[CTC] Sources: Digital trade deal under ‘serious’ interagency consideration

Wed Nov 3 07:12:29 PDT 2021

Sources: Digital trade deal under ‘serious’ interagency consideration
By Madeline Halpert, Inside US Trade 
11/2/2021

The White House is seriously considering a digital trade agreement in the Indo-Pacific region, increasing contact with domestic stakeholders and evaluating the scope of a potential deal, multiple sources tell Inside U.S. Trade, though the administration is taking a methodical approach before potentially embarking on negotiations.

While a digital trade initiative has been under consideration <https://insidetrade.com/node/172121> for several months, the administration recently has ramped up contact with domestic stakeholders and is seriously evaluating the pursuit of some type of agreement with Indo-Pacific allies, according to industry sources and analysts.

“My understanding is that it’s under serious interagency discussion and there’s outreach to important stakeholders to get input,” Wendy Cutler, vice president of the Asia Society Policy Institute and former negotiator at the Office of the U.S. Trade Representative, told Inside U.S. Trade.

A senior private-sector representative, meanwhile, confirmed that the administration has been seeking input from industry groups over the past month as it evaluates what priorities to pursue in negotiations, as well as how any digital agreement might fit with the Biden administration’s worker-centered trade agenda.

The specifics are still under interagency debate, the source added. The administration is mulling whether to take a regional approach -- to forge a deal with a small group of like-minded countries -- or to pursue several bilateral agreements with Indo-Pacific partners.

A bilateral approach, the source said, could resemble the digital trade deal the U.S. struck with Japan in 2019, or might take the form of new Trade and Investment Framework Agreements. USTR Katherine Tai in September said the agency was “intensifying” work under TIFAs <https://insidetrade.com/node/172274>, which she noted the U.S. has with a number of countries in the Indo-Pacific, including Indonesia, Taiwan and Vietnam.

Also up for debate is the timing, with some sources suggesting a deal might not be pursued until after next year’s midterm elections.

The White House, the senior private-sector representative added, is still trying to figure out who would steer the initiative. “There's an interesting set of players, and I think it's also not exactly clear where the lead will come from,” the source said.

The evaluation of a digital trade deal comes as countries in the Indo-Pacific region are becoming increasingly connected through trade agreements that do not include the U.S. The Association of Southeast Asian Nations as well as five regional partners in 2020 signed the Regional Economic Comprehensive Partnership, which includes China. And last month, China and Taiwan applied to join <https://insidetrade.com/node/172242> the Comprehensive and Progressive Agreement for Trans-Pacific Partnership.

This month, Beijing applied to join the Digital Economy Partnership Agreement, a non-binding digital trade agreement that includes Chile, New Zealand and Singapore.

The Biden administration has said it is not ready to consider joining CPTPP. President Trump withdrew the U.S. from the deal’s predecessor, the Trans-Pacific Partnership, shortly after he was inaugurated.

Cutler, however, said China’s push to join CPTPP should “light a fire under the administration” to come up with a “bold, market-opening, rules-based initiative” in the region, such as a digital trade deal.

The senior private-sector representative said the Biden administration has consulted “on and off” with Japan about what a digital trade agreement might look like. The White House also has talked with Singapore and Australia “a lot,” the source added.

Vice President Kamala Harris this summer traveled to Singapore to deepen engagement with the region, while Tai has discussed digital trade with Singapore Minister of Trade and Industry Gan Kim Yong, according to USTR. Australian Minister for Trade, Tourism and Investment Dan Tehan said he held talks in July <https://insidetrade.com/node/171910> with Tai as well as lawmakers about a digital trade agreement. He has offered Australia, Singapore, Japan, South Korea, Canada, New Zealand and Chile as potential candidates for an agreement.

USTR last week announced <https://insidetrade.com/node/172546> that Tai will head to Japan and South Korea the third week of November to “discuss the enduring U.S. commitment to the Indo-Pacific region and to strengthen trade and economic relationships with key allies and partners.”

