At the US International Trade Commission today, I testified on the need to include strong digital trade provisions among the early achievements in a US-Japan trade agreement before the US Trade Representative (USTR). The hearing examined US industry priorities to help inform the objectives for the upcoming trade negotiations.
As the first and third largest economies in the world, making up nearly a third of global GDP, the United States and Japan have an opportunity to set a new global “gold standard” for digital trade, consistent with BSA’s Digital Trade Agenda.
Core digital trade rules are paramount to the future of our digital economy. In areas including cloud computing, artificial intelligence (AI), and the Internet of Things (IoT), the United States and Japan are close allies with a long history of bilateral cooperation to drive growth, foster innovation, and cement US and Japanese leadership in emerging technologies.
In September 2018, USTR Robert Lighthizer and Japan’s Minister of Economy, Trade and Industry Hiroshige Seko agreed “to cooperate in facilitating digital trade and growth of the digital economy and to enhance business environments through the promotion of data security.” And as Prime Minister Shinzo Abe emphasized earlier this year in a policy speech before the Diet, Japan must be resolved to “fully mobilize all possible measures” to secure its future in relation to emerging digital technology, including IoT and AI. Negotiating an early outcome on digital trade is a crucial element of our two countries’ digital future.
Negotiating an early outcome on digital trade will also provide an alternative model to an emerging regional trend toward digital protectionism and isolationism. As reflected in our 2018 NTE submission, the Asia Pacific region has seen a proliferation of policies that disadvantage US and Japanese exporters and manufacturers. These policies have included data localization requirements, restrictions on cross-border data transfers, customs requirements on electronic transmissions, source code disclosure requirements, and forced technology transfer and indigenous innovation requirements, among other barriers to digital trade.
Digital trade is also a critical component of any goods-focused negotiation. Software, AI, IoT, and other emerging technologies, as well as the ability to transfer data across borders, are critical to US and Japanese global competitiveness in advanced manufacturing. Simply negotiating tariffs without protecting our shared digital trade priorities will leave our two countries exposed to digital protectionism that closes foreign markets to US and Japanese exports.
While ongoing discussions in multilateral fora like the G20, the Organization for Economic Co-Operation and Development (OECD), and the World Trade Organization can contribute to the issuance of political statements and gradual norms building, it is urgent that the United States and Japan take proactive steps to safeguard their shared strategic and economic interests through the early negotiation of binding, enforceable trade provisions that establish a new digital trade model for the world.
BSA appreciates the US government’s leadership on digital trade and looks forward to working with USTR on this critical issue. Thank you to USTR for inviting me to be part of the discussion. You can read my full testimony here.
