Opportunities and Challenges for Trade Policy in the Digital Economy (U.S. Senate Committee on Finance, Subcommittee on International Trade, Customs, and Global Competitiveness)

Hearing	Opportunities and Challenges for Trade Policy in the Digital Economy
Committee	U.S. Senate Committee on Finance, Subcommittee on International Trade, Customs, and Global Competitiveness
Date	November 30, 2022

 

Hearing Takeaways:

• Digital Trade: The hearing focused on the topic of digital trade and its growing importance in international trade agreements. While there was not a singular definition provided for the term “digital trade,” there was general agreement that the term encompassed cross-border data flows and the use of digital technologies, including cloud computing and artificial intelligence (AI), for enabling trade. Mr. Feith remarked that digital trade was fundamentally different from the trade of physical goods because countries had less control over the dissemination of information and digital goods.
  • Impact of Digital Trade: Subcommittee Members, Ms. Bliss, and Dr. Meltzer stated that digital trade was a key driver of economic growth for the U.S. and supported a variety of industries beyond the technology sector. Mis. Bliss also asserted that digital trade had played a key role in enabling many U.S. businesses to weather the COVID-19 pandemic. 
  • Impact on National Security: Subcommittee Members, Ms. Bliss, Mr. Feith, and Dr. Meltzer raised concerns that foreign adversaries (particularly China) would employ digital trade policies to advance their own global priorities and to weaken the U.S. They argued that the U.S. must be cognizant of these threats and seek to incorporate American values into international digital trade agreements. Mr. Feith warned that the Chinese Communist Party (CCP) viewed data as a critical input for global power and would therefore employ digital trade to collect and harvest data from around the world.
  • Impact on Workers: Mr. Woodall expressed concerns over how trade had impacted workers in traditional industries. He stated that cross-border digital commerce had offshored tens of thousands of U.S. jobs. He further remarked that digital trade supports automated decision making and algorithmic management software that increasingly hires, controls, evaluates, monitors, and fires workers in the U.S. He asserted that these technologies could shortchange the earnings of workers, expose workers to unsafe conditions on the job, infringe on the right to form unions, and exacerbate employment discrimination. He remarked that the U.S. would therefore need to protect workers from the downsides of digitization and provide workforce development opportunities. 
• Digital Trade Policies: Subcommittee Members and the hearing’s witnesses expressed interest in current opportunities to develop digital trade policies through Congressional resolutions, trade agreements under consideration, legislation, and other policy tools.
  • Bipartisan Resolution Supporting Digital Trade: Subcommittee Chairman Tom Carper (D-DE) and Sen. Todd Young (R-IN) mentioned their efforts to develop a bipartisan and bicameral resolution advocating for the U.S. to work with its allies to establish “forward looking” digital trade policies. Ms. Bliss thanked the Senators for their work on this resolution.
  • The Indo-Pacific Economic Framework (IPEF): A key area of interest during the hearing was the current IPEF negotiations. IPEF is a recently launched initiative meant to establish baseline principles across members in various policy areas, including trade policy. Subcommittee Members and the hearing’s witnesses expressed interest in using IPEF to ensure that American values informed digital trade rules in the Asia-Pacific region. They stated U.S. influence in this region was key to counteract Chinese pressure on digital trade issues. Dr. Meltzer highlighted how many IPEF member countries were signatories of the Regional Comprehensive Economic Partnership (RCEP). He commented that RCEP included many loopholes and exceptions that enabled China to pursue restrictive internet policies and control data flows. Ms. Bliss suggested that IPEF could serve as a vehicle for the development of a AI best practices and principles, a commitment to worker upskilling within the digital area, the inclusion of tools for small businesses, a promotion of digital inclusivity, and actions to address censorship. 
  • The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP): Subcommittee Ranking Member John Cornyn (R-TX) and Ms. Bliss expressed interest in having the U.S. join the CPTPP and suggested that IPEF could position the U.S. to join this agreement. Dr. Meltzer mentioned how China was seeking to join the CPTPP and warned that China’s membership in that agreement could enable it to influence future digital trade policies.
  • The U.S. Department of Commerce’s Information and Communications Technology and Services (ICTS) Regulatory Framework: Mr. Feith expressed support for the U.S. Department of Commerce’s new ICTS regulatory mechanism for reviewing cross-border data flows. He explained that this mechanism would gather expertise from all of the relevant parts of the Executive Branch to assess the national security implications and risks associated with cross-border data flows. He stated that the ICTS regime is particularly focused on cross-border data transfers involving the U.S. and foreign adversary countries (including China and Russia).
  • Preservation of the Moratorium of Duties on E-Commerce: Subcommittee Ranking Member Cornyn and Ms. Bliss expressed support for preserving the current moratorium on e-commerce duties as part of its international trade negotiations. Ms. Bliss commented that a permanent moratorium would particularly benefit small businesses and warned that a lapse of this moratorium could undermine the ability of small businesses to import and export products and services.
  • Need to Address AI Issues in Digital Trade Agreements: Ms. Bliss, Dr. Meltzer, and Mr. Woodall expressed interest in having the U.S. address AI issues as part of its digital trade policy. They highlighted how China was seeking to export its AI regulatory framework to other countries. They raised concerns that China’s approach to AI regulation posed threats human rights and labor rights.
  • Need to Address Employer Surveillance in Digital Trade Agreements: Full Committee Chairman Ron Wyden (D-OR) and Mr. Woodall expressed concerns that many U.S. trading partners (including India, Vietnam, and Indonesia) were increasingly employing surveillance tools to monitor worker communications, eliminate dissent, and prevent the formation of labor unions. Mr. Woodall called for U.S. action to address this surveillance.
  • Support for Small Businesses: Subcommittee Chairman Tom Carper (D-DE) and Ms. Bliss expressed interest in policies that would support small businesses in accessing foreign markets. Ms. Bliss mentioned how the U.S. government and private sector maintained facilitator laboratories that provided startup companies and small businesses with digital tools, including AI systems and cloud technologies. She suggested that public-private partnerships could be used to provide this support.
  • Use of Broadband Infrastructure Support as a Negotiating Tool: Dr. Meltzer noted how much of the world currently lacked sufficient broadband infrastructure. He suggested that the U.S. could increase its support for the development of broadband infrastructure in other countries as a means to advance its digital trade policy objectives.
  • Digital Authentication and Digital Identification (ID) Policies: Dr. Meltzer also remarked that policies that recognized the legitimacy of electronic signatures were essential for enabling international trade. He also stated that digital trade rules should address digital authentication and digital ID issues and commented that these rules could enable more seamless online communications.
  • Customs Reforms: Dr. Meltzer further suggested that the U.S. pursue increases in de minimis customs duty levels around the world. He also recommended that the U.S. consider reforms to customs procedures to ensure that small businesses could sufficiently navigate the customs process.
• Concerns Over Digital Trade Agreements: Sen. Elizabeth Warren (D-MA) and Mr. Woodall expressed concerns that digital trade agreements could be used to weaken U.S. oversight of technology companies and national sovereignty more broadly.
  • Reduced Oversight of Technology Companies: Sen. Warren and Mr. Woodall raised concerns that large technology companies were seeking to influence the rules in digital trade deals so that they could prohibit governments from taking actions to oversee them. They noted how trade deals could prevent countries from enacting laws to review source codes for the purposes of guarding against bias. Ms. Bliss disputed the assertion that large technology companies were controlling the U.S.’s digital trade policy agenda and contended that the development of strong digital trade rules would benefit large and small companies across a variety of industries.
  • Reduced National Sovereignty: Sen. Warren and Mr. Woodall also raised concerns over the ability of countries to enact legitimate policies that might not be in accordance with international trade agreements. They noted how these policies could include protections for personal data and prohibitions on anti-competitive platform practices. Mr. Woodall noted that the World Trade Organization (WTO) had upheld under 5 percent of challenged regulations using necessary and legitimacy-type tests. He predicted that it would be even more difficult for protections to survive legal challenges in the digital space. He commented that the regulatory infrastructure and foundation needed to defend the legitimacy and necessity of regulations in this space was very limited.
• Other Policy Topics: The hearing considered additional policy topics and proposals that were not specific to digital trade agreements.
  • Proposal to Ban TikTok: Mr. Feith argued that the U.S. ought to ban TikTok. He asserted that China was currently using the platform to harvest large amounts of data from Americans, transmit favored messages to users, issue censorship guidance, and influence young Americans. He also stated that the threats posed by Chinese platforms were not limited to TikTok. He highlighted how TikTok’s parent company ByteDance had a new virtual reality company called Pico and noted that Pico had ambitions for the U.S. metaverse market. He further mentioned how there were a wide range of social media, payment, and other platforms that come from China. He stated that the aggregate nature of the data being collected from these platforms could pose threats to the U.S.
  • Foreign Tracking of Health, Genomic, and Medical Data: Subcommittee Members and Mr. Feith expressed concerns that the U.S. had failed to protect against the foreign collection of health, genomic, and medical data. Mr. Feith expressed concerns that Chinese companies (including WuXi AppTec and BGI) are expanding their operations within the U.S. and indicated that these companies were responsive to the requests of the CCP and Chinese military. He asserted that these data collection efforts were part of China’s efforts to become the global leader in data analytics capabilities. Sen. Elizabeth Warren (D-MA) also expressed concerns that large technology companies were working to collect this sensitive health data form U.S. consumers so that they could resell the data to interested buyers. She suggested that that the U.S. would want to impose limits on the transfers of sensitive data to countries with poor data protections. 
  • Chinese Involvement in Innovative Technology Companies: Mr. Feith further raised concerns over Chinese involvement in U.S. drone, autonomous vehicle (AV), and digital mapping companies. He warned that these companies could export the data that they collected within the U.S. He also highlighted how China had engaged in intellectual property (IP) theft and had posed threats to telecommunications infrastructure both domestically and abroad. He called on the U.S. to take more forceful actions to address the threats posed by this Chinese involvement in the critical technology industry.

