[CTC] Could digital trade be an IPEF ‘early harvest’? For USTR, it’s complicated

Thu Sep 22 10:57:33 PDT 2022

Could digital trade be an IPEF ‘early harvest’? For USTR, it’s complicated
Inside US Trade, 9/21/22

While some members of the Indo-Pacific Economic Framework for Prosperity are eyeing an “early harvest” agreement focused on the digital economy, the idea presents a political quandary for the Office of the U.S. Trade Representative, as it could be seen as catering to large technology corporations rather than prioritizing the labor principles espoused by the administration, according to industry, civil society and labor stakeholders.

South Korean Trade Minister Ahn Duk-geun told Inside U.S. Trade earlier this month <https://insidetrade.com/node/174970> that the digital economy aspect of IPEF’s trade pillar was a key focus for members -- and a potential area for an initial deliverable. Malaysian Trade Minister Azmin Ali told Inside U.S. Trade he believed a deal including digital outcomes could be done within a year <https://insidetrade.com/node/174934>

USTR Katherine Tai, however, said on Sunday that speculation about potential early harvests was “premature <https://insidetrade.com/node/175011>.”

“We’re coming into this with a lot of ambition and ... a lot of motivation,” she added, insisting the U.S. would engage “robustly across all components of the trade pillar because all of them are important.”

“We will see just how fast we can get to our deliverables. We are focused on speed, agility, and also on being practical,” Tai added.
An early harvest deal could not be focused solely on digital trade, an industry source contended. “I think there would be a lot of resistance to that internally,” the source said, referring to the administration’s “current posture on trade.”

Some countries are eager to strike a digital deal early, according to two industry sources who said Australia, Singapore and Japan had pushed for a separate digital pillar in hopes of moving quickly in that area. However, one said, they ran into “strong resistance” from the Biden administration.

An early harvest digital deal could build on commitments the U.S. has made in previous trade agreements, according to Melinda St. Louis, the director of Public Citizen’s Global Trade Watch. However, she noted, some stakeholders are hoping instead that the administration will use the IPEF digital trade negotiations to establish a new paradigm.

“If they do an early harvest, my worry is that it would be just a cut-and-paste from previous agreements,” she said. “I would be concerned and skeptical if it’s about building on current agreements we believe have been influenced by big tech.”

St. Louis isn’t the only one talking about digital provisions already enshrined in trade deals. In suggesting that a digital deal could be in the offing, Ahn pointed to the participation of several Indo-Pacific countries in either digitally focused agreements like the Digital Economy Partnership Agreement, or trade agreements that contain digital elements, like the Comprehensive and Progressive Agreement for Trans-Pacific Partnership.

But Public Citizen and other civil society groups have been critical of provisions intended to ensure the free flow of data across borders, limit data localization policies, protect trade secrets such as source code and algorithms, and enshrine internet service liability protections like those in the controversial Section 230 of the Communications Decency Act.

The U.S.-Mexico-Canada Agreement included language that largely mirrored the controversial Section 230, which protects internet service providers from liability for third-party content. President Biden, however, has called for Section 230 to be reformed, a civil society source noted.

Also, while USMCA generally protects companies’ trade secrets, such as source code and algorithms, from disclosure, the Justice and Labor departments, for enforcement purposes, are seeking access to technology companies’ source code and algorithms, the civil society source continued.

Digital provisions akin to those in USMCA are antithetical to the administration’s worker-centric focus, according to Lori Wallach, the Rethink Trade program director at the American Economic Liberties Project. “If IPEF reuses the previous model of digital trade provisions, it will be strongly anti-worker-centric, as those past agreements are entirely rigged by big tech solely for the purpose of evading government oversight to stop their abuses of workers, consumers, and competing businesses,” she said.

Digital provisions in IPEF should instead represent a new, more inclusive model, a labor source said, and “that might not be compatible with an early harvest.”

A new kind of digital trade model must be in line with the worker-centric focus Tai and the Biden administration have emphasized, according to a civil society source. “It seems quite clear that there will have to be a new approach to be consistent with what this administration has been advocating,” the source said.

Digital provisions could be made worker-focused, argued Orit Frenkel, the co-founder of the American Leadership Initiative, a group that aims to craft policy solutions for “21st-century realities.” The main beneficiaries of a digital agreement would be small businesses, she argued. Large companies already are players in various IPEF markets, but small businesses don’t have the capacity to navigate 13 different regulatory regimes, she continued.

In conjunction with a digital outcome, companies could announce new worker training programs akin to the “upskilling initiative <https://insidetrade.com/node/174936>” the Commerce Department announced during the IPEF ministerial earlier this month. That initiative included 14 technology companies -- among them Amazon, Apple, Google and Microsoft -- that pledged to increase digital training opportunities for women and girls in the Indo-Pacific.