The U.S. should consider allowing as “many different countries and economies as possible” to join a digital economy agreement, Victoria Espinel, the CEO of BSA | The Software Alliance, which describes itself as the leading advocate for the global software industry, told Inside U.S. Trade.

There is, however, a “logic” to beginning any digital agreement with allies in the Indo-Pacific that are also focused on the digital economy, said Espinel, who served as the first assistant USTR for intellectual property and innovation in the early 2000s. She would later serve as President Obama’s senior IP adviser.

The BSA | Software Alliance was one of more than a dozen groups, including the U.S. Chamber of Commerce, to sign a Sept. 10 letter <https://insidetrade.com/node/172176> to the Biden administration encouraging it to develop digital trade rules with trusted partners in the Indo-Pacific region.

Espinel said the Software Alliance in recent weeks has held conversations with a number of government agencies, including the Commerce Department and USTR, about a potential digital trade deal. But sorting out the details will take some time. “The administration is being thoughtful about this and is thinking about how to do this in the context of a durable trade policy agenda,” she said.

Others said an initiative probably would not get off the ground until after midterm elections.

A digital trade deal is likely to garner bipartisan congressional support <https://insidetrade.com/node/172498>, House Foreign Affairs Asia and the Pacific subcommittee Chair Ami Bera (D-CA) recently told Inside U.S. Trade. Bera contended that Congress might “take the lead” on the issue, putting pressure on the administration and potentially allowing it to move more quickly on a deal. He called a digital trade deal a “gettable” alternative to joining CPTPP.

China’s CPTPP application is “the elephant in the room” that should force the U.S. to take action, another industry representative said. “We have to be proactive and take leadership on economic and trade issues,” the source said, calling a digital trade deal a “no-brainer.”

A digital trade agreement could provide an opportunity to “go beyond” CPTPP, Espinel said, noting that several years have passed since TPP was negotiated. “Digital economy issues have continued to proliferate and move forward,” she said. “We think there is tremendous scope to go further than the digital sections of TPP.”

CPTPP as well as the digital chapter of the U.S.-Mexico-Canada agreement contain some “strong foundational principles” on data transfers and data localization, said Joe Whitlock, the director of policy at BSA | The Software Alliance and a former senior director for innovation and intellectual property at USTR. But the Biden administration, he added, has a “historic opportunity” to pave the way on new digital governance issues in trade agreements. He cited digital inclusion provisions, digital tools to address climate change and government access to data as “cutting-edge” areas where the U.S. could take a leadership role.

Any agreement also should include provisions on digital services standards, an area in which the U.S. is “being discriminated against,” said Christine Bliss, the president of the Coalition of Services Industries. “Let's create some disciplines themselves to put in the digital provisions to make sure that the standards are developed in a transparent and non-discriminatory manner,” said Bliss, a former AUSTR for services, investment, telecommunication and e-commerce.

The U.S. also could use a digital trade pact as an opportunity to “build trust” in the digital economy by ensuring adequate protection of personal data and developing an ethical governance framework for the use of artificial intelligence, she added.

Espinel said a failure to develop digital trade rules in the region would be a “significant missed opportunity” for the U.S. “It concerns me that if the U.S. doesn't act, and other countries do, then the U.S. is left behind,” she said. She also pointed to a “significant uptick” in government policies around the world that impede the digital economy, and the potential for more if the U.S. fails to act. A July report from the Information Technology and Innovation Foundation found that the number of countries with regulatory barriers obstructing the flow of data across borders almost doubled <https://insidetrade.com/node/171790> in the past four years.

One “need look no further than” RCEP, Whitlock said. He noted that the e-commerce chapter of the agreement does not punish countries for implementing measures that restrict cross border data transfers and other “predatory measures” in the digital space. Such rules, he said, provide “much less legal certainty” in a critical part of the digital economy.

“If the United States is not active in setting the rules of the digital economy,” Whitlock contended, “then others will fill the space with potentially other values.”

Arthur Stamoulis
Citizens Trade Campaign
(202) 494-8826

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