Hearing Witnesses:

1. Ms. Christine Bliss, President, Coalition of Services Industries
2. Mr. David Feith, Adjunct Senior Fellow, Indo-Pacific Security Program, Center for a New American Security
3. Dr. Joshua P. Meltzer, S.J.D., Senior Fellow, Global Economy and Development, Brookings Institution
4. Mr. Patrick Woodall, Policy & Research Director, AFL-CIO Technology Institute

Member Opening Statements:

Subcommittee Chairman Tom Carper (D-DE):

• He remarked that the hearing would seek to understand what digital trade is, explore why digital trade is important to the U.S., and identify opportunities for U.S. partnership with allies on digital trade issues.
• He discussed how digital technologies and the internet had transformed the U.S. economy and cited the near ubiquity of smartphones as evidence of this trend.
  • He commented that digital connectivity often made it easier, faster, and less expensive to trade goods and services across the world.
• He stated that digital innovation had revolutionized nearly every industry, which has resulted in the growth of internet-enabled trade of goods and services.
• He noted how the real value added for the U.S. digital economy had grown by an average annual rate in excess of 5 percent between 2005 and 2019.
  • He indicated that this 5 percent annual growth rate had outpaced the 2 percent annual growth rate for the U.S.’s overall economy.
• He stated that the COVID-19 pandemic had accelerated the growth of the U.S. digital economy through causing people to stay home and use the internet to access medical services, stream content, and book vacations.
• He remarked that the U.S. digital economy’s growth was benefiting consumers and spurring job creation.
  • He highlighted how the U.S. digital economy enabled small businesses to easily sell their products and services globally.
• He also stated that the Committee must consider how digital trade impacts U.S. national security.
  • He mentioned how foreign adversaries (including China) were currently employing digital technologies to advance authoritarianism and to crack down on freedom of speech and human rights.
• He remarked that the U.S. had an opportunity to develop international rules for digital trade that would be reflective of American values.
  • He commented that the U.S. had negotiated ambitious rules for digital trade through the U.S.–Mexico–Canada Agreement (USMCA) and an agreement with Japan.
• He mentioned how he had worked to develop a bipartisan and bicameral resolution advocating for the U.S. to work with its allies to establish “forward looking” digital trade policies.
  • He also expressed his interest in working with U.S. Trade Representative Katherine Tai and the Biden administration to address digital trade issues as the Office of the U.S. Trade Representative (USTR) negotiates IPEF and other digital trade agreements.

