win for Chinese tech giants who want to bully smaller countries into following the Chinese model of internet censorship, and a win for China’s Great Firewall, which locks out American companies and locks Chinese citizens into a repressive regime of government surveillance.”

Canada digital services tax

Also under the microscope is a digital services tax expected to be passed in the Canadian Senate this month.

According to the Computer & Communications Industry Association, Canadian Bill C-59 would impose a digital services tax of 3% on revenues from online marketplaces, online advertising, social media, and user data services. The DST would disproportionately harm U.S. businesses, costing U.S. businesses between $0.9 billion and $2.3 billion annually.

In a June 10 letter to Tai, the U.S. Chamber called on the Biden administration to seek relief via the dispute mechanisms under USMCA.

“Now that Canada is poised to pass this legislation, in the face of broad U.S. opposition, it is clear that a more robust response is called for—a response reliant on the trade tools you recently endorsed,” the U.S. Chamber said. “Specifically, we urge USTR to initiate formal dispute settlement procedures with Canada, beginning with consultations under the U.S.-Mexico-Canada Free Trade Agreement (USMCA).”

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