As the global economy grows increasingly digital, official U.S. trade policy is apparently reverting to analog. In a confounding decision at the recent World Trade Organization (WTO) talks, the United States Trade Representative (USTR) withdrew key trade provisions that would establish ground rules for important twenty-first-century issues, such as cross-border data flows, data localization, and source code transfers.
This short-sighted decision risks undercutting America’s global technology leadership, stifling innovation and entrepreneurship, and handing China a crucial advantage at a critical juncture.
Digital trade is the lifeblood of the new economy, supporting millions of American jobs, accounting for 55 percent of U.S. exports of traded services, and contributing billions of dollars to our economy. Whether in finance, healthcare, manufacturing, retail, or transportation, digital connectivity enables companies large and small to access global marketplaces, collaborate across borders, and build the technologies of tomorrow.
For decades, the United States has led the world in innovation and has been at the forefront of the digital economy. This has been immensely beneficial to our businesses, workers, and overall economy. However, we cannot take our leadership position for granted. To ensure the United States maintains its standing, we must promote a fair and open global digital economy governed by rules that reflect our values and incentivize innovation and entrepreneurship.
That is why successive administrations—both Republican and Democrat—have rightly supported international rules enabling cross-border data flow, opposing mandatory local data storage, and preventing forced software source code transfers.
By retreating from these critical proposals, the USTR is undermining America’s position in shaping the digital rules of the road that will govern essential aspects of our economy. These rules will determine how data moves across borders, how businesses operate in the digital sphere, and how intellectual property is protected in the online world. The USTR’s decision to abandon these principles will leave the United States at a disadvantage in negotiating these crucial rules.
Without assurances of open data flows overseas, U.S. firms will face higher operational costs, narrower market reach, and diminished opportunities from stifled innovation. This hits small businesses and entrepreneurs especially hard since digital connectivity provides access to customers abroad. Data localization mandates likewise present security risks and costs because U.S. firms may be forced to duplicate costly data centers in every foreign country. Such requirements allow authoritarian regimes direct access to sensitive commercial data on American citizens and businesses. Forced source code transfers could also enable foreign actors, especially cyber thieves in adversarial nations, namely China and Russia, to exploit vulnerabilities and steal intellectual property.
The consequences of this move will be profound. Domestically, the USTR’s misguided decision could kill jobs, undermine innovation, raise prices for consumers, and hamper American businesses’ ability to grow and invest in communities.
From a broader strategic perspective, USTR’s actions could empower China to take a leadership role in the global tech race and author international standards that advance a very different vision for technology and society—one centered on censorship and authoritarianism.
Make no mistake, China eagerly awaits the openings this decision provides. Over the past decade years, Beijing has made it a top national priority to win the global tech race and pioneer the next-generation technologies, particularly AI, quantum computing, and biotechnology, which promise to fundamentally transform practically every facet of society. As such, they have engaged in espionage, and IP theft, while investing billions in state subsidies to bolster Chinese firms’ position, especially on next-generation technologies critical to economic and military power.
The USTR just gave these Chinese tech titans a big boost.
That is why we are coming together—as two former U.S. senators from across the political aisle—to sound the alarm and urge the administration to reverse course before it is too late.
This is not a political issue. This is about safeguarding the vital engine that drives our national security, our economic prosperity, and our values. We cannot afford to sit on the sidelines as the rules governing the economy of the future are shaped right before our eyes. Rather, we must do as we have done for decades and take our seat at the head of the negotiating table.
The administration will have an opportunity to do just that at the next upcoming U.S.-EU Trade and Technology Council (TTC). It is imperative that United States Trade Representative Ambassador Katherine Tai, Secretary of State Antony Blinken, and Secretary of Commerce Gina Raimondo use this gathering to re-declare America’s commitment to developing digital trade standards that protect our shared values of openness, accessibility, innovation, and freedom of expression.
The future of American power, prosperity, and technological prowess hangs in the balance.
Kent Conrad represented North Dakota in the Senate from 1986 to 2013 as a Democrat.
Saxby Chambliss represented Georgia in the Senate from 2003 to 2015 as a Republican.
Senators Conrad and Chambliss serve as advisers to the American Edge Project.