Subcommittee Ranking Member John Cornyn (R-TX):

• He remarked that the Subcommittee was focused on the threat that China poses to U.S. national security through its “weaponization” of trade. 
  • He asserted that China had failed to adhere to international trade rules set forth by the WTO.
• He expressed concerns over recent reports that the U.S.’s European allies might retaliate for provisions included within the recently passed Inflation Reduction Act of 2022.
  • He contended that the threats posed by the CCP and Russia made it even more important for the U.S. to maintain a strong relationship with its European allies.
  • He called on the Biden administration to limit the trade ramifications stemming from the Inflation Reduction Act of 2022.
• He then remarked that protectionist trade policies had historically harmed the U.S. and asserted that the U.S. should not pursue such policies.
• He advocated for the U.S. to join the CPTPP and called the U.S.’s decision to walk away from the agreement a mistake.
  • He mentioned how this topic had been a top issue of conversation during his recent official visit to Japan.
• He criticized the Biden administration for failing to reopen negotiations on the CPTPP and stated that the U.S. should now look towards developing sectoral specific free trade agreements.
  • He specifically suggested that the U.S. consider a free trade agreement that was focused on digital trade.
  • He noted how Congressionally-approved free trade agreements were insulated from domestic political pressure, provided long-term certainty for businesses, and reinforced the U.S.’s relationships with allies.
• He then highlighted how China had employed censorship as a barrier to digital trade.
  • He stated that China was currently weaponizing its digital infrastructure against its own protesting citizens as a form of retaliation.
• He further expressed interest in defining digital trade and noted how there were underlying physical elements for all digital items.
  • He asserted that semiconductors served as the physical elements that underlaid digital trade and suggested that the U.S. consider semiconductors as part of its digital trade conversations.
• He also expressed interest in exploring how digital trade agreements helped to solidify the U.S.’s relationships with its allies against the threat posed by the CCP.
• He asserted that any digital trade agreement between the U.S. and other countries ought to include provisions that incorporate disciplines on semiconductors.
  • He indicated these provisions should include the incorporation of semiconductor incentives, harmonization of export controls regarding China, and supply chain resiliency.
• He stated that the U.S. should work to identify common areas of agreement amongst business, labor, and national security stakeholders in its development of digital trade policies.
  • He commented that these areas of agreement could involve opposition to both data localization requirements and forced technology transfers.
• He also argued that there should be no taxation of electronic transmissions across borders or requirements for data centers to be located in a given nation.

Witness Opening Statements:

Ms. Christine Bliss (Coalition of Services Industries):

• She noted how the members of her trade association, the Coalition of Services Industries (CSI), include distribution, logistics, financial services, professional services, and information and communication technology (ICT) services companies.
  • She indicated that these member companies included manufacturers of consumer technology, telecommunications equipment, and health and nutrition products.
• She remarked that the digital economy did not exclusively provide benefits to the information technology (IT) sector and contended that digital technology provided benefits to a wide range of companies and sectors.
• She contended that the U.S. must address growing digital protectionism abroad through “high ambition” trade initiatives that include binding and enforceable digital disciplines, removals of discriminatory barriers, and promotions of economic inclusivity.
  • She commented that the U.S. should particularly focus on these initiatives in the Indo-Pacific and Europe.
• She discussed how the digital economy impacted all aspects of American life and noted how the digital economy in 2021 had generated $3.7 trillion in gross output, over 10 percent of total U.S. gross domestic product (GDP) and had supported 8 million U.S. jobs.
  • She highlighted how many white collar and blue collar U.S. jobs now require digital skills and called it critical for workers to receive digital training to take advantage of these job opportunities.
• She remarked that digital trade was a key source of resilience during the COVID-19 pandemic and mentioned how digitally traded services exports had increased by $74 billion between 2019 and 2021.
  • She noted how service exports in some other sectors had declined over the same period.
  • She further commented that Delaware’s services exports in 2021 had exceeded their 2019 levels due to digitally tradable exports (including financial and insurance services).
• She noted how one-third of small businesses had indicated that they would not have survived the pandemic without access to digital tools.
  • She specifically highlighted how cloud services had enabled manufacturers to continue their operations during the pandemic and how telemedicine had enabled the health care industry to expand its reach.
• She further stated that the digital economy enabled the proliferation of small business in a variety of sectors, including auctioning, life sciences, marketing, and insurance.
• She remarked that good digital trade policy would promote American values (including democracy and freedom) and warned that China and other authoritarian regimes were imposing their own rules for digital trade.
  • She commented that these alternative rules were incompatible with American values and present national security concerns.
• She stated that like-minded trade partners should be working to defend democratic values through a rules-based trade system that adheres to longstanding norms of non-discrimination and openness.
  • She commended Subcommittee Chairman Tom Carper (D-DE) and Sen. Todd Young (R-IN) for their bipartisan resolution that encouraged cooperation and coordination with allies and that listed digital trade barriers.
• She remarked that the U.S. must address discriminatory services and digital trade barriers through strong digital disciplines.
  • She indicated that these disciplines include AI principles, good regulatory practices for digitally enabled services standards, small- and medium-sized enterprise (SME) digital capacity building, and worker digital upskilling.
• She stated that IPEF appeared to provide the most immediate opportunity to create binding and enforceable rules to address the aforementioned issues.
  • She added that IPEF could serve as a “building block” for enabling the U.S. to join CPTPP.
• She lastly expressed CSI’s support for a bipartisan extension of Trade Promotion Authority (TPA).

Mr. David Feith (Center for a New American Security):

• He remarked that China’s open access to American data constitutes a national security problem and called on the U.S. to both expand digital trade with its allies and curb unregulated flows of sensitive data to China.
  • He specifically recommended that the U.S. ban social media platform TikTok, control exports of American biodata, and limit U.S. data flows to China.
• He stated that China’s approach to digital trade was a key element of their national security strategy and highlighted how Chinese President Xi Jinping had called data the critical input for China’s economic strength and national power.
• He discussed how the CCP had made exploiting data a strategic priority both internally and internationally.
  • He indicated that this exploitation involved personal health records, genetic sequences, online browsing habits, corporate trade secrets, supply chain records, and financial accounts.
  • He further indicated that this exploitation involved the photos, voice recordings, and mapping imagery captured by smartphones, drones, and smart cars.
• He remarked that China viewed data control as critical for its global influence and censorship operations and commented that this explained China’s aggressive regulation of Chinese applications (including TikTok).
  • He alleged that China used TikTok to harvest large amounts of data from Americans, transmit favored messages to users, issue censorship guidance, and influence young Americans.
• He stated that there were currently no rules at either the international or national level governing China’s use of TikTok.
  • He noted how the Biden administration was reviewing the national security dangers posed by TikTok and mentioned how there were currently legislative proposals to ban TikTok.
• He asserted that the U.S.’s response to TikTok would be a test of its seriousness regarding data privacy, counterintelligence, election integrity, and democratic sovereignty.
  • He further raised concerns that China would seek to build upon TikTok’s success through exporting metaverse companies to the U.S.
• He then remarked that U.S. laws and policies were failing to protect health, genomic, and medical data and commented that this failure to protect the data jeopardized patient privacy and U.S. national security.
  • He stated that Chinese companies (including WuXi AppTec and BGI) are expanding their operations within the U.S. and indicated that these companies were responsive to the requests of the CCP and Chinese military. 
• He asserted that China’s access to U.S. health data (especially DNA) posed multigenerational ramifications for the U.S.
• He then expressed support for the U.S. Department of Commerce’s new ICTS regulatory mechanism and contended that this regulatory mechanism could address various national security concerns.
  • He raised concerns over the U.S. Department of Commerce’s failure to address Chinese firms that were improperly accessing large data repositories from data centers.
  • He also highlighted how the U.S. Department of Defense (DoD) had tied Chinese drone manufacturer DJI to the Chinese military.
  • He further mentioned how many leading U.S. AV and digital mapping companies relied upon Chinese financing and engineering and noted how these companies could freely export sensitive data about U.S. roads, maps, and critical infrastructure.
• He stated that the U.S. Department of Commerce could use their ICTS regulatory mechanism to address the aforementioned concerns and lamented how the U.S. Department of Commerce had yet to make use of this regulatory mechanism.

