(Un)Holy Digital Alliances

The political background and substantive implications of the recent US reversal on market-opening digital trade policies are now emerging with greater clarity. And what a tangled web has unfolded, with dissemblance, bold assertiveness, cozy political dealings, and a casual relationship with facts all combined in a fascinating stew.

First, in the background, there is the outsourcing of digital trade policy from the Office of the US Trade Representative (USTR) to the Federal Trade Commission (FTC). This was not a hostile takeover: It turns out US Trade Representative Katherine Tai fully supports FTC Chairwoman Lina M. Khan’s neo-Brandeisian determination to rein in or break up Big Tech. In a speech last spring at the virulently anti-tech Open Market Institute, Tai identified USTR’s key mission as attacking entrenched private and monopoly power. While Tai signaled her support for the FTC approach in subsequent speeches and comments, the first actual move to upend US digital policy came in the October decision to withdraw from World Trade Organization discussions on e-commerce, vaguely at the time citing the need for “policy space.”

To review briefly, the US has supported the free flow of data and resisted data localization requirements back at least to the Obama administration, with the strongest language data liberalization rules negotiated by the Trump administration (with overwhelming bipartisan congressional support) in the US-Mexico-Canada Agreement (USMCA). It should be noted that the USMCA digital rules contain clear exceptions—largely ignored by opponents—for legitimate public policy regulations.

Though USTR initially downplayed the significance of the WTO ecommerce withdrawal and claimed (falsely) that Congress had been fully briefed, in recent weeks, USTR Tai has launched a full-throated defense of the action, asserting that previous administrations’ policies had “impoverished” American workers and without greater regulation digital trade rules would continue that trend. In attempting to distinguish Biden policy from Chinese state-dominated data resources, Tai argues that in the US, “All of the data that is created by all of us is captured and accessed by…a small set of extremely powerful, extremely rich companies.” Recently, she attended a competition policy forum in Europe where she praised Europe’s preemptive regulatory approach to digital policy. Back in the US, Tai is now arguing that US regulatory policy—privacy legislation, antitrust enforcement, and consumer protection legislation—must first precede further digital trade market-opening trade rules. As noted, this argument ignores the exceptions stipulated in the USMCA and that other nations have similar data flow and data localization protections that have not blocked domestic regulations. Tellingly, also despite substantial opposition to the progressive assault on Big Tech, no one has argued that the current USMCA language would stall US domestic regulation.

As for domestic alliances, it has become clear that the USTR, Tai, and her political staff have close ties with the progressive wing of the Democratic Party along with anti-global NGOs such as Public Citizen, Rethink Trade, and The American Federation of Labor and Congress of Industrial Organizations. On digital trade issues, USTR statements often reflect the negative arguments of these groups. This is not surprising, as key USTR staff and economic advisers have backgrounds in the labor movement, offices of congressional trade skeptics, and organization such as the Open Market Institute.

To be clear, elections matter, and there is nothing illegal or unethical about the intimate relations between USTR and Democratically-oriented trade skeptic interest groups. But from the free market digital perspective here, the united front described above constitutes a nest of vipers whose sting will degrade US digital competitiveness as long as infects US digital trade policy. Finally, it is ironic that the Biden administration, which proclaims championing the “little guy,” is taking a position that will hinder small and medium-sized businesses who—more than Big Tech—depend on an open internet and the free flow of business and financial information to compete in international markets.