Comparing the Digital Trade Provisions in the New U.S. Trade Deals
My series of posts comparing specific provisions across the Trump administration's Agreements on Reciprocal Trade got interrupted, but let me get back to it now, with a focus on certain digital trade provisions in the nine agreements for which we now have the full legal text. To keep this post manageable, I'm going to discuss only three of these provisions.
First up, these agreements all have a provision along the following lines about digital services taxes: The U.S. trading partner signing the agreement "shall not impose digital services taxes, or similar taxes, that discriminate against U.S. companies in law or in fact." So, no discrimination in digital services taxes. That's very clear. But wait, what do they mean by discrimination? Are we talking about a discriminatory effect or a discriminatory intent? Can legitimate regulatory purposes be taken into account in the analysis, and if so how? So actually, it could be a bit more clear.
Next is a provision on facilitation of digital trade, where discrimination is also a key aspect. The Malaysia agreement says the following:
Malaysia shall facilitate digital trade with the United States, including by─
(a) refraining from measures that discriminate against U.S. digital services or U.S. products distributed digitally; [7]
...
[7] For greater certainty, Malaysia has the right to regulate in the public interest.
The Argentina, Cambodia, El Salvador, Guatemala, Indonesia, Taiwan, and Ecuador agreements are basically the same but do not have the "right to regulate" footnote, for whatever that's worth (maybe not much). Bangladesh is the same as well, but for some reason only covers digital products and not digital services (also, it says "digital products" as opposed to "products distributed digitally" like the others).
As with the digital services taxes provision, we have the question of what exactly "discriminate" means in this context as well.
Finally, there are provisions related to these U.S. trading partners signing digital trade agreements with other countries. Interestingly, some agreements (Argentina, El Salvador, and Ecuador) don't address this issue at all. The rest of the agreements can then be put into two broad groups.
The Malaysia and Cambodia agreements require only that the trading partner "shall consult with the United States before entering into a new digital trade agreement with another country that jeopardizes essential U.S. interests"; the Indonesia agreement is similar but requires the possibly lesser "shall communicate."
Another group of agreements mentions the possibility of the following punishment for governments signing digital trade agreements with the wrong countries: The U.S. terminating the trade agreement and reimposing the IEEPA reciprocal tariffs. In this regard, the Guatemala agreement says that in the event "a new digital trade agreement with certain countries" is signed, the U.S. "may terminate this Agreement and reimpose the applicable reciprocal tariff rate set forth in Executive Order 14257 of April 2, 2025" (these tariffs, of course, have now been struck down by the Supreme Court in the Learning Resources case, and therefore would not be legal under domestic law, presumably excluding this as a U.S. response). The Bangladesh agreement is similar, but talks about "a country that jeopardizes essential U.S. interests," and requires consultations before imposing the duties. The Taiwan agreement refers to "a 'covered nation' as defined in 10 U.S.C. § 4872" and says the U.S. may "reimpose the applicable reciprocal tariff rate" but does not specify an EO as the other two agreements do.
What are the implications of all this trade deal language, with its variations? There has been a proliferation of domestic digital regulations and taxes in recent years, and there are some complex issues surrounding (1) whether these measures would violate non-discrimination or similar obligations in international agreements and (2) whether any relevant exceptions are satisfied. These issues are hypothetical at this point because we haven't seen litigation in this area, so it's not clear what real world impact the international rules would have on domestic policy. In the meantime, though, the Trump administration seems to be trying to prevent any international rules that it considers undesirable, mainly due to connections to China. To this end, it is using one set of international agreements to try to constrain another set of international agreements. How these international agreements interact with each other and with domestic regulations and taxes is going to be interesting to watch in the coming years.
The relevant provisions of the legal texts are below.
Article 3.1: Digital Services Tax
Malaysia shall not impose digital services taxes, or similar taxes, that discriminate against U.S. companies in law or in fact.
Article 3.2: Facilitation of Digital Trade
Malaysia shall facilitate digital trade with the United States, including by─
(a) refraining from measures that discriminate against U.S. digital services or U.S. products distributed digitally;[7]
...
[7] For greater certainty, Malaysia has the right to regulate in the public interest.
