The U.S. made headlines last week by withdrawing some proposals it had previously made on specific aspects of the WTO Joint Statement Initiative on E-commerce negotiations. Many pro-trade people were upset by this decision, but for reasons I will explain below, I wasn't as bothered.
My first question here was, what exactly did USTR do and say? Here's the statement from the WTO e-commerce meeting that USTR sent me when I asked them:
Turning to the JSI, the United States continues to support a commercially meaningful agreement that provides benefits to workers, consumers, and small businesses participating in the digital economy, and that supports inclusivity by participation of developing WTO members.
It is essential that our approach to digital trade policy is grounded in how it affects our people, both as workers and consumers. We also must ensure that our policy takes into account these regulatory objectives, balancing the right to regulate in the public interest and the need to address anticompetitive behavior in the digital economy.
As we take these realities into account, the United States is mindful of ongoing global and domestic discourse on these important issues. We are currently conducting internal consultations on the U.S. approach to digital trade rules in sensitive areas such as data and source code. As these consultations proceed, we have had to take a pause on active engagement in these small group discussions.
Therefore, the United States is withdrawing our proposals and attributions on data flows, data localization, and source code. We understand these issues remain a priority for many in the negotiations.
The United States emphasizes our continued support for the JSI. We believe that many important issues have been and can be addressed, and would encourage JSI participants to focus on what can be achieved by the end of the year, and to drop proposals that have not achieved a sufficient amount of support. In that spirit, the United States will withdraw our proposal on non-discriminatory treatment of digital products.
We also remain committed to working with all Members to find a path forward on development provisions that provide targeted flexibility tailored to individual developing Members that allow them to take on board the JSI trade commitments.
I wish it were easier to find the details of what has been "proposed and attributed" previously on the issues in question (data flows, data localization, source code, and non-discriminatory treatment of digital products). If I'm using the WTO's DocsOnline database properly, the full list of documents from this negotiation is here, but only some of those documents are public. The only public communication I see from the U.S. is this one. A leaked consolidated text from December 2020 also has some details of individual country proposals, including from the U.S. (For comparison, you can see what the U.S. agreed to as part of the USMCA digital trade chapter here.)
Based on all of that, you can piece together a bit of what the U.S. proposed in terms of specific language and what it generally had in mind on these issues. When you do that, what I see is that you end up with a combination of obligations, exceptions that are specific to those obligations, and general exceptions, and I think it's fair to say that the precise mix of these that would have come out of the WTO JSI e-commerce discussions is uncertain, as is the impact these rules would have on domestic policy-making.
Let me illustrate this through an example from the USMCA. The main data flows obligation in Chapter 19 looks quite broad (although it's hard to say just how broad), going beyond nationality-based non-discrimination:
Article 19.11: Cross-Border Transfer of Information by Electronic Means
1. No Party shall prohibit or restrict the cross-border transfer of information, including personal information, by electronic means if this activity is for the conduct of the business of a covered person.
But there there's a specific exception:
2. This Article does not prevent a Party from adopting or maintaining a measure inconsistent with paragraph 1 that is necessary to achieve a legitimate public policy objective, provided that the measure:
(a) is not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination or a disguised restriction on trade; and
(b) does not impose restrictions on transfers of information greater than are necessary to achieve the objective.5
5 A measure does not meet the conditions of this paragraph if it accords different treatment to data transfers solely on the basis that they are cross-border in a manner that modifies the conditions of competition to the detriment of service suppliers of another Party.
And then on top of that specific exception, Chapter 32 includes the following general exception:
Article 32.1: General Exceptions
...
2. For the purposes of Chapter 15 (Cross-Border Trade in Services), Chapter 16 (Temporary Entry for Business Persons), Chapter 18 (Telecommunications), Chapter 19 (Digital Trade),2 and Chapter 22 (State-Owned Enterprises and Designated Monopolies), paragraphs (a), (b), and (c) of Article XIV of GATS are incorporated into and made part of this Agreement, mutatis mutandis.3
How do the obligation, the specific exception, and the general exception fit together? And how would they apply to actual regulations in this area? It's very hard to answer these questions, and I'm not sure anyone has a good sense of this.
That leads me to why I'm not more worked up about the change in the U.S. position. One thing I worry about with international e-commerce/digital rules is that we may carry over to digital trade some of the drafting and interpretive messes that exist in the GATT/WTO (and elsewhere) with (1) non-discrimination obligations, (2) obligations that go beyond non-discrimination, and (3) exceptions. Crafting rules for digital trade is a big deal, and it's worth spending some time thinking about the core principles of trade law and how we want them to apply here. How do we formulate non-discrimination obligations? When obligations go beyond non-discrimination, how much do they intrude into domestic policy-making? What do we think of necessity tests? These are conversations worth having, both as a general matter and in the digital trade context specifically. (I wrote about a couple aspects of the wording of the non-discriminatory treatment of digital products provision here and here.)
While I said I'm not as upset about these change in the U.S. position as others are, what I'd really like to see here are some U.S. proposals related to the questions I just asked. They may need some time to come to a view on this, but at some point these are the conversations that should take place. What would be great is some proposed text that comes with an explanation of the balance they think the specific language strikes between international regulation and domestic policy-making, and how and why the chosen language achieves the right balance.