Dr. Joshua P. Meltzer, S.J.D. (Brookings Institution):

• He noted that while there was no globally agreed upon definition for the term “digital trade,” he stated that the term was increasingly used to describe an ecosystem that was more expansive than just e-commerce.
  • He indicated that the term “digital trade” encompassed cross-border data flows and the use of digital technologies (such as cloud computing and AI) for enabling trade.
• He highlighted how trade agreements now contain digital trade chapters (instead of e-commerce chapters) that include new commitments to not prohibit cross-border data flows and to not require data localization as a condition for doing business.
  • He indicated that these commitments were subject to WTO General Agreement on Trade in Services (GATS) Article XIV style exceptions.
• He stated that digital trade chapters in trade agreements aim to encourage regulations that will foster trust in cross-border data flows.
• He then remarked that digital trade commitments can deliver significant economic gains for the U.S.
  • He mentioned how a 2019 U.S. International Trade Commission (ITC) assessment of the USMCA’s economic impacts had found that the Agreement’s digital trade chapter was a key driver of economic gains for the U.S.
  • He commented that the USMCA’s digital trade chapter had benefited companies that rely upon cross-border data flows, including firms in the services economy, manufacturing industry, and agriculture industry.
• He discussed how e-commerce was one aspect of digital trade and commented that e-commerce enabled small businesses to reach customers on a global basis.
• He stated that the development of e-commerce platforms, such as eBay, Amazon, Etsy, Mercado Libre, and Lazada, addressed many of the barriers that have previously prevented small businesses from exporting their goods and services.
  • He explained that these platforms provided integrated payments solutions, trust mechanisms, cheap and effective dispute settlement, and links to express delivery services.
• He remarked that trade policy played a key role in enabling small businesses to engage in digital trade.
  • He highlighted how the WTO’s Trade Facilitation Agreement (TFA) reduce the cost of getting goods through customs, the USCMA raises the de minimis customs duty levels in Canada and Mexico, commitments on electronic signatures and electronic authentication provide legal frameworks for cross-border transactions, and commitments to not restrict data flows and to encourage interoperability among digital payment systems facilitate e-commerce.
• He also stated that services exported online were another growth opportunity for the U.S. and noted how the U.S. had been a net-exporter of services for over 30 years.
  • He indicated that services now comprise around 40 percent of total U.S. trade and added that 30 percent of U.S. export goods comprise services value added services used in the production of goods.
  • He commented that the aforementioned dynamics meant that over 60 percent of total U.S. exports now comprise services.
• He mentioned how recent data from the Organisation for Economic Co-operation and Development (OECD) showed that the U.S. was the world’s largest exporter of digitally deliverable commercial services by a large margin.
• He remarked that while digital trade constitutes an opportunity for U.S. businesses, he highlighted how the OECD Digital Services Trade Restrictiveness Index (DSTRI) shows high levels of digital trade restrictions globally.
  • He commented that India and Indonesia maintained significant digital trade restrictions and noted how both countries were participating in the IPEF negotiations.
  • He added that India and Indonesia had much less significant digital trade restrictions than China and asserted that China maintains one of the world’s most restrictive digital trade regimes.
• He also stated that digital trade impacts access to and the development of key digital technologies, such as AI.
  • He mentioned how U.S. National Security Advisor Jake Sullivan had recently asserted that U.S. leadership in AI was necessary for national security purposes.
• He discussed how many countries were moving to regulate AI and expand AI research and development (R&D) cooperation.
• He mentioned how China (which had the world’s second highest AI capacity behind the U.S.) was beginning to implement its own AI governance framework.
  • He indicated that this framework includes regulations on the development and deployment of AI algorithms and increased control over Chinese technology firms leading in AI development.
  • He also stated that China was beginning to export its model for AI regulation to other countries.
• He noted that while some countries were now using their trade agreements to support the development of AI, he indicated that the U.S. was not among these countries.
• He remarked that renewed U.S. global leadership on digital trade issues was needed to develop rules to govern digital trade more broadly.
  • He warned that China was currently working to develop its own set of international digital trade rules.
  • He also mentioned how China was seeking to join the CPTPP and warned that China’s membership in that agreement could enable China to influence future digital trade policies.
• He stated that the upcoming IPEF negotiations constitute an opportunity for the U.S. to re-engage on the development of international digital trade rules.

Mr. Patrick Woodall (AFL-CIO Technology Institute):

• He remarked that the labor movement was “deeply interested” in international trade policy and noted how trade deals have cost the U.S. millions of manufacturing and service sector jobs.
  • He commented that these job losses have upended the economic security of working families and have worsened the U.S.’s economic and racial inequalities.
• He stated that digital trade impacted workers in traditional industries and noted how cross-border digital commerce had offshored tens of thousands of U.S. call center and back-office jobs.
• He also stated that this offshoring of jobs had created a “digital underclass” of gig workers in the developing world that power AI systems.
  • He explained that these workers tag images and code information for low pay and work in countries (like India and the Philippines) with poor working conditions and weak labor laws.
• He further remarked that digital trade supports automated decision making and algorithmic management software that increasingly hires, controls, evaluates, monitors, and fires workers in the U.S.
  • He asserted that these technologies could shortchange the earnings of workers, expose workers to unsafe work conditions, infringe on the right to form unions, and exacerbate employment discrimination.
• He then discussed how large technology companies affect U.S. workers through collecting, combining, and commodifying vast troves of personal data that compromised the privacy of individuals.
  • He asserted that social media company algorithms advance online hate, amplify political disinformation, and harm the mental health of young people.
• He remarked that the existing policy framework for trade made it more difficult to safeguard workers, consumers, and society from the known and emerging downsides of the digital economy.
• He stated that current digital trade deals grant broad and unfettered powers to companies to ship data and deploy software worldwide.
  • He commented that these authorities over data and software were more expansive than for trade rules on physical goods.
• He also stated that current digital trade rules limit or forbid the government from overseeing the technology sector and the sector’s data and software products.
  • He described the technology industry as reflexively opposed to any government oversight and commented that the technology industry viewed such oversight as an illegitimate trade barrier.
• He remarked that trade agreements have constrained domestic governance since the 1990s to curb “so-called” non-tariff trade barriers.
  • He noted how fewer than 5 percent of challenged regulations at the WTO had been upheld in trade disputes.
• He asserted that the stringent regulatory restrictions imposed on digital trade were fundamentally different from the restrictions imposed on other areas of trade and commented that the U.S. was just beginning to grapple with the need to meaningfully oversee digital technologies.
  • He lamented how bipartisan efforts to protect personal data and address anti-competitive platform practices could run afoul of existing digital trade practices.
• He stated that the combination of unilateral corporate powers and narrow regulatory constraints in digital trade could therefore lead to a largely unregulated technology landscape.
• He called on the U.S. to develop a worker-centered digital trade policy that would allow for the protection of personal information in critical sectors through restrictions on cross-border data flows.
  • He also asserted that safeguarding critical infrastructure and personal data would help to keep good jobs within the U.S.
• He remarked that the U.S. must be able to “meaningfully” oversee algorithms and source codes to enforce current labor and employment laws.
  • He also stated that the U.S. must pass new laws to address emerging issues, such as electronic workplace surveillance and digital privacy.

