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​US boosted by digital trade but internet barriers remain

By: | at 12:40 PM | International Trade  

A new U.S. government report highlighted both the growing importance of digital trade to the United States and a long list of trade barriers that American internet and other online companies face around the world.

“The increase in digital trade is having a significant impact on the U.S. and global economy,” the U.S. International Trade Commission (ITC) said in the first of two reports on the issue requested by Senate Finance Committee Chairman Max Baucus at the urging of Senator Ron Wyden, both Democrats.

“This report shows that the digital economy represents an American trade advantage but it also identified barriers that are stifling further growth,” Wyden said.

As U.S. trade negotiators pursue free trade agreements in Europe and the Asia-Pacific region, “it is important that these barriers are addressed so that U.S. digital trade can reach its full potential as a driving force behind the U.S. economy,” the Oregon senator said.

The study comes as the United States is pushing in trade talks to open new markets for leading U.S. internet companies like Amazon, Apple, Facebook, Google and Microsoft, which have already helped make the United States the world’s largest exporter of digital services.

That has become more complicated after revelations that the National Security Agency was mining personal data from top U.S. internet companies including under a secret program named Prism.

The Washington-based Information Technology and Innovation Foundation this month estimated U.S. cloud computing providers could lose $21.5 billion to $35.0 billion in revenue over the next three years if foreign customers decide the risk of storing data with a U.S. company outweighed the benefits.

The German government responded this week to concerns raised by the Prism surveillance program by agreeing on initial plans to boost European technology companies and make them a more favorable alternative to U.S. peers.

In its report, the ITC acknowledged the difficulty of estimating digital trade because of the lack of a standard definition and shortcomings in available data.

But U.S. exports of “digitally-enabled” services, one measure of digital trade, totaled $356.1 billion in 2011, a 26-percent increase from $282.1 billion in 2007, covering areas such as financial services, retail services, professional services, healthcare, logistics and education, the ITC said.

Europe, with its strong internet infrastructure, is the most important digital trading partner for the United States and is also an important destination for U.S. digital trade-related foreign direct investment, the ITC said.

One impediment to increased trade are foreign government policies that compel digital companies to use local data servers, technology and inputs or that provide procurement preferences for local firms, the report said.

Many “localization” requirements are justified on data privacy grounds, and it is often challenging to determine whether they are imposed for that purpose or to favor the country’s domestic firms, the ITC said.

Different approaches to data privacy protection can also be an obstacle to trade, an issue that U.S. firms hope to address in talks with the 27-nation European Union on the proposed Transatlantic Trade and Investment Partnership pact.

In another area, U.S. music, book, software and movie companies view digital piracy of copyrighted material as their biggest obstacle to increased online exports, while “internet intermediaries” such as Google and Facebook are more concerned about foreign laws that could hold them liable for the actions of users on their networks.

In one instance, “the Italian government brought a criminal case against several Google executives for a video posted by a YouTube user that showed the bullying of a disabled student, despite the fact that Google had a notice and take-down system in place that resulted in the prompt removal of the video from the site,” the ITC said.

U.S. digital companies complain that censorship in countries including China, Vietnam and Saudi Arabia also hurts their business operations, as do restrictive immigration policies and complicated customs procedures, the ITC said. (Reuters)