Testimony to the U.S. International Trade Commission on Digital Trade and the Moratorium on Digital Duties

October 6, 2020

My testimony will focus on the evolution and impact of U.S. trade policy as it relates to international e-commerce and digital trade and the challenges involved in trying to analyze and quantify the value of these provisions to the U.S. economy, especially as it relates to the moratorium on enacting duties on digital products.

 

At its beginning, the global digital economy was open to trading by default. Data and digital goods and services flowed freely. But it didn’t take long for countries to enact barriers (whether for economic, political, or social goals). Over time, an increasing number of countries came to realize that digital technologies and products are part of a fierce race for global innovation and technological advantage and they didn’t want to invest the time, resources, and expertise to help their firms and workers become more competitive and innovative—so they turn to digital protectionism. Service market restrictions, forced local data residency requirements, forced local staff and office requirements, and opaque and discriminatory digital content review processes are just some of the growing range of tools in the digital protectionist toolbox. These are the targets of U.S. trade policy.

 

Global digital trade has grown in size and importance despite the lack of clear, predictable, and enforceable rules under the various World Trade Organization (WTO) agreements, which remains largely anchored to tariffs and 20th-century trade in manufactured and agricultural goods and commodities. Yet, in agreeing to enact a moratorium on imposing customs duties on electronic transmission in 1998, WTO members showed considerable foresight in seeking to protect the (at that stage) nascent e-commerce sector by ensuring it’d remain free from tariffs. However, the moratorium needs to be renewed every two years and its opponents continue to question its true meaning. So the threat of digital duties remains.