Congressional Question Period:

Subcommittee Ranking Member John Cornyn (R-TX):

• Ranking Member Cornyn noted how Dr. Meltzer had stated that there was no globally agreed upon definition for the term “digital trade” and that the term was increasingly used to describe an ecosystem that was more expansive than e-commerce. He further noted how Dr. Meltzer had included cross-border data flows and the use of digital technologies (including cloud computing and AI) in his definition for the term “digital trade.” He asked Ms. Bliss to indicate whether she agreed with Dr. Meltzer’s definition for the term “digital trade.”
  • Ms. Bliss expressed agreement with Dr. Meltzer’s definition for the term “digital trade.” She remarked that digital trade encompassed the infrastructure and technology underlying the internet, internet platforms, software, online services, applications, and emerging technologies. She stated that digital trade was fundamentally about the electronic transmission of data across the internet and the content involved in these data transfers.
• Ranking Member Cornyn then noted how U.S. adversaries, including China and Russia, employed information warfare to steal U.S. data and to promote disinformation. He asked Mr. Feith to discuss how a digital trade agreement between the U.S. and its democratic allies could be beneficial and promote U.S. values.
  • Mr. Feith remarked that digital trade was fundamentally different from the trade of physical goods. He noted how nations could control the trade of physical goods at their borders and arrange the trade of physical goods according to agreements. He asserted that the global nature of the internet enabled adversarial nations to operate within U.S. telecommunications networks and U.S. platforms. He also stated that this ability for adversarial nations to operate platforms available in the U.S. had enabled these nations to influence U.S. politics through data harvesting, propaganda, and censorship. He commented that that the U.S. currently lacked mechanisms in its international trade rules and domestic regulations to respond to these novel threats. He noted how the Committee on Foreign Investment in the U.S. (CFIUS) addressed inbound foreign investments from adversarial nations and how the U.S. maintained export controls for licensing and restricting the traditional export of certain goods, services, and some technologies. He further noted how the U.S. maintained federal procurement restrictions that limit what federal departments, agencies, and contractors could purchase. He remarked however that the U.S.’s traditional regulatory structures had not addressed domestic digital commerce that had international digital trade implications. He noted that this digital commerce often involved mobile applications, surveillance footage, and the cross-border sharing of sensitive data (such as genomic data). He remarked that the U.S. Department of Commerce’s new ICTS regime could play a valuable role in protecting the U.S.’s national security interests in the context of cross-border data flows. He noted however that the ICTS regime had not yet been implemented and called on the U.S. to begin implementing this regulatory regime. 

Subcommittee Chairman Tom Carper (D-DE):

• Chairman Carper asked Mr. Feith to explain the U.S. Department of Commerce’s ICTS regime.
  • Mr. Feith explained that the U.S. Department of Commerce’s ICTS regime was meant to serve as a structure would gather expertise from all of the relevant parts of the Executive Branch to assess the national security implications and risks associated with cross-border data flows. He indicated that this structure would involve both national security and economic departments and agencies, as well as the intelligence community. He stated that the ICTS regime is particularly focused on cross-border data transfers involving the U.S. and foreign adversary countries (including China and Russia).
• Chairman Carper then expressed his support for having the U.S. re-engage with its allies in the Asia-Pacific region. He stated that the current IPEF under development provided the U.S. with an opportunity to assert its regional leadership on digital trade issues. He asked the witnesses to recommend specific digital trade policies for the U.S. to advocate for as part of the IPEF negotiations.
  • Ms. Bliss first indicated that CSI had submitted its full list of recommendations for IPEF’s digital trade chapter to the Committee. She remarked that the U.S. should base IPEF’s digital trade chapter off of the digital trade provisions in the USMCA and its agreement with Japan. She added that the digital trade policies of Australia and Singapore should inform the U.S.’s work on IPEF. She stated that the U.S. needed to address cross-border data flows as part of IPEF. She noted that there did exist some restrictions on cross-border data flows where there existed “legitimate” public policy objectives and expressed her support for maintaining these restrictions. She then remarked that data localization was pernicious and increasing. She raised concerns that China was making use of data localization requirements to advance its priorities. She further stated that IPEF was not absolute in prohibiting source code transfers and highlighted how there existed exceptions to these provisions for law enforcement, judicial processes, regulators, inspectors, and other circumstances. She also expressed support for making the moratorium on imposing duties on e-commerce permanent. She then suggested new provisions for IPEF, including the development of a set of best AI practices and principles, a commitment to worker upskilling within the digital area, the inclusion of tools for small businesses, a promotion of digital inclusivity, and actions to address censorship.

