Last month, the US Trade Representative (USTR) announced a reversal of a long-standing US position in favor of stronger digital trade rules. As we’ve said before, this action hurts American workers, opens the door to unfair treatment of American companies, and threatens our global competitiveness.
These laws are designed to prevent foreign governments from unfairly targeting American companies. USTR’s shift sends a signal that Washington can no longer oppose such discrimination against American companies.
The main concern is that America’s small and medium-sized businesses will be hit hard. Let’s take a step back to identify the issue and why it’s so important to the success of small businesses in the US.
What is digital business?
Digital business is electronically enabled. In other words, anything facilitated by digital technologies is either digitally or physically delivered. For example, digital commerce includes the purchase of a paper book through an online marketplace and physical delivery, as well as the purchase and digital delivery of an e-book.
Why is it important for small businesses?
Digital business is opening up the market for US small businesses to grow their overseas opportunities thanks to e-commerce platforms and digital advertising tools that allow them to take advantage of the following.
Finding new customers through targeted online search and other tools;
Adoption of e-payment systems that ensure fast, economical and secure transactions;
Employ cloud technology that allows them to work with the complexities of major global businesses; And
Use shipping, customs clearance and fulfillment providers that enable you to ship products worldwide.
How will the USTR action affect small businesses?
Like large companies, small businesses with fewer products, service lines, and resources cannot afford the data environment, forced technology transfers, and arbitrary regulatory regimes of American companies.
Removing US support for fighting cross-border data restrictions would make it easier for other countries to impose forced localization or other measures on critical data flows. It also makes it harder for small businesses to move their data across borders.
Additionally, ending U.S.-backed source code protection would make it easier for adversaries to attack vulnerable businesses with cyber and intellectual property theft—a burden small businesses can bear.
Finally, weakening protections for American companies abroad encourages foreign governments to use discrimination as a way to generate revenue or achieve political goals—all at the expense of the American economy.
All of this comes at a time when global barriers — such as data environment measures and other regulatory restrictions — are increasing exports to the United States of digitally tradable services. Left unchecked, the proliferation of these restrictions will deprive American workers and companies of the benefits of exporting digitally tradable services.
According to a recent letter outlining the impact of the USTR decision on small companies:
“Leaving the negotiating table will weaken the global competitiveness of American startups and small businesses, and allow countries like China to remain at the table for leadership that is anti-democratic and oppressive, and directly contradicts the policies of the United States in the G7.”
Small and medium-sized businesses are resilient, but that doesn’t mean they’re immune to the effects of sudden policy changes. They don’t have to worry that the US government won’t have their back. USTR should restore America’s longstanding support for strong digital trade rules—for American businesses of all sizes.
About the authors
Isabel Ixo, director of international policy at the US Chamber of Commerce, advocates for the Chamber’s international trade and investment priorities before the administration, Congress and foreign governments.