China Gains as U.S. Abandons Digital Policy Negotiations
The future of U.S. global digital policy hangs in the balance following a shock decision by the office of the United States Trade Representative (USTR) that the United States no longer supports provisions that protect cross-border data flows, prohibit forced data localization, safeguard source code, and prohibit countries from discriminating against digital products in the World Trade Organization (WTO). The USTR’s previous position allows data to flow freely, with restrictions as the exception, in contrast to China’s position that seeks stricter control and oversight based on local law and regulation before allowing data to flow. While the difference between the two positions may have seemed rather technical, it served as the foundation for U.S. government support for an open Internet and digital economy. That foundation is now gone.
As Nigel Cory and Samm Sacks write in Lawfare, without U.S. support for trade commitments against data localization, U.S. policymakers and companies will have a harder time pushing back on localization requirements in countries where U.S. and Chinese firms are in fierce competition for market share.
The USTR’s decision has far-reaching implications for the future of governing the internet and data that will reverberate beyond the WTO and IPEF. The absence of U.S. advocacy for data flows sends the message to other countries that they can enact restrictions that will discriminate against U.S. firms—which undermines the U.S. economy and leadership in governing digital technologies.