Sen. Charles Grassley (R-IA):

• Sen. Grassley asked Mr. Feith to explain why it was necessary for the U.S. to ban TikTok and similar types of platforms.
  • Mr. Feith remarked that TikTok and other platforms subject to CCP influence, control, and subversion posed threats to the U.S. He indicated that these threats involve both the data that would flow from the U.S. to China and the data that would flow from China to the U.S. He asserted that these platforms created data privacy concerns for Americans and stated that TikTok had provided contradictory public statements about its ability to secure user data from the CCP. He contended that TikTok could not possibly keep this data secure from the CCP given how Chinese laws required Chinese companies to comply with CCP information requests. He stated that there thus existed an “enormous” risk that the CCP would harvest U.S. user data from the TikTok platform. He then remarked that the CCP could use TikTok and similar types of platforms to export censorship to the U.S. given how many Americans rely upon these platforms for news and information. He suggested that the CCP might eventually use their control of these platforms to control the news being disseminated about conflicts involving the U.S. and China. He raised concerns that China could have TikTok morph into a platform for the mass manipulation and mobilization of U.S. users.
• Sen. Grassley asked Mr. Feith to indicate whether there were other countries that could infringe upon the data of U.S. consumers.
  • Mr. Feith stated that while other countries posed threats to U.S. consumer privacy, he asserted that the magnitude and severity of the consumer privacy concerns posed by China were unmatched. He mentioned how the Biden Administration had issued its Executive Order (EO) on Protecting Americans’ Sensitive Data from Foreign Adversaries in June 2021 and noted that six countries were covered under the term “foreign adversaries.” He indicated that these six countries were China, Russia, Iran, North Korea, Cuba, and Venezuela. He also stated that the threats posed by Chinese platforms were not limited to TikTok. He highlighted how TikTok’s parent company ByteDance had a new virtual reality company called Pico and noted that Pico had ambitions for the U.S. metaverse market. He further mentioned how there were a wide range of social media, payment, and other platforms that come from China. He stated that the aggregate nature of the data being collected from these platforms could pose threats to the U.S.

Sen. Catherine Cortez Masto (D-NV):

• Sen. Cortez Masto asked Mr. Feith to indicate how old the practice of data harvesting was.
  • Mr. Feith commented that data harvesting has existed for as long as there has been data.
• Sen. Cortez Masto asked Mr. Feith to indicate whether it was too late to adopt regulatory regimes to protect the personally identifiable information (PII) of platform users.
  • Mr. Feith answered no. He acknowledged that while some forms of harm were irreversible, he stated that such regulatory regimes could prevent future harms from occurring.
• Sen. Cortez Masto asked Mr. Feith to explain what he meant by the term “harm.”
  • Mr. Feith stated that harm could refer to the exposure of private information that was of intelligence value.
• Sen. Cortez Masto interjected to note that Mr. Feith had discussed the importance of protecting biodata. She asked Mr. Feith to indicate whether it was already too late for the U.S. to address this issue. She commented that the biodata of many individuals had already been made available and could not be made private again. She asked Mr. Feith to discuss how the U.S. should address this situation.
  • Mr. Feith acknowledged that there had occurred improper data transfers that were harmful and that could not be remedied. He stated however that there were current uses of biodata that were imperfect and would require additional ingestions of data. He asserted that preventing future ingestions of sensitive data should therefore be of interest to the U.S. He further stated that there were potential uses of biodata that were currently unknowable.
• Sen. Cortez Masto interjected to express agreement with Mr. Feith’s response. She also expressed interest in developing a regulatory regime for protecting the biodata of Americans.
  • Mr. Feith mentioned how Full Committee Chairman Ron Wyden (D-OR) had introduced bipartisan legislation that would create a new export control category for bulk American data. He stated that this legislation would empower the U.S. Bureau of Industry and Security (BIS) to combat the risks associated with the infringement of American biodata. He recommended that Congress consider this legislation in the future.
• Sen. Cortez Masto asked Mr. Feith to indicate whether he supported the proposed ICTS regulatory structure.
  • Mr. Feith expressed his support for the ICST regulatory structure.
• Sen. Cortez Masto asked the witnesses to indicate whether there were any existing models for data protections that Congress should consider adopting.
  • Mr. Feith answered no. He stated that the European Union (EU) had mostly directed their General Data Protection Regulation (GDPR) privacy framework against the U.S. government and U.S. technology companies. He described the EU as “rather uninterested” in addressing data protections for Europeans in China. He added that Chinese platforms were also operating in Europe.

Sen. Todd Young (R-IN):

• Sen. Young remarked that the U.S. must work with its partners and allies to further refine the rules governing digital trade. He also stated that the U.S. must ensure that its digital trade rules could prevent bad actors from purloining U.S. data. He then remarked that the Biden administration had recognized the importance of IPEF’s digital trade provisions and called on the U.S. to take a more targeted approach to the issue. He mentioned how he had introduced a resolution on this topic with Subcommittee Chairman Tom Carper (D-DE). He then discussed how the U.S. had recently developed digital trade rules as part of the USMCA. He asked Ms. Bliss to explain how the digital trade provisions under consideration in IPEF would be different from the digital trade provisions in the USMCA.
  • Ms. Bliss first thanked Sen. Young for his leadership on the bipartisan resolution on digital trade. She then noted how IPEF differed from the USMCA in that it was not a free trade agreement (FTA) and it did not directly offer market access. She stated that the U.S. would need to convince countries to adopt high level digital trade standards as part of IPEF and commented that many of these countries might not share the U.S.’s values. She recommended that the U.S. seek to include incentives (such as capacity building) as part of IPEF. She also remarked that the U.S. should work to include new digital trade provisions in IPEF that went beyond the digital trade provisions of the USMCA and the U.S.’s agreement with Japan. She specifically recommended that the U.S. work to include AI principles, digital worker upskilling provisions, the creation of SME digital tools, inclusivity provisions, and cybersecurity provisions as part of IPEF.
• Sen. Young then expressed interest in the national security implications of digital trade. He discussed how China was both one of the most “digitally restrictive” economies in the world and one of the largest consumer markets in the world. He noted how Mr. Feith’s testimony had detailed the CCP’s efforts to accumulate and exploit data to advance their own authoritarian interests. He asked Mr. Feith to discuss the consequences associated with allowing for China to dictate global standards for digital trade. He expressed particular interest in how U.S. inaction on digital trade issues would impact the Asia-Pacific region.
  • Mr. Feith noted how Chinese President Xi Xingping had stated that countries that recognized the significance of data and that could exploit data would be best positioned moving forward from a geopolitical standpoint. He also noted how Chinese President Xi Xingping had stated that data would be key for a country’s economic and national power moving forward.
• Sen. Young asked Mr. Feith to indicate whether he agreed with Chinese President Xi Xingping’s assessment regarding the importance of data.
  • Mr. Feith answered affirmatively.
• Sen. Young commented that U.S. policymakers should not dismiss Chinese President Xi Xingping’s assessment regarding the importance of data.

