New Report Calls to Create U.S. Digital Single Market

October 7, 2019

WASHINGTON—As cities and states across the United States pass new laws and regulations aimed at the digital economy, each new layer of rules creates more conflict and complexity for businesses. To create consistent national rules, a new report from the Information Technology and Innovation Foundation (ITIF), the world’s top-ranked think tank for science and technology policy, recommends the United States establish a digital single market—a national market for digital goods and services free of artificial barriers. Achieving a digital single market will either require states to cooperate more on creating uniform laws or Congress to take a more active role in passing laws that preempt conflicting rules. The report examines case studies in data privacy, taxes, net neutrality, money sending, and telehealth, and calls on states and Congress to take specific steps to develop a digital single market for the United States.

“When it comes to the digital economy, a standard set of rules is far better than a disjointed thicket of laws. National rules promote efficiency and innovation, while ensuring uniform protections for all consumers,” said ITIF Senior Policy Analyst Alan McQuinn, lead author of the report. “It is the responsibility of Congress to work with states and where necessary establish national rules preempting state and local governments.”

States and localities have created multiple barriers to digital commerce through restrictive licensing, conflicting rules, and policies that benefit local incumbents at the expense of innovative market entrants. These effects are clear in areas such as data privacy, taxes, net neutrality, money sending, and telehealth.

To create a U.S. digital single market, the report makes the following recommendations:

  • States should enter into multi-state compacts that create national legal standards where they have common goals;
  • States should create reciprocity agreements when they cannot agree to the same rules;
  • When states cannot agree on a common path forward or establish reciprocal agreements, or in areas where it is easier to create a top-down national framework, Congress should pass federal legislation that preempts states and local governments from creating conflicting rules; and
  • The Federal Trade Commission and other relevant federal regulators should do more to identify and challenge state and local barriers to a U.S. digital single market, and they should use every tool at their disposal to create rules to unify digital regulations across the United States.

“Congress should not abdicate its responsibility to protect interstate commerce,” said ITIF Vice President Daniel Castro, co-author of the report. “The United States is trying to compete with China and the Europe Union, two places that have made substantial progress in integrating their internal markets, and U.S. businesses will fall behind if they are faced with an increasingly fragmented market for digital goods and services.”

Read the report.