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1 1 (December 03, 2020)

handle is hein.crs/govdcrl0001 and id is 1 raw text is: * ~ ~ tiE>sct~rch $3c ~ .................... Updated December 3, 2020 Digital Trade Background The rapid growth of digital technologies in recent years has facilitated economic activity and created new opportunities for U.S. consumers and businesses. For example, consumers today access e-commerce, social media, telemedicine, and other offerings not imagined 30 years ago. Firms of all sizes and in every industry use digital services and technologies to drive internal efficiencies and better compete globally. For example, businesses use advanced technology to reach new markets, track global supply chains, analyze big data, and create new products and services. At the same time, new technologies raise new trade policy issues, including the lack of common disciplines to help govern such trade, the emergence of diverging standards and new trade barriers, and broader public policy questions about online information, all issues of active congressional interest. Data and data flows form a pillar of innovation and economic growth. Trade in manufactured goods and agricultural products often depends on cross-border data flows. For example, manufacturers may communicate with global customers and suppliers via the internet. Farmers may use real-time satellite data to optimize the productivity of crops and soil. Digitally-delivered service exports also rely on cross-border data flows. According to the Bureau of Economic Analysis, in 2018, U.S. exports of information and communication technology (ICT) goods and services were $148 billion and $80 billion, respectively. In addition, exports of potential digitally- enabled services were $499 billion, comprising over half of U.S. services exports. The volume of global data flows is growing faster than trade or financial flows, and its positive gross domestic product (GDP) contribution offsets the lower growth rates of trade and foreign direct investment (FDI). The Coronavirus Disease 2019 (COVID-19) pandemic has highlighted the importance of digital trade in the global economy (see Text Box). Digital Trade and COVID-19 The COVID-19 pandemic, with social distancing enforcement, lockdowns, and other measures, has led to spikes in digital trade, both business-to-consumers and business-to-business. The increases reflected a surge in online shopping, social media use, internet telephony, teleconferencing and teleservices (such as education and medicine), and streaming of videos and films. The World Trade Organization (WTO) noted that the pandemic has underscored the importance of digital technologies in general, but also vulnerabilities, including the digital divide, and trade barriers across the globe. In general, the United States supports an open, secure, interoperable, and reliable internet, including the free flow of online information. However, some Members of Congress and industry stakeholders raise growing concerns about the rise of digital trade barriers, divergent rules, and national standards around the globe that could impair U.S. digital sales or undermine U.S. technological leadership. Protectionist policies may erect barriers to digital trade, or damage trust in the underlying digital economy, and can result in the fragmentation of the internet or discriminatory trade treatment. As with traditional trade barriers, digital trade constraints can be classified as tariff or nontariff barriers and take many forms (see Text Box). What some policymakers see as protectionist, however, others may view as necessary to safeguard certain domestic policy interests. Prominent trade issues include Internet Sovereignty. In some nations, the government seeks strict control over digital data within its borders, such as what information people can access online, and how information is shared inside and outside its borders, creating digital trade barriers. For example, firms operating in China experience a variety of barriers, such as censorship (the so-called Great Firewall), requirements to use local standards, and national security reviews; Russian laws ban virtual private networks and require providers of encrypted messaging services to potentially share users' chats. Localization and Cross-Border Data Flow Limits. Organizations seek efficiency and market access by freely moving data across national borders or by using cloud services. Regulators seeking to promote security and personal data privacy, or support domestic firms, may enact mandates for local data storage or use of local partners or inputs, raising costs for foreign firms. A 2017 survey by the U.S. International Trade Commission (USITC) found that data localization was the most-cited policy measure seen to impede digital trade. For example, the European Union's data protection regulation places limits on the use and cross-border transfer of individuals' personal data while China's Cybersecurity Law restricts cross-border data transfers and broad-based data localization mandates. Cybertheft or Forced Technology Transfer. Infringement of intellectual property rights (IPR) or lack of IPR enforcement may limit a company's ability to benefit fully from its innovations and investments, such as trade secrets, proprietary algorithms, or source code. The costs associated with IPR infringement in the digital environment are difficult to quantify but are considered to be significant, potentially exceeding the volume of sales through traditional physical markets or legitimate downloads. Regulatory Issues. Governments may impose requirements deemed overly burdensome by firms and which increase costs, or that favor local firms. Regulations may be applied, for example, in a discriminatory or overly trade-restrictive manner, creating a trade barrier for foreign firms. For

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