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Barriers to Digital Trade Demand Attention

· October 28, 2016

Yesterday the U.S. Trade Representative received input from stakeholders about trade barriers to U.S. exports, in an annual process called the National Trade Estimate Report.  This included comments from CCIA, identifying barriers to digital trade.

When soliciting input for this report back in July, U.S. officials inquired specifically about e-commerce, a growing part of the U.S. economy.  Internet-based trade represents an increasingly large component of U.S. trade, and in fact the U.S. is the largest exporter of services, which includes Internet services.  (The U.S. exported $688 billion in services in 2014).

The most recent report from March reflected a special emphasis on digital trade, addressing subjects like arbitrary obstructions to cross-border data flows in China, data localization mandates in Russia and Indonesia, and news aggregation fees in EU member states.  Recent research shows that problems such as these have worsened, highlighting the need for U.S. officials to focus additional resources on digital trade barriers and enforcement.

A recent Brookings Institution study estimated the global loss from Internet blackouts at $2.4 billion a year.  The Brookings research described how, for example, various countries block messaging apps to prevent political activists or protesters from communicating.  Independent of the burden this places on democratic discourse, these actions — often taken without legal process — also handicap service providers from reaching their users and consumers.  In fact, a Deloitte study released yesterday found that the single-day cost of an Internet shutdown in a high-Internet use country could exceed $23 million per every 10 million citizens.

Site- and service-blocking policies are the most obvious threats to Internet exports, but policies like data localization, which compel services to retain all data handled in-country for purposes of surveillance or law enforcement access, and taxes on linking and news aggregation in Europe represent similarly problematic barriers.  CCIA’s submission focuses considerably on problems arising in the EU, including a troubling proposal, covered previously by DisCo here, that would compel online services to monitor Internet users and mandate that they filter content.  This particular initiative, at odds with years of trans-Atlantic practice, presents Internet services with the choice of exiting the European market or facing crippling liability risks.

The largest growth opportunities for U.S. Internet companies are international markets, and barriers to entering these markets thus pose a threat to long-term economic growth in the Internet sector.  But more traditional companies utilize the Internet to reach customers as well, and threatens to Internet trade therefore pose a risk to the economy at large.

Digital Trade

Companies rely on clear, predictable rules that facilitate digital trade to export their products and services around the world. These rules include balancing the competing interests between encouraging investment and enabling information access; promoting the free flow of information online; and maintaining balanced intermediary liability regimes.