Full Committee Chairman Ron Wyden (D-OR):

• Chairman Wyden discussed how the internet in the U.S. was free and open while the internet in China was very restrictive. He stated that China’s restrictive internet policies have prevented U.S. businesses from entering the Chinese markets and have silenced dissent. He also raised concerns that other U.S. trading partners, including India, Vietnam, and Indonesia, were increasingly employing surveillance tools to monitor worker communications, eliminate dissent, and prevent the formation of labor unions. He asked Dr. Melzer to provide recommendations for trade policy reforms that would best position the U.S. to push back against the aforementioned trends.
  •  Dr. Meltzer remarked that U.S. leadership on digital trade policy could play an important role in fostering an ecosystem that reaffirmed the norm of an open and free internet. He commented that this U.S. leadership would be particularly important in the Asia-Pacific region. He stated that the strategic conflict between the West and China would play out within the Asia-Pacific region. He mentioned how RCEP included many loopholes and exceptions that enabled China to pursue restrictive internet policies and to control data flows. He highlighted that many important Asia-Pacific countries were RCEP signatories. He stated that U.S. engagement within the Asia-Pacific region would be key to advancing the U.S.’s views on data regulation and the free flow of data during future intentional negotiations.
• Chairman Wyden asked Dr. Meltzer to provide specific digital trade policy recommendations for the U.S. to effectively push back against human rights violations.
  • Dr. Meltzer suggested that the U.S. leverage access to its market as a way to incentivize the region to adopt its preferred approach to data flows and data regulation.
• Chairman Wyden interjected to ask Dr. Meltzer to recommend specific incentives that the U.S. could employ to obtain its digital trade policy objectives.
  • Dr. Meltzer stated that IPEF might enable the U.S. to meet many of its digital trade policy objectives. He remarked however that a more comprehensive digital trade agreement that included certain digital trade rules would be beneficial. He also stated that digital trade rules should be coupled with enforcement and conditioned access to the U.S. market to ensure that the rules would be complied with.
• Chairman Wyden interjected to comment that the Committee was very interested in using incentives as a means of supporting digital trade policy objectives.
  • Dr. Meltzer noted how much of the world currently lacked sufficient broadband infrastructure. He suggested that the U.S. could increase its support for the development of broadband infrastructure in other countries as a means to advance its digital trade policy objectives.

Sen. Elizabeth Warren (D-MA):

• Sen. Warren remarked that large corporations were using bad trade deals to increase their profits and reduce protections for workers and consumers. She stated that large technology companies were now working to “rig” digital trade rules to undermine laws and rules meant to oversee these companies. She discussed how companies were increasingly relying upon AI systems, even though these systems were often discriminatory. She noted how U.S. policymakers were now reviewing AI systems to protect against bias. She stated that large technology companies were working to keep the code underlying their AI systems secret. She asked Mr. Woodall to indicate whether source code secrecy rules would prevent Congress from passing pending legislation that would require companies to submit the code underlying AI systems to the government or third parties for bias assessments.
  • Mr. Woodall noted that while Congress could always pass laws that require the submission of AI source codes, he indicated that these laws could run afoul of digital trade rules (which would make them vulnerable to legal challenges and trade disputes). He also discussed how the regulatory landscape governing the digital and technology worlds was very thin. He noted how most other areas of trade (such as environmental protections and workplace safety) had been well-established prior to the creation of the WTO. He stated that the ability of digital trade policy to address the known downsides of technology on workers and people would be different from the ability of other areas of trade policy to address potential downsides.
• Sen. Warren noted how technology companies often claimed that source code secrecy was necessary to protect trade secrets from China. She stated however that technology companies had advocated for digital trade rules that would apply to everyone, including U.S. regulators. She noted that these technology companies claimed that these rules include exceptions that ensure that U.S. regulators could obtain access to source code if necessary. She indicated that U.S. regulators could look at source code or algorithms for a specific investigation, inspection, examination, enforcement action, or judicial proceeding. She asked Mr. Woodall to indicate whether regulators could make use of this exception.
  • Mr. Woodall expressed concerns regarding the effectiveness of this exception. He noted that regulators would need to have a reasonable suspicion to justify pursuing an investigation into a source code. He stated however that the current specificity language could make it difficult for regulators to determine whether an investigation was warranted in the first place. He also stated that the current specificity language would preclude sector-wide or practice-wide investigations, which were a common tool for regulators.
• Sen. Warren commented that large technology companies want to protect their AI source code from both China and U.S. regulators. She asserted however that large technology companies were only interested in secrecy when it involved their own secrets. She stated that large technology companies were currently working to collect, store, and sell user data to any interested buyer. She commented that this desire to make use of consumer data was leading large technology companies to advocate for no limits on the international transfers of data as part of digital trade rules. She suggested that the U.S. might want to impose limits on the transfers of sensitive data, such as period tracking data or location data for people that visit abortion clinics. She added that the U.S. would want to impose limits on the transfers of this data to countries with poor data protections. She indicated that large technology companies had asserted that these concerns were not warranted because counties could still pass data protections so long as the protections adhered to standard trade agreement language known as the legitimate public policy exception. She asked Mr. Woodall to indicate how often countries have been able to successfully employ this language to defend their laws protecting consumers, workers, or the environment.
  • Mr. Woodall noted that the WTO had upheld under 5 percent of challenges regulations using necessary and legitimacy-type tests. He commented that it was therefore difficult for countries to defend their protections using policy caveats. He predicted that it would be even more difficult for protections to survive legal challenges in the digital space. He commented that the regulatory infrastructure and foundation needed to defend the legitimacy and necessity of regulations in this space was very limited. He stated that many legislative proposals currently under consideration involving digital privacy and monopolistic platform practices could run afoul of digital trade rules. He also noted how the USMCA’s language stated that privacy rules must be necessary and proportionate to the risks posed. He asserted that this language imposed a higher threshold for defending privacy rules. He lastly remarked that there existed a good reason to make exceptions for consumer data in certain fields (such as biometric data, health data, and financial data) from blanket allowances for cross-border data flows.
• Sen. Warren asserted that large technology companies were seeking to “weaponize” digital trade rules as a way to resist bipartisan efforts to curb their influence. She stated that Congress should not allow for large technology companies to “hijack” the U.S.’s current trade negotiations, such as the IPEF negotiations.

