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1 [1] (January 6, 2025)

handle is hein.crs/goverxj0001 and id is 1 raw text is: inform ng the Ieg sative deba since 1914 Updated January 6, 2025 Digital Trade and Data Policy: Key Issues Facing Congress Digital trade includes trade in all goods and services for which orders are placed digitally. E-commerce generally refers to digitally ordered goods. Services that are digitally ordered may also be delivered digitally (e.g., online banking) or provided through a subscription (e.g., streaming or cloud services). Cross-border data flows are essential to the technologies used to digitally order and deliver goods and services, and to many facets of the digital economy, including digital platforms. Because of this, much debate on digital trade is focused on data policy and technology. Issues facing Congress include approaches to data privacy, data localization, regulation of the technology sector, and the impact of foreign digital regulations on the U.S. economy. Congress could also consider legislation to encourage or require the executive branch to pursue certain objectives or respond to foreign regulation that impacts U.S. technology companies. Measuring the Dgnta Economy Output in the U.S. digital economy, consisting mainly of e- commerce, digital services (e.g., telecommunication, internet, and cloud services), and infrastructure (software and hardware), was $4.3 trillion (9% of the value of all goods and services produced in the United States) in 2022 (most recent data available), an increase of 42% since 2017 (Figure 1). As of 2022, e-commerce was the largest activity by output, while cloud services was the fastest growing. Figure I. Digital Economy Gross Output 5,000 $ in billions All Other Priced Digital Services 4000 . - Cloud Services l-nternet& Data Services 3,000 Hardware 4/ software 2,C0 070 Telecommunications Services 1,000 i E-Commerce 2017 2022 Source: CRS calculations using U.S. Bureau of Economic Analysis (BEA) data. Note: Excludes federal nondefense digital services due to their small size ($402 million in 2017 and $457 million in 2022). The total value of digital trade flows is difficult to estimate in part because official international trade statistics do not explicitly measure digital trade. Some measures of trade in digital services exist and provide insight into the growth of digital trade over time. The U.S. Bureau of Economic Analysis (BEA) tracks trade in services that could be delivered digitally, including telecommunications, business, and information services. U.S. exports of such services were $656 billion in 2023 (64% of total U.S. services exports), an increase of 31% since 2018. This growth outpaced the 19% growth in total U.S. services exports during this time. Some international organizations are discussing how to improve the accuracy of statistics on digital trade, including enhanced tracking of international business-to-consumer (B2C) or business-to-business (B2B) e-commerce and cross-border data flows (see text box). Cross-Border Data Flows vs. Digital Trade Most cross-border data flows are transfers of information between servers unrelated to commercial transactions. Digital trade involves the cross-border transfer of a good or service for money in a commercial transaction. Some cross-border data flows are digital trade (e.g., the online purchase of a dataset from a foreign company) or related to a digital trade transaction (e.g., data flows associated with international e- commerce). As a result, the treatment of cross-border data flows may impact digital trade. Digital trade is increasingly interconnected with data policy and regulation of emerging technologies (e.g., artificial intelligence) and digital platforms, both of which rely on cross-border data flows. U.S. Diga Trade and Data Policy Until 2023, the United States generally promoted the free flow of data in its free trade agreements (FTAs), with limited exceptions. The Biden Administration has reconsidered these policies. In fall 2023, the U.S. Trade Representative (USTR) withdrew support for provisions on cross-border data flows, data localization, and the transfer of source code in the Joint Statement Initiative (JSI) on E- commerce. The JSI, a plurilateral negotiation among 91 members of the World Trade Organization (WTO) who collectively account for over 90% of global trade, aims to establish rules on e-commerce that build on existing WTO standards and frameworks. A joint statement was released in July 2024 without the support of the United States and eight other members, despite the removal of the provisions the United States withdrew its support for in 2023. In 2023, the United States also suspended digital trade talks in the Indo-Pacific Economic Framework for Prosperity (IPEF). USTR Katherine Tai attributed these decisions to the need for policy space to address a lack of a domestic regulatory environment in the United States governing data flows and the technology sector. A coalition of technology companies that support more competition in the app marketplace praised the decision and urged the Administration to advance proposals that would regulate technology firms. Other industry groups across a range of sectors expressed concern with the potential for restrictions on data to harm American workers.

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