We live in an age where a savvy entrepreneur in Burlington or Omaha can create good jobs at a good profit by marketing a new idea or product through the Internet to a worldwide audience. Through an uninhibited flow of data, the Internet has truly empowered small and large businesses alike to fully participate in the global economy.
But what if this worldwide exchange of data was disrupted due to protectionist trade policies of foreign governments? What would happen to those small businesses in Vermont and Nebraska that created a profitable business and good jobs by marketing and selling through the Internet? Unfortunately, these are not academic questions.
Several countries, including Brazil, China, Mexico, Russia, South Korea, Switzerland, Turkey, and Vietnam, have already enacted or are considering policies that would limit the flow of Internet traffic in and out of their borders. Some of these efforts are regulatory and require a company to jump through onerous hoops before sending data overseas. Other policies are more protectionist and would require companies to build facilities within a country’s borders, changing the basic flow of the Internet.
Proponents believe such a requirement would create jobs in that country but this logic is faulty in more ways than one. The Internet is a two-way network and raising costs harms all parties by severely restricting its efficiencies and reach. A