Subcommittee Chairman Tom Carper (D-DE):

• Chairman Carper remarked that digital connectivity could create global sales opportunities for small businesses. He stated however that small businesses often need additional support in order to access foreign markets. He asked the witnesses to recommend resources that could help small businesses to participate in the digital economy. He also asked the witnesses to address how digital trade rules could facilitate new export opportunities for SMEs.
  • Ms. Bliss first disputed the assertion that large technology companies were controlling the U.S.’s digital trade policy agenda. She noted how her organization contained both large and small companies as members and estimated that only 10 percent of her organization’s members would be considered large technology companies. She contended that the development of strong digital trade rules would benefit both large and small companies across a variety of industries. She then discussed how the U.S. Department of Commerce supported small businesses in their export efforts and called for additional support in this area. She mentioned how the U.S. government and private sector maintained facilitator laboratories that provided startup companies and small businesses with digital tools, including AI systems and cloud technologies. She suggested that public-private partnerships could be used to provide this support. She also recommended that IPEF include a provision that would require signatory countries to provide digital tools to their small businesses. She further expressed support for policy efforts to expand general capacity building in IPEF countries.
  • Dr. Meltzer remarked that digital trade rules would be most important for small businesses because small businesses were generally less equipped to absorb the transaction costs and frictions associated with trade. He commented that digital trade rules could enable small businesses to engage in global commerce in a more seamless fashion. He then divided digital trade rules into three main categories. He indicated that the first category involved rules that facilitate e-commerce. He remarked that policies that recognized the legitimacy of electronic signatures were essential for enabling international trade. He also stated that digital trade rules should address digital authentication and digital ID issues and commented that these rules could enable more seamless online communications. He further highlighted how the USMCA’s increase in de minimis customs duty levels had been successful in raising U.S. e-commerce exports to Canada and Mexico. He suggested that the U.S. pursue increases in de minimis customs duty levels around the world. He lastly recommended that the U.S. consider reforms to customs procedures to ensure that small businesses could sufficiently navigate the customs process. He then indicated that the second category involved rules around interoperability. He stated that the U.S.-EU Privacy Shield 2.0 would impact U.S. small businesses selling into Europe that collected customer data upon transactions. He called it important for digital trade rules to enable protected cross-border data flows, even when countries had differing regulations. He indicated that the third and final category involved rules that would enable platforms to facilitate small business exports.
  • Ms. Bliss expressed agreement with Dr. Meltzer’s response. She also stated that the U.S. should pursue a permanent moratorium on e-commerce duties as part of its international trade negotiations. She commented that a permanent moratorium would particularly benefit small businesses and warned that a lapse of this moratorium could undermine the ability of small businesses to import and export products and services.
• Chairman Carper then discussed how digital infrastructure (which includes broadband internet, data centers, and semiconductors) have become critical to global trade. He asked Mr. Feith to identify current vulnerabilities in the U.S.’s digital infrastructure. He also asked Mr. Feith to provide recommendations for safeguarding digital infrastructure resources.
  • Mr. Feith discussed how China had engaged in IP theft and had posed threats to telecommunications infrastructure both domestically and abroad. He stated that the U.S. had taken actions to respond to these thefts and threats and mentioned how the U.S. Federal Communications Commission (FCC) had recently taken actions to restrict the ability of Chinese companies to participate in the U.S.’s telecommunications infrastructure. He then discussed how traditional U.S. regulatory approaches often did not address drones, surveillance systems, and cameras. He noted that while the U.S. Department of Homeland Security (DHS) and the DoD had issued statements about the threats posed by these technologies, he indicated that these statements were often advisory in nature. He elaborated that these statements did not restrict the actions of state governments, local law enforcement agencies, or power grid infrastructure operators on procurement matters. He highlighted that while some of the DHS’s advisories had succeeded in influencing some power grid infrastructure operators to get rid of their Chinese-procured drones, he stated that other power grid infrastructure operators had disregarded these advisories. He also raised concerns that the U.S. was failing to address Chinese influence within the fields of autonomous transportation and digital mapping. He noted how many of the U.S.’s leading autonomous transportation and digital mapping companies were heavily reliant on China for financing and engineering and indicated that these companies were able to operate freely within the U.S. He stated that the ability of these companies to share information collected in the U.S. with China posed risks to the U.S.’s cybersecurity and critical infrastructure.
• Chairman Carper then called it critical that U.S. workers benefit from the growing use of digital technologies in the form of better jobs and higher wages. He asked Mr. Woodall to discuss how digital trade and investments in the workforce help to ensure that U.S. workers develop the necessary skills to succeed in the digital economy. He mentioned how many Delaware small businesses had told him that they had difficulties finding skilled workers.
  • Mr. Woodall remarked that workforce investments would be “critical” for future generations of technologies. He stated that the AFL-CIO was working to ensure that new technologies would lead to the creation of union jobs with good pay and opportunities for upward mobility. He raised concerns however that many new technologies would harm conditions and fairness in the workplace and drive down worker incomes. He stated that it would be challenging to address the workplace surveillance and algorithmic management enabled by these new technologies. He remarked that the U.S. would therefore need to protect workers from the downsides of digitization and provide workforce development opportunities.
  • Ms. Bliss recommended that IPEF and other U.S. digital trade initiatives include provisions to address AI principles. She stated that these provisions should respect human-centered values and address potential AI abuses.
  • Dr. Meltzer mentioned how the White House had released a blueprint for human rights and AI and suggested that this blueprint could inform future digital trade agreements. He stated that this blueprint reflected the U.S.’s values and would ensure that AI did not infringe upon human rights and labor standards.
• Chairman Carper then asked the witnesses to identify digital trade actions that the U.S. should not take.
  • Mr. Woodall remarked that the U.S. should avoid blanket exclusions in its trade deals. He recommended that the U.S. exclude vulnerable personal data and critical infrastructure data from its data flow and data localization commitments. He commented that there needed to exist more protections for these areas.
  • Dr. Meltzer first recommended that policymakers should work to ensure that digital trade did not become a partisan issue. He then stated that the U.S. should focus on the exceptions when developing digital trade agreements. He commented that these exceptions were where policymakers must balance the maximization of opportunities with the desire for national sovereignty over certain areas.
• Chairman Carper commented that the Committee currently did not view digital trade as a partisan issue. He then provided the witnesses with an opportunity to address any issues that they wanted to.
  • Dr. Meltzer remarked that the U.S. should be cognizant of how the rest of the world would perceive the U.S.’s actions within the area of digital trade. He stated that there was an international desire for the U.S. to re-engage on digital trade issues within the Asia-Pacific region. He noted how China was currently pressuring Asia-Pacific countries on digital trade issues and stated that U.S. leadership on digital trade issues would be well-received in the Asia-Pacific region.
  • Mr. Feith remarked that the U.S. needed to proactively address the threats posed by China before these threats became perceived as unfixable. He noted how TikTok had a much smaller market share and level of influence two years ago and stated that TiKTok’s growth had been very quick. He warned that problematic data relationships between the U.S. and China could provide China with leverage over the U.S. He commented that this leverage could eventually limit the U.S.’s decision making abilities.
  • Ms. Bliss remarked that the U.S. needed to consider ways to convince non-like-minded countries to accept digital trade principles that reflected U.S. values. She cautioned that the U.S. would likely receive pushback from certain countries (such as Indonesia and Vietnam) during the IPEF negotiations. She further stated that the U.S. must build upon its previous digital trade work in any future digital trade initiatives.
  • Mr. Woodall remarked that the Committee needs to address the effects of digitization on workers in its trade policy work.