The importance of digital trade to the U.S. economy is growing almost exponentially, but at the same time, countries around the world are erecting barriers to the flow of data across borders. This increasingly dangerous situation is a critical reason the U.S. must negotiate strong data flow provisions in the Trans Pacific Partnership (TPP) – an agreement that was high on President Obama’s agenda during his visits to Japan and Malaysia.
Despite this, it is not surprising that the president returned home with little visible progress on the trade agreement. Until Congress gives the administration effective negotiating tools through the Trade Priorities Act (TPA), we are unlikely to get the best deal for American businesses and workers. Without this legislation, the president can’t go to Congress for an up or down vote on TPP – sending a clear message to our negotiating partners that any deal they strike isn’t final. No country will put forward their best offer now if they expect the U.S. will return later with new demands.
The Chamber of Commerce says that within 10 years, “products and services reliant on cross-border data flows will add over $1 trillion annually to the global economy with the United States at the fore.” The Bureau of Economic Analysis estimates that between 1998 and 2010, information and communications technology-enabled trade grew at an annual rate of 9 percent, compared with 3 percent for all other services exports. Digital content and software publishers, movie and video producers, financial investment activities, and scientific research and development are all a huge part of this trade.
This trade is a fast-growing part of the economy, and it is fundamental to our economic future. In fact, the United States International Trade Commission reports that American exports of digitally enabled services grew from $282.1 billion in 2007 to $356.1 billion in 2011, with exports exceeding imports every year.
A key factor driving digital trade is the rapid transition to the cloud. Software companies increasingly use subscription-based Internet delivery models. As hard-copy delivery of software disappears, U.S. companies must have appropriate digital trade provisions in order to seamlessly deliver products and remain competitive.
“Big data” is also significantly changing the trade landscape by driving productivity growth and the development of new products and services. Data analytics, and the jobs flowing from big data collection and analysis, is becoming a major economic driver. But, as the Brookings Institution points out, “big data often requires aggregation and analysis across national borders.” As a result, anything that effectively reduces cross-border data flows undermines the full potential of data-driven innovation.
The critical goal on data flows is to ensure that governments refrain from implementing trade-related measures that impede digital trade in goods and service, restrict cross-border data flows, or require local storage or processing of data. Getting this done right, and getting it done soon, is essential – there are already a large and growing number of rules and restrictions around the world addressing cross-border data flows and storage.
With the flow of data increasing across borders, the concerns over protecting the ideas and innovation associated with those data flows are also accelerating. And they are significant concerns. Consider this: the last WTO “Trade Policy Review” of the United States reported that in 2011 the U.S. posted an $84 billion surplus in IP license trade, which includes the software that increasingly underpins modern economies. Data flows and IP protection are essentially linked as the U.S. seeks to achieve trade agreements that support our high-tech economy.
The agreements under negotiation – the TPP (TPP), the Transatlantic Trade and Investment Partnership (TTIP), the Trade in Services Agreement (TISA), and the Information Technology Agreement (ITA) are all economically ambitious for the U.S. According to the Peterson Institute, the TISA alone could increase our business services exports by $300 billion a year.
But first and foremost is the TPA – legislation that strengthens America’s negotiating position and ensures an appropriate focus on getting digital trade right. With it, we will be able to achieve trade agreements that help some of the fastest growing industries in the United States, create more high paying jobs here, and meet the demands of our high-tech, innovation-based economy.
Schonander is director of international public policy for the Software & Information Industry Association (SIIA), the principal trade association for the software and digital content industries. He worked at the U.S. State Department for 25 years, most recently as senior adviser for Europe, OECD and WIPO intellectual property affairs.