USTR to Scale Back Digital Trade Concerns in Annual Report

The Office of the U.S. Trade Representative is scaling back references to digital trade barriers and other regulatory actions in an upcoming annual report in recognition of the right of governments to regulate in the public interest, a spokesperson for the trade agency confirmed Wednesday.

By statute, the annual report, known as the National Trade Estimate on Foreign Trade Barriers, "is intended to identify significant barriers to trade," a USTR spokesperson said. "But over the years, it has evolved into a mechanism for our biggest corporate stakeholders to list any government action that they didn’t like."

"Under this Administration, the threshold for inclusion in the NTE is whether an issue is an effort to regulate in the public interest, and if not, whether that issue is a significant trade barrier, which applies equally to digital trade-related issues," they added.

The statement came in response to a tweet Wednesday morning from John Murphy, senior vice president for international affairs at the U.S. Chamber of Commerce, who expressed concern about this year's report, which is due out at the end of the month.

"Hearing multiple reports that USTR is scrubbing the annual NTE to cut references to foreign digital trade barriers and instances of digital discrimination against US firms," Murphy wrote on X, formerly known as Twitter. "If true, it's another damaging retreat—and a threat to the 3m Americans whose jobs depend on digital trade."

The more than 450-page 2023 report contained the word digital 170 times and also listed digital trade and e-commerce as one of 14 areas of foreign trade barriers. As examples, it listed barriers to cross-border data flows, including data localization requirements, discriminatory practices affecting trade in digital products, restrictions on the supply of Internet-enabled services and other restrictive technology requirements.

Since then, USTR has been increasingly at odds with the business community over its approach to digital trade. Last fall, the administration withdrew support for longstanding U.S. positions promoting free data flows and other provisions amenable to American tech companies in talks on a plurilateral e-commerce agreement at the World Trade Organization.

However, a person close to the administration, who spoke on condition of anonymity to discuss administration deliberations, noted that U.S. Trade Representative Katherine Tai signaled a new approach to the topic as far back as November 2021 in a speech on digital trade.

One of the key questions facing policymakers, Tai said in that speech, is "how can we balance the right of governments to regulate in the public interest with the need for rules that guard against behavior that discriminates against American workers and businesses?"

Against that backdrop, the upcoming foreign trade barriers are expected to be a more "nuanced" approach, instead of simply assuming a foreign data localization requirement is "bad," the person said. "It's not going to be black and white anymore," they added.

In addition, USTR is taking that approach to many of the regulatory trade barriers that have been listed in the report in the past in recognition of the Biden administration's desire to leave other governments the policy "space" to regulate, the person said.

Over the years, the NTE has become "bloated" and "stuffed" with regulatory barriers, so it makes sense now to scale it back to reflect the Biden administration's different approach to trade policy, the person said.

Nigel Cory, associate director for trade policy at the Information Technology and Innovation Foundation, called USTR's move "disappointing and highly misguided" and said it would compound concerns overseas about the U.S.'s approach to data flows and a free and open internet.

"All this lends itself to helping China advocate for its preferred restrictive and protectionist approach to data flows and digital trade," Cory added.