But that event stoked fears among civil society groups that technology companies are playing an outsized role in IPEF. Some unions viewed the announcement as companies’ “trying to train young women for their outsourced low-wage non-union … call centers,” the civil society source said.

Civil society groups, another source added, “were skeptical and concerned that this was potentially being sold as an incentive for countries to participate in IPEF, yet was giving a bigger role to private companies.”

The labor and civil society sources said that since the enactment of agreements like CPTPP and DEPA, public opinion in some U.S. partner countries has shifted against technology companies. “The ground has shifted in the last few years,” the labor source said. “A lot of folks are realizing the threats of a largely unregulated digital economy.” Governments, the source added, are looking to “recalibrate” their approaches to digital trade and take different stances that stake out more room for regulation.

Facebook’s January 2021 decision to temporarily ban news articles from its platform in Australia, and Google’s threat to block its service in the country -- in protest of an Australian law requiring that companies pay news publishers for content that appears on their websites -- led to the vilification of the companies there, the civil society source said. Accordingly, the Australian government is more in sync with the Biden administration on tech regulations, the source said.

A broader package
Both industry sources suggested that USTR should seek an early harvest package that goes beyond digital rules, with one specifying a broader package could include environmental and labor provisions or cover other priority issue areas. One said that an early harvest deal that included provisions on cross-border data flows or data localization would be difficult to negotiate, while other elements focused on e-commerce formalities and digital trade facilitation, for example, could be more attainable.

The labor community would oppose any effort to split off digital provisions via an early harvest deal, according to the labor source.

Provisions on digitizing customs processes, such as digital invoicing and electronic customs certificates, would be ideal inclusions in an early harvest outcome, Frenkel contended. Increasing customs digitization would facilitate trade and leave “less room for corruption” because of increased transparency, she said.

Some countries would not be able to meet those commitments immediately, Frenkel noted, advocating for a “two-tier” system that establishes transition periods and outlines how countries will eventually meet new standards.

Some developing countries have called for IPEF to include transition periods <https://insidetrade.com/node/174614>, but the idea has not been endorsed by all members. And without an agreement on transition periods, an early harvest might be off the table because of one of IPEF’s core tenets -- that participants in one pillar must meet all of the commitments of that pillar. This could prevent a subset of countries from moving forward on a digital deal, the labor source noted.

The ministerial statement
The ministerial statement <https://insidetrade.com/sites/insidetrade.com/files/documents/2022/sep/wto2022_0637a.pdf> the 13 participants of IPEF’s trade pillar issued at the conclusion of their first in-person ministerial earlier this month gives little hint to which way the administration is leaning on digital trade, according to industry, civil society and labor stakeholders.

The statement outlines broad negotiating objectives for “advancing inclusive digital trade” by “facilitating digital trade; addressing discriminatory practices; and advancing resilient and secure digital infrastructure and platforms.” The participants also promise to “promote and support, inter alia: (1) trusted and secure cross-border data flows; (2) inclusive, sustainable growth of the digital economy; and (3) the responsible development and use of emerging technologies.”

Global Data Alliance Executive Director Joseph Whitlock called it “encouraging” that the first listed principle was “trusted and secure cross-border data flows.” IPEF members should start with a baseline principle that data should be able to cross borders freely, he said, which is not at odds with other security provisions. “If a country does establish a policy measure that has an incidental impact on transfers, USMCA provides a roadmap for how to address that,” he added. The alliance is a cross-border group of companies focused on data standards and policy.

But the ministerial statement’s provisions did not alarm groups that have an opposing view of how IPEF should treat cross-border data flows. “I wouldn’t read too much into them,” the labor source said. “Governments prefer to start with these high-level commitments because it leaves room for everyone to participate in the negotiations.”

The statement, which “didn’t say any of that controversial stuff,” could be read one of two ways, according to the civil society source: As a high-level, non-controversial approach or the intentional avoidance of buzzwords that would spur a groundswell of civil society action against big tech. “Either way is equally feasible,” the source said.

One of the industry sources pointed out that the ministerial statement included a reference to addressing discriminatory barriers, which was not included in a draft statement leaked in July. The addition of that language was a positive, the source said, as were Tai’s opening remarks at the in-person ministerial, when she said the U.S. wants to “build connectivity and trust between key markets, including standards on cross-border data flows and data localization.”

“Obviously we would have liked to see something stronger,” the source said about the ministerial statement, including a reference to a moratorium on e-commerce duties. “But we get that they were working with 13 other countries and that there were certain practicalities about how high-level it has to be.” -- Brett Fortnam (bfortnam at iwpnews.com <mailto:bfortnam at iwpnews.com>)

Arthur Stamoulis
Citizens Trade Campaign
(202) 494-8826

-------------- next part --------------
An HTML attachment was scrubbed...
URL: <http://lists.citizenstrade.org/pipermail/ctcfield-citizenstrade.org/attachments/20220922/fed22d26/attachment-0001.htm>