North America’s digital trade framework may soon get its first reboot in more than a quarter century. Thanks to the United States-Mexico-Canada Agreement (USMCA), American businesses of all sizes, workers, entrepreneurs, developers, and content creators – in every sector of the U.S. economy – could soon be able to take advantage of the best digital trade agreement negotiated to date. USMCA breaks down barriers to digital trade while setting critical global precedents for future agreements. Congress should take swift action to pass USMCA as soon as possible.
When NAFTA entered into force in the 1990s, core parts of today’s economy – online marketplaces, the cloud, the app economy, the sharing economy, smart manufacturing, Internet of Things, precision agriculture, and data-driven machine learning – were mere science fiction. The word “internet” didn’t even appear in the agreement. We are overdue to modernize NAFTA.
The U.S. is the global internet and digital content leader. The internet supports over 3 million jobs across all sectors. In fact, approximately 60 percent of jobs in the U.S. created by digital services exports are in sectors outside of the tech sector like manufacturing, agriculture, and healthcare. American leadership is yielding new jobs, lower prices for consumers, seamless and innovative products and services, and advancements across all industries. This leadership translates into increased availability of U.S. goods and services across the globe, and the North American digital marketplace is a prime example of this success. Over the last 10 years, the U.S. digital trade surplus with Mexico and Canada has grown 64.4 percent, and now adds $19.2 billion per year to the U.S. economy.1
Strong provisions in USMCA will help to facilitate the free flow of information across borders, prohibit forced data localization, and establish robust intermediary liability protections that ensure internet services can both host and moderate content on their platforms. While USMCA is not perfect and could have included protections that recognize the critical importance of the fair use of copyrighted material, this agreement is a strong, decisive step towards securing America’s continued digital trade leadership.
U.S. digital exports support millions of American jobs and for every $1 million in U.S. digital service exports supports about 6 American jobs, according to IA research.
Specifically, USMCA will:
Protect the free flow of information across borders.
The internet is a borderless medium and the movement of electronic information enables virtually all North American commerce. Every sector of the economy relies on information flows. USMCA ensures that data can move safely throughout North America while recognizing governments’ ability to protect personal information.
Prohibit harmful data localization practices.
Requirements that force U.S. companies to store, process, or otherwise manage data locally hurt businesses of all sizes and threaten the open nature of the internet. Data localization mandates are increasingly cutting into U.S. job growth and compromising security. USMCA ensures that limits on where data can be stored and processed are minimized, enhancing cross-border access to digital products and services.
Establish robust intermediary liability protections.
Intermediary liability protections allow online services to host user-to-business communications, moderate content, and facilitate massive volumes of U.S. exports, especially by small- and medium-sized businesses. Intermediary liability protections support 425,000 U.S. jobs and $44 billion in U.S. GDP annually. Holding online services liable for content posted by third parties, including customer reviews or other user-generated posts, would severely restrict exports, while making it more difficult for platforms to evolve new approaches to address harmful online content. USMCA extends U.S. intermediary liability protections to Mexico and Canada.
Include important elements of the U.S.’s strong, innovation-oriented copyright framework.
The U.S. innovation-oriented copyright framework benefits consumers, protects creators’ legitimate rights, and enables new innovation – including through safe harbors provided for in the Digital Millennium Copyright Act (DMCA). This framework has been critical to the U.S. digital economy domestically and needs to be projected globally. USMCA establishes copyright safe harbors that provide clear intellectual property protections and predictability for consumers, creators, and innovative services. While this is a large and important step forward for any free trade agreement, USMCA includes only a portion of the core U.S. copyright framework. We hope, in the future, U.S. trade agreements also include key provisions in U.S. law like fair use-style rights that U.S. innovators and creators depend upon. Fair use laws underpin one in eight U.S. jobs, drive 16 percent of our economy, enable U.S. companies to earn $5.6 trillion annually, employ 18 million Americans, and generate $368 billion in exports each year. They hold the key to future U.S. innovation, including in areas like artificial intelligence.
Streamline some customs processes.
E-commerce is enabling millions of American small businesses exporters in ways impossible when the original NAFTA was negotiated. Complex laws and policies, though are slowing the speed of delivery, increasing costs, and compromising U.S. competitiveness – which in turn – prevents US companies from taking advantage of the benefits of e-commerce. Provisions in the USMCA Customs Administration and Trade Facilitation Chapter, including the $2,500 informal clearance threshold, have the potential – if implemented correctly – to break down these barriers in North America. However, IA urges the administration to refrain from seeking additional authority from Congress to unilaterally amend the current U.S. de minimis threshold. The U.S. should focus on ensuring Mexico and Canada fully implement the Customs Chapter and refrain from rolling back a critical policy utilized by small businesses.
Protect against threats to encryption and source code integrity.
Some countries force companies to disclose encryption keys or source code as a condition of market access. These measures – if left unchallenged – would compromise U.S. technology and hurt American exporters and users. USMCA limits governments’ ability to require disclosure of proprietary computer source code and algorithms, which better protects the competitiveness of digital suppliers without inhibiting specific regulatory proceedings.
Promote open access to government-generated public data.
Access to non-sensitive, federal public data in an open, machine-readable format will enable new innovation by making it easier for people and businesses to build new apps, improve machine learning models, and develop new tools to make data more useful. Machine-readable government data allows businesses of all sizes to contribute more to the nation’s economy by finding, analyzing, and building upon data in ways that would have been unimaginable when NAFTA first entered into force.
Congress can promote America’s global digital leadership by quickly approving this 21st-century agreement. IA looks forward to working with the administration during the implementation phase of USMCA. This agreement presents a real, critical opportunity to build on America’s competitive advantage in the digital sector, to the benefit of the entire economy.
- IA assumes Potentially ICT-enabled services (exports, imports, and balance) are the equivalent of digital trade. Data for 2007-2017 from Bureau of Economic Analysis, Table 3.3 U.S. Trade in ICT and Potentially ICT-Enabled Services, by Country or Affiliation.↩