US Trade Commission: TPP e-commerce rules “template” for future global agreements

Last week, the independent US International Trade Commission issued its long-awaited economic analysis of the proposed Trans-Pacific Partnership (TPP) agreement. Congress has mandated such reports for all US trade agreements. As in the past, the USITC’s assumptions and conclusions are based on solid, standard models for evaluating the economic impact of trade agreements. Aware, however, of the highly controversial issues surrounding trade policy and the deep division among US stakeholders and members of Congress, the commission’s analysis adopts very cautious, conservative estimates of economic gains and losses.

Overall, the headline estimates are that the TPP will produce “positive effects, albeit small” as a percentage of the total size of the US economy: By 2032, annual income would be $57 billion higher than baseline projections, and real GDP would be $43 billion higher than baseline projections. These would represent 0.23 percent and 0.15 percent of total US income and GPD, respectively. The other major economic study on this topic was published by the Peterson Institute. This study used less limiting but still widely accepted assumptions and found somewhat more positive results: US income gains of $131 billion by 2030.

Great praise for the TPP’s e-commerce chapter

Among other provisions, the TPP requires member governments to allow full cross-border transfer of information, bans forced localization of computing facilities and services, prohibits requirements to transfer technology as a condition of conducting business, and bans the imposition of customs duties or taxes on Internet traffic.

These provisions were well received by the USITC. In contrast to the caution in the overall conclusions, the commission was highly laudatory of the key elements of TPP’s e-commerce chapter. Its initial, brief press release for the study highlighted the new e-commerce rules as “vital to optimizing the global operations of large and small US companies in all sectors.”

In the full report, the commission further supplemented its austere economic conclusions with more detailed positive expository statements regarding the e-commerce chapter, including the following:

-“TPP’s provisions bearing on digital trade and Internet-based commerce, areas in which the United States has strong competitive advantages, are more wide-ranging than in any previous US FTA . . . The e-commerce chapter . . . serves as a template for future US and global trade agreements. This is especially true when this chapter is combined with other TPP chapters, including Cross-Border Trade in Services, Intellectual Property, Investment, and Customs and Trade Facilitation.” (pp. 345-346)

-“Manufacturing is one field to which the e-commerce chapter’s provision would be of increasing importance; the growing use of the Internet of Things . . . requires the free movement of ever-larger amounts of data, which would be protected under TPP . . . TPP’s e-commerce provisions would also be particularly important to [small and medium-sized businesses] that rely on Internet-based services to sell and source products and services around the globe.” (p. 349)

-“The United States is a leading global innovator and creator of digital products and content, and in analyzing, storing and managing data . . . TPP’s e-commerce provisions, including particularly those ensuring cross-border data flows and protecting against localization measures, will likely strengthen the competitive advantage the United States has in many digital sectors . . . More widely, TPP will likely benefit US businesses in all sectors with relatively higher levels of digital intensity. These include information and technology firms — such as cloud computing and storage services providers, producers of audiovisual products, and providers of streaming services — but also, increasingly, manufacturers, retailers, and other services providers that depend on  electronic commerce and the Internet as well.” (p. 354)

-“According to many observers, TPP’s e-commerce and other digital trade-related provisions are the most transformative measures in the agreement.” (p. 345)

Implications far beyond TPP

There is one other significant point to underscore that lies beyond the mandate of the commission: Timing is vital. While the report notes that the e-commerce chapter will form a template for future US trade agreements, the implications are much broader in the international arena. Legal principles and rules for the Internet are still in their infancy. If successfully ratified by the 12 members of the TPP, the regime created for e-commerce, international competition, and regulation will inevitably form an important baseline for future international law and custom.

One can only hope, finally, that a thus-far reluctant US Congress will educate itself to the far-reaching strategic fallout from walking away from the TPP and this seminal Internet framework.

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