Article 3.3: Digital Trade Agreements
Malaysia shall consult with the United States before entering into a new digital trade agreement with another country that jeopardizes essential U.S. interests.
Article 3.1: Digital Services Taxes
Cambodia shall not impose digital services taxes, or similar taxes, that discriminate against U.S. companies, in law or in fact.
Article 3.2: Facilitation of Digital Trade
Cambodia shall facilitate digital trade with the United States, including by refraining from measures that discriminate against U.S. digital services or U.S. products distributed digitally, ...
Article 3.3: Digital Trade Agreements
Cambodia shall consult with the United States before entering into a new digital trade agreement with another country that jeopardizes essential U.S. interests.
Article 3.1: Digital Services Taxes
El Salvador shall not impose digital services taxes, or similar taxes, that discriminate against U.S. companies in law or in fact.
Article 3.2: Facilitation of Digital Trade
El Salvador shall facilitate digital trade with the United States, including by refraining from measures that discriminate against U.S. digital services or U.S. products distributed digitally, ...
Article 3.1: Digital Services Taxes
Guatemala shall not impose digital services taxes, or similar taxes, that discriminate against U.S. companies in law or in fact.
Article 3.2: Facilitation of Digital Trade
Guatemala shall facilitate digital trade with the United States, including by refraining from measures that discriminate against U.S. digital services or U.S. products distributed digitally, ...
Article 3.3: Digital Trade Agreements
If Guatemala enters into a new digital trade agreement with certain countries, the United States may terminate this Agreement and reimpose the applicable reciprocal tariff rate set forth in Executive Order 14257 of April 2, 2025.
Article 3.1: Digital Services Tax
Argentina shall not impose digital services taxes, or similar taxes, that discriminate against U.S. companies in law or in fact.
Article 3.2: Facilitation of Digital Trade
1. Argentina shall facilitate digital trade with the United States, including by refraining from measures that discriminate against U.S. digital services or products distributed digitally. ...
Article 3.1: Digital Services Tax
Bangladesh shall not impose digital services taxes, or similar taxes, that discriminate against U.S. companies in law or in fact.
Article 3.2: Facilitation of Digital Trade
1. Bangladesh shall facilitate digital trade with the United States, including by: (a) refraining from measures that discriminate against U.S. digital products; ...
2. If Bangladesh enters into a new digital trade agreement with a country that jeopardizes essential U.S. interests, the United States may, if consultations with Bangladesh fail to resolve its concerns, terminate this Agreement and reimpose the applicable reciprocal tariff rate set forth in Executive Order 14257 of April 2, 2025
Article 4.1: Digital Services Taxes
TECRO, through its Designated Representative, shall not impose digital services taxes, or similar taxes that discriminate against enterprises of the territory represented by AIT in law or in fact.
Article 4.2: Facilitation of Digital Trade
TECRO, through its Designated Representative, shall facilitate digital trade with AIT, through its Designated Representative, between the territories represented by the Parties, including by refraining from measures that discriminate against digital services or products distributed digitally of the territory represented by AIT, ...
Article 4.3: Digital Trade Agreements
If the authorities of the territory represented by TECRO enter into a digital trade agreement with a “covered nation” as defined in 10 U.S.C. § 4872, AIT, in consultation with its Designated Representative, may terminate this Agreement and reimpose the applicable reciprocal tariff rate.
Article 3.1: Digital Services Taxes
Indonesia shall not impose digital services taxes, or similar taxes, that discriminate against U.S. companies in law or in fact.
Article 3.2: Facilitation of Digital Trade
Indonesia shall facilitate digital trade with the United States, including by:
(a) refraining from measures that discriminate against U.S. digital services or U.S. products distributed digitally;
...
Article 3.3: Digital Trade Agreements
Indonesia shall communicate with the United States before entering into a new digital trade agreement with another country that jeopardizes essential U.S. interests.
Article 3.1: Digital Services Taxes
Ecuador shall not impose digital services taxes, or similar taxes, that discriminate against U.S. companies in law or in fact.
Article 3.2: Facilitation of Digital Trade
Ecuador shall facilitate digital trade with the United States, including by refraining from measures that discriminate against U.S. digital services or U.S. products distributed digitally, ...