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1 1 (March 16, 2023)

handle is hein.crs/govekxj0001 and id is 1 raw text is: Congressional Research Servio Informing the legislative debate since 1914 March 16, 2023 Digital Trade and Data Policy: Select Key Issues Background Digital trade refers to all forms of commerce conducted by electronic means and includes trade in both goods and services. The digitization of the global economy in the 21st century has facilitated traditional trade in goods by allowing businesses to access markets worldwide more easily in addition to generating trade flows in services sectors that businesses can deliver digitally (e.g., financial services) and creating trade in services integral to the digital economy (e.g., cloud computing services). The Biden Administration's policies emphasize addressing barriers to digital trade because cross-border data flows play a large role in facilitating trade and overall economic activity. Congress may consider setting negotiating priorities related to digital trade, in addition to implementing legislation related to data privacy, an important aspect of the digital economy. Because digital trade covers different methods of trading goods and services, its total value is not captured by one statistic. According to the U.S. Bureau of Economic Analysis (BEA), U.S. exports of one component of digital trade, information and communications technology (ICT) services-which consist of telecommunications, computer services and charges for the use of intellectual property- were $89 billion in 2021 (11% of total U.S. services exports), a 21% increase since 2016. Total U.S. services exports grew by only 1.5% during this time. U.S. exports of all services that can be delivered digitally, including business services, were $594 billion in 2021 (75% of total U.S. services exports), an increase of 33% since 2016. The digital economy is also growing quickly. The BEA defines the digital economy as consisting mainly of digital services (e.g., telecommunication, cloud, internet and data services), infrastructure (software and hardware) and e- commerce. The U.S. digital economy contributed $3.7 trillion to output (9% of total U.S. output) and employed 8 million workers (5% of total U.S. workers) in 2021, an increase of 36% and 11%, respectively, from 2016. Data Flows in the Digital Economy Cross-border flows of data are essential to the technologies used to digitally order and deliver both goods and services. A 2021 United Nations Conference on Trade and Development (UNCTAD) Report notes that in the digital economy everything is data; any activity on the internet can be digitized by converting it into binary code, and data flows are transfers of digitized activities. The majority of cross-border data flows are exchanges related to the operation of the internet. Only cross-border data flows that are commercial transactions are considered international trade. For example, the purchase and use of U.S.-based Amazon cloud computing services by a foreign company is a U.S. export of cloud services. Select Key Issues for U.S. Trade Policy The important role of data flows in all economic activity and the fast growing digital economy have created new types of trade barriers and policy questions, in addition to creating new areas in which countries can negotiate and set rules. Barriers to digital trade can directly affect e- commerce (e.g., limitations on cross-border credit card payments) or have broader implications (e.g., data privacy). Figure I. Digital Services Trade Restrictiveness Index for Select Key U.S. Trading Partners, 2022 4Less restrictive 0.0 a.1 More restrictive 0.2 03 0.4 CANADA 0 U.S. 0.O6 UK 1-106 SWITZERLAND I16 AUSTRALIA 0.06 MEXICO 0.03 JAPAN 0.13 MALAYSIA 0.13 THAILAND 0.14 VIETAM1 015 SINGAPORE 0.20 S. KORE 0.20 BRAZIL 0.221 *EU27, excIuding Bulgaria, Croatia, Cyprus Malta, and Romania where no data were available. 0.35 0.36 Source: CRS calculations using Organisation for Economic Cooperation and Development (OECD) data. The Organisation for Economic Cooperation and Development (OECD) Digital Services Trade Restrictiveness Index measures barriers that primarily affect e-commerce and digitally traded services in infrastructure and connectivity, electronic transactions, payment systems and intellectual property rights. According to the index, the United States is less restrictive in these barriers than all countries except Canada in a select group of key trading partners (Figure 1). Barriers to digital trade, however, also may have an impact beyond e-commerce. Such barriers affect data flows or privacy, digital platforms, or emerging technologies. A country's data governance regime captures the different policies that may impact the use and flow of data and, by extension, digital trade. When compared to its trading partners, the United States does not have some attributes of what some stakeholders view as a comprehensive data governance regime, such as a federal data privacy law and a

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