November 7, 2017 |

Barriers to digital trade threaten U.S. internet’s success abroad

IA recently completed its yearly assessment of barriers to digital trade that American exporters face around the globe. In comments to the Office of the United States Trade Representative (USTR), IA identified over 100 government measures in more than 40 foreign markets that are limiting, restricting, or outright blocking American internet-enabled exporters. Barriers to digital trade – including data flow restrictions, unbalanced copyright and liability regimes, restrictive regulation of online services, and a number of new emerging problematic foreign measures – continue to threaten American leadership on digital trade and the enormous potential of the digital economy.

The internet sector is a key driver of the U.S. economy, with internet industries representing an estimated 6 percent of U.S. GDP, totaling nearly $1 trillion. The industry now accounts for more than 10.4 million American jobs, 86 percent of which are outside major tech hubs. U.S. industries – small and large – once locked out of trade, are using internet-enabled tools to reach foreign markets and customers in ways never imagined, even a decade ago.

Yet as the internet becomes ubiquitous to trade, many countries are now taking starkly different approaches to the laws and regulations that affect the internet, creating conflict with the U.S. legal frameworks that have allowed digital trade to thrive. In just three years, there has been a significant drop-off in the number of the world’s top internet companies that are based in the U.S. To maintain U.S. leadership, IA encourages USTR to redouble efforts to preserve and expand the internet’s role as a key driver of U.S. exports, job creation, and economic development by making digital trade a top priority in the 2018 National Trade Estimate Report.

In this year’s comments, IA identified barriers to digital trade in key markets – from unbalanced copyright and liability regimes in the EU (including Spain, Germany, and France), Australia, Brazil, Colombia, India, and Ukraine to restrictions on U.S. cloud services providers in China, to regulations on so-called “over-the-top” (OTT) services in Brazil, Colombia, the EU, Ghana, India, Indonesia, Kenya, Thailand, Vietnam, and Zimbabwe. IA also highlighted a number of emerging measures governments are proposing such as local presence and/or partnership requirements and forced transfers of technology, encryption keys, source code, and algorithms that continue to act as burdensome market access barriers. These barriers often play a direct role in how IA members decide to expand in foreign markets, pursue new customers, expand operations, and decide to monetize products and services. In some cases, due to these barriers, companies have been forced to abandon key foreign market all together.

In addition to engaging directly with our trading partners on these barriers, IA believes USTR should use ongoing and future trade negotiations to fight for a clear set of rules for how governments treat digital trade. For example, updating NAFTA represents a once-in-a-generation opportunity to both establish common rules for the North American market and set the precedent for future U.S. trade agreements. With this in mind, IA strongly urges USTR to prioritize digital trade in NAFTA modernization talks by seeking strong commitments on data flows and restrictions on server localization; intermediary liability protections; customs modernization; and balanced copyright – including copyright safe harbors and limitations and exceptions for the digital environment – that reflect U.S. law. IA believes an updated NAFTA must benefit all U.S. stakeholders, not just some at the expense of others.

IA looks forward to working with USTR in the coming year to continue addressing foreign barriers to digital trade.

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