The Office of the United States Trade Representative (USTR) recently stunned virtually everyone by pulling out of digital trade negotiations at the World Trade Organization (WTO). The decision was preceded by disagreements within the Executive Branch and left otherwise administration-friendly members of Congress apoplectic.
This is in addition to the fact that digital services exports accounted for more than 75 percent, or $594 billion, of all services exports in 2021, and supported more than 8 million jobs. Given the harm the decision will do to U.S. national security and economic interests, the only plausible interpretation seems to be that it is an expression of misguided ideology.
Officially, USTR explained the abrupt change in posture as necessary to provide “policy space” for domestic debates about digital regulation, including competition law, to unfold. But an even cursory look at subsequent statements from supportive members of Congress leave no doubt that the real reason was a desire to hobble “Big Tech.” Left unsaid – or unthought – is that the country that would stand to benefit the most from this is China. And look no further than the December 20, 2023 announcement that the WTO is close to formalizing digital trade rules that will support discriminatory data regimes globally and further cede U.S. leadership in this area.
Coming on the heels of the recently issued Executive Order on Artificial Intelligence, which again stressed the importance of U.S. leadership in global technology, pursuing a parallel policy seeking to undermine the very companies that the administration will be relying on to execute its AI strategy is mind-boggling.
Supporters of USTR’s unilateral move seem oddly obsessed with weakening digital trade rules in order to allow Congress maximum flexibility to shape domestic legislation and regulations as it sees fit. But that argument misunderstands foundational international trade rules and their interplay with domestic U.S. law. First, the rules on non-discrimination prohibit members of the WTO from discriminating against products or services originating in other WTO member countries. They have nothing to do with domestic legislation in the United States aimed at U.S. companies. Second, when writing legislation implementing trade agreements, Congress always includes language stipulating that, if there is a conflict between trade agreement provisions and U.S. law, U.S. law prevails.
All of the substantial pieces of U.S. legislation recently contemplated in the antitrust space, none of which seem likely to pass anyway, were directed at U.S.-owned companies. So, saying that there is a need for “space” for Congress to act is a red herring. Rather, the more likely reason animating efforts to weaken digital trade rules is an attempt to clear the way for foreign governments to discriminate, at will, against a handful of U.S. companies, as the Digital Markets Act, Digital Services Act, and Data Act in Europe do. But that is not an acceptable role for Congress or the administration to play.
The decision to walk away from previous U.S. positions in WTO e-commerce talks, of course, also follows the curious joint March 22, 2023, letter from the Department of Justice’s Antitrust Division and the Federal Trade Commission (FTC), where Assistant Attorney General Kanter and FTC Chair Khan reportedly sought to enlist the head of USTR, Katherine Tai, in their efforts to undermine a long-standing bipartisan agreement on the U.S. government’s approach to international rules on competition and digital trade.
While USTR consults with other federal government agencies, including the DOJ, on questions of trade policy through the Trade Policy Review Group, neither the FTC nor the DOJ have a formal role in the development of U.S. trade policy. And for good reason: their jurisdictions are focused entirely on the enforcement of domestic law. “The mission of the Antitrust Division is to promote competition by enforcing the antitrust laws…” And “[t]he FTC’s mission is protecting the public from deceptive or unfair business practices and from unfair methods of competition through law enforcement….”
Simply put, the Antitrust Division and the FTC have no more relevant expertise or experience related to U.S. foreign trade policy than USTR does when it comes to the enforcement of antitrust law. Curiously for a non-classified letter, the exact contents of Mr. Kanter and Ms. Khan’s missive have also been surprisingly hard to come by, which only adds to the impression that their efforts to meddle in U.S. trade policy were, at best, highly dubious.
The decision to abandon digital trade talks at the WTO was deeply misguided. Congress and the administration have plenty of room to explore ways to regulate in response to challenges posed by the digital transformation without undermining U.S. economic and national security interests. That the decision also left some of our closest allies in the lurch and emboldened China only compounds the seriousness of the mistake. It would behoove USTR Tai to reverse course posthaste. Absent that, President Biden must do it for her.
