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The Worrying Prospects for Digital Trade under President Trump

Jan 17 , 2017
  • Susan Ariel Aaronson

    Research Professor of International Affairs, Elliott School of International Affairs, GWU
In the early days of the web and e-commerce, the Clinton administration recognized they had to figure out a strategy to reconcile the internet, which is global, with laws and regulations, which are domestic.  Instead of demanding negotiations for shared global rules, administration officials put forward a set of principles, which they called the Framework for Global Electronic Commerce. These principles would allow policymakers around the world to collaborate  to keep the internet trustworthy, stable, and open, and to be technologically neutral as the platform evolved over time and space.   
1. The private sector and market forces, not government mandates, should determine the internet’s development;
2. Governments should refrain from imposing new and unnecessary regulations or new taxes;
3. Government intervention should be minimal and consistent, primarily directed towards building trust, protecting privacy, and maintaining security online;
4. Governments should recognize the unique qualities of the internet including its decentralized nature and its tradition of multi-stakeholder governance rather than statist control;
5. Given the internet’s global nature, governments should work internationally, preferably through trade agreements, to govern e-commerce and information flows.
The framework was and remains a huge success: it facilitated internet stability, digital trade, and economic growth. Moreover, it had a significant influence on how other nations governed this shared platform. However, a Trump administration could put this all at risk because Trump and his team want to focus less on trade expansion and more on bilateral negotiations, trade enforcement, and protectionism.
In the twenty years since the framework’s release, policymakers have adhered to many of its principles. The George W. Bush and Obama administrations fought state control over the internet and helped the internet economy grow. Policymakers in many nations generally recognize that the private sector should take the lead in internet innovation, and many governments have established laws to maintain trust and stability online. The 164 members of the WTO agreed that trade agreements are an appropriate venue to govern e-commerce while government officials have included language governing cross-border information flows in many recent agreements.
The framework helped many U.S. companies prosper. Firms such as Alphabet (Google’s parent company), Amazon, Apple, Facebook, and Microsoft are not only global trade behemoths, but are some of the most valuable companies in the world. Yet economists have found that 75 percent of the value created by the internet and technology sector is captured by companies in traditional industries such as textiles, steel, or chemical manufacturing which embrace digital trade to connect with new customers and suppliers in markets around the world. 
The framework also helped citizens and companies around the world profit from digital technologies, changing both who trades and as well as how people and firms trade. According to the WTO, the global market in ecommerce was worth over $12 trillion in 2015.  Exports of computer and information services are the fastest growing sector of trade, averaging 18 percent growth from 1995-2014.  In 2014, approximately 12 percent of global trade in goods was conducted via an e-commerce platform like Amazon, Alibaba, or eBay. By relying on these platforms, anyone with a connection can sell goods and services online at any time. With more competition, the costs of goods and services have declined, allowing more people to reap the benefits of trade. Moreover, the internet has enabled more individuals to create their own jobs, whether driving for Lyft or Uber, renting rooms for Airbnb, or doing part time work found on Amazon Mechanical Turk or other sites.
However, the election of Donald J. Trump as president threatens to undermine US support for the framework that US policymakers created. The President-elect doesn’t seem to understand the internet’s role in economic growth, why an open internet is important to that growth, and how trade agreements help stimulate such growth.  As example, at a 2015 rally, he was quoted as saying that he would talk with Bill Gates about “closing that internet up in some ways.” The president-elect’s embrace of protectionist policies and rejection of the TPP, the first international trade deal with binding provisions for digital trade, are a worrying sign of his administration’s potential views.   
Yet digital trade and the digital economy are particularly important to the United States. In 2014, the US International Trade Commission estimated that digital trade’s combined effects of increased productivity and lower trade costs increased U.S. real gross domestic product (GDP) by $517.1- $710.7 billion  (some 3-5%), and increased U.S. aggregate employment by 0.0 to 2.4 million full time jobs (an estimate of 0-1.8%)  In 2015, the US exported over $385 billion in digitally enabled services—one measure of digital trade—or some 54 percent of U.S. services exports that year alone. 
President-elect Trump aims to increase the growth of the U.S. economy to 3 to 4 percent annually while stimulating domestic employment. The Trump Administration will be unable to meet these goals unless officials find a way to encourage and foster the internet economy and digital trade. The framework provides a roadmap to do just that. 
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