Jonathan (Josh) Kallmer photo
The United States is Poised to Lead on Digital Trade

Digital technology drives global commerce. It ensures payments happen on time and in the right amount. It keeps farms yielding abundantly, factories working efficiently, and trucks running smoothly. It allows stores to track and manage inventory seamlessly. But to grow and thrive in the modern economy, businesses need trade rules that protect their operations and address today’s digital reality. The United States can show global leadership and establish the gold standard for 21st century trade by passing the United States-Mexico-Canada Agreement (USMCA).

The USMCA sets a new and important precedent for modern trade rules that reflect the importance of data, technology, and innovation in the United States – and the North American – economy. Its landmark digital trade provisions foster technological advancement for American companies of all sizes and industries and solidify North America as the destination of choice for cutting-edge technology development, manufacturing, and delivery.

The USMCA promotes the seamless flow of data across borders. This is essential to the vibrancy of the international economy and ensures American businesses and entrepreneurs can easily access data and provide services to partners in Canada and Mexico. The agreement also allows companies to store their data wherever they choose, leveraging the global, interconnected nature of the internet and lowering unnecessary costs and regulatory burdens – especially for U.S. small businesses expanding into new markets.

The agreement establishes important measures to support American companies that deliver or rely on digital services. It eliminates requirements for companies to share source code, encryption keys, or algorithms as a condition for doing business, protecting the valuable trade secrets that make American companies competitive internationally. It also prevents costly tariffs and taxes on technology products and services on which companies across sectors rely. In addition, the USMCA ensures that value-added services, like online media or communications offerings, won’t be subject to legacy telecommunications regulations that hamper the ability of companies to provide innovative messaging or video streaming services that consumers demand.

The USMCA also creates consistency in testing and certification procedures for tech goods in the North American market and promotes the use of international standards for devices and other equipment, cutting red tape for U.S. exports. These provisions will significantly reduce regulatory burdens on companies by easing delays at the border and duplicative or costly local testing, both of which make American-made products less competitive and digital technologies less accessible for consumers.

Beyond its protections for digital technology, the USMCA preserves the United States’ economic relationship with Canada and Mexico – two of its most important relationships. Canada and Mexico are the United States’ largest and second largest export markets, and the North American trade relationship supports over 14 million American jobs. Ensuring the United States can continue to invest in, manufacture for, and export products to Canada and Mexico is essential to maintaining the significant degree of commercial integration in North America and safeguarding the daily operations of thousands of U.S. companies, small and large, across all sectors.

Ratification of the USMCA would be a boost for the American economy and bring predictable rules for all companies that use digital technologies in North America. That said, in order for American companies and consumers to fully benefit from the agreement’s high standards, it is critical that the three countries do not implement the USMCA in a way that reduces or negates the parts of the agreement that most facilitate trade. As part of this, and to avoid causing significant harm to American consumers and small businesses, it is critically important that no changes are made to the existing U.S. de minimis threshold as a result of implementation of the USMCA in the United States. The administration must also include details on how it plans to apply the agreement’s technical aspects and work with Congress to ensure its provisions are fully and consistently enforced.

The United States has an important opportunity to continue to be the world’s leader in global commerce by passing the USMCA. We urge the administration and Congress to work together to do so.

Public Policy Tags: Trade & Investment