Free Digital Trade Seen Requiring Focus on Data Localization, Beneficial Regulations

Ensuring digital trade is essential to promoting U.S. economic growth and trade talks, including renegotiations of existing trade agreements, should aim to raise the bar for those goods that are subject to customs and taxes, and push for beneficial approaches on data localization and cybersecurity, panelists said in a congressional hearing this morning. During a Joint Economic Committee hearing on the dynamic gains from free digital trade for the U.S. economy, Sen. Mike Lee (R., Utah), vice chairman of the committee, said, “We are swiftly approaching the point where the word ‘digital’ will be an unnecessary adjective for trade. Although, I’m sure trade lawyers will want to maintain the extra level of specificity for billing purposes.

“But we need to work both domestically and internationally to facilitate trade and innovation,” Sen. Lee continued.  “We should seek to ensure that sensible regulations and standards are put in place for the protection of intellectual property and private information.

“Congress has set clear priorities for negotiating trade agreements that can lower trade barriers for digital goods and services, and the Trump administration is pursuing those priorities in the current NAFTA discussions,” Sen. Lee added.  “It is critical for future U.S. economic success to ensure a regulatory setting in which innovators, entrepreneurs, and businesses can experiment with new technology and succeed in a global market.”

Sen. Lee asked panelists for recommendations on the top issues they would adopt to promote digital trade if given the opportunity.

Daniel Sepulveda, former deputy assistant secretary of state and coordinator for communications and information policy, said he would “advocate at every international gathering that data localization isn’t used in an anticompetitive manner.”  Bridging the digital divide, both abroad and within the U.S., is another top priority, Mr. Sepulveda said.

Nick Quade, general manager of the e-commerce division of Relay Networks, Inc., stressed the importance of raising the threshold for the value of individual shipments that are considered “de minimis” and exempt from custom, taxes, and entry documentation requirements to $800 from the current average of about $180.  “An $800 minimum threshold universally would be incredible,” Mr. Quade said.  “Not only would we be able to reach consumers, but we’d be able to reach business-to-business there too.”

Daniel Griswold, senior research fellow and co-director of the Program on the American Economy and Globalization at George Mason University’s Mercatus Center, agreed that a $800 de minimis threshold would be “great.”  But he added, “How do you get there?”  Most countries have a de minimis standard of less than $200, “so there’s some heavy lifting there,” he said.

Sean Heather, vice president of the Center for Global Regulatory Cooperation at the U.S. Chamber of Commerce, also recommended addressing regulatory issues around the world, citing the questions surrounding the proper path for regulating autonomous vehicles.  “Who’s responsible for pushing good regulatory frameworks for autonomous vehicles?” he asked.  “There’s a huge role here.  Once we’ve decided on a regulatory model that we think works here,” the U.S. should consider advocating it for the rest of the world.

In his prepared remarks, Mr. Heather also elaborated on concerns regarding data localization becoming “more prominent and problematic, limiting the ability of companies to move data.” Mr. Heather said that cross-border data transfers are “becoming just as important as the ability to move goods, services, or capital. Further benefits will not be realized if data does not have the ability to cross borders. Data localization requirements directly limit the movement of data. Some common requirements U.S. companies are facing include mandatory establishment of a data center or physical presence within a jurisdiction in order to operate as well as restrictions on how data can be transferred internationally.”

Meanwhile, Rep. Don Beyer (D., Va.) asked what digital trade issues U.S. negotiators should address in the renegotiation of the North American Free Trade Agreement (NAFTA) sought by the Trump Administration.

Mr. Heather said there are not a lot of significant barriers to digital trade with Canada and Mexico. “But there are always new questions, like cybersecurity and how cybersecurity regulations are being promulgated around the world,” he said.  There’s not a particular cybersecurity problem with Canada or Mexico, “but we do have an opportunity to get the rules right,” Mr. Heather said.  “It’s an opportunity to create a high standard that we’d like to see around the world.” —Brian Hammond

Courtesy TRDaily