U.S. Trade Rep. Katherine Tai spoke recently at a SeedAI event and had some interesting things to say about both online business models and digital trade regulation.
I'll start with a quote that reflects what she has said many times about sorting out domestic digital regulation before the U.S. negotiates these issues internationally:
It is my strong feeling as the trade representative that we have to exercise, and certainly from the trade perspective, an amount of executive restraint to let our legislators, our policymakers, to let our democracy decide what are the American values that are going to prevail in this moment of technology evolution that's defining not just how our economy works, but how our very society is going to evolve. At this point in time, trade needs to know its place. And that's not to say we should sit on our hands and watch the world go by. That means that we need to be actively engaging with all of the other policymakers, plugging ourselves in, listening, communicating with debates domestically, to be able to position ourselves for success.
I see her point here, but on the other hand, other governments are negotiating these issues internationally, and it seems like it would be valuable for the U.S. to be part of those conversations. It may be a while before U.S. policymakers resolve these issues domestically (and honestly, that may never happen!), and in the meantime I would think that whatever administration is in power would want to try to shape the international conversation.
Next up, she raises something that is near and dear to my heart, which is how to build online business models that work for both companies and consumers:
The issue of the business models of our technology companies, of the distributors and platforms and hosts for content creation and content distribution is, I think, creating some real questions around what interests this business model is serving. So, a business model oriented towards clicks, a business model based on what is now popularly understood and discussed as surveillance capitalism, is all about a business model that is generating profit based on data, the movement of data, the aggregation of data and what you do with people's data. I think that what is really interesting for me is to see how that business model is coming into contact and conflict with the business model of traditional media. And I'll just share with you, from our parochial vantage point of being USTR, recently just a week and a half ago, we were in Abu Dhabi for the 13th Ministerial Conference of the World Trade Organization. And we wanted to stay in good contact with the beat reporters who were going to Abu Dhabi with us, and as we were reaching out to the different outlets we were discovering so many of our beat reporters who have been laid off just in the past couple months, who were not available to come with us, and reading about what's happening at the LA Times, The Washington Post, The Wall Street Journal. There is a moment of comeuppance for the traditional media business model. So why am I tracking all of this? Because this relates directly to the impacts from what we might negotiate right now or what we need to negotiate in the future.
As someone who runs two online businesses, let me say that a model based on selling users' data is not something I would want to be a part of. You can't avoid collecting some data, in order to give users access, provide them with usage stats that they want, etc. But I'm not comfortable with selling data for profit, and I wish there were less of that generally on the internet. I understand that this model gives a lot of people access to information for which they don't have to make any direct payment, so there is value in it, but nevertheless I would like to see more companies explore approaches that avoid reliance on selling data. I appreciate Tai's comments on this issue, and it might be useful if there were a tech specialist of some sort in the Biden administration (or a future administration) who would focus on this issue and promote this message. I don't think they necessarily have to regulate here, but they can use the bully pulpit to get the message out.
Speaking of regulation, there was this question from the audience about the EU's Digital Markets Act:
Small businesses, as you're mentioning, in the app economy, they depend on tech platforms for several things, including access to a global market. In 2023 there was a report of foreign trade barriers and USTR identified the DMA, which took effect last week, as a potential barrier. There are some potential concerns about how the DMA could degrade platform services that a lot of small businesses in the US, small tech companies, depend on, including privacy and security. But I was just wondering as you prepare for the upcoming TTC meetings, if you intend to raise some of these concerns with European counterparts?
And here was Tai's response:
It's true that this was in the 2023 report as a potential barrier. And that does reflect our traditional approach to trade, which is to look at regulatory activities from other countries and just see how they might impact American company interests. I think that the DMA is a really, really good example of the cusp of change, and the cusp of increased nuance that we're bringing, especially to digital economy issues. When we're talking about the platforms, yes, I know a lot of small businesses have told me that the platforms are creating the entry point for them to connect with the global economy. And that's a wonderful thing. That's something that we should celebrate, because it is about opening up more opportunities, especially for the small and the medium companies. Here's the issue. Shouldn't we have more platforms then? Right? Shouldn't we have more opportunities like that? And I think the DMA's approach is to look at some of these platforms and to look at their role as what they call gatekeepers.
But as we're connecting the trade conversation with the competition and anti-monopoly conversation, the other way I might frame that is, some of these platforms serving as the holders of choke points, right? Being a platform like that, yes, when you're operating in the best possible terms, you're creating opportunities. But when there aren't enough of those types of platforms, what that means is those platforms have a lot of power to determine when and how those opportunities can be accessed by the smalls and the mediums. So that's an aspect of our trade policy that is in formation right now, which is to not rely on our old instincts of, well, what's the nationality of your company, and whose side I should be fighting on. Right now, the question that we're looking at is, what's the pro-democracy, pro-competition, pro-worker angle, and it is shifting the conversation that we're having.
I appreciate what the EU is trying to achieve here, but I'm not sure how helpful the DMA will be. My sense is that the EU's GDPR led to a lot of commercial and non-commercial sites forcing you to select your cookie setting every time you go to the site, and in my view that has been a huge negative. Will the DMA be any better at providing people with a good experience on the internet and on apps? We'll see how things play out. I tend to think improvements here are mostly up to us as consumers. If most people are willing to spend their time on "free" platforms, giving companies their data so they can sell it for profit, well, that's what the digital landscape will look like. Alternatively, we could put in the effort to do things like follow websites using their RSS feeds, switch to the emerging federated social media platforms, and pay for the services of companies that do not base their business model on selling user data. (And yes, I have a financial interest in people taking this approach, but beyond that I think it would make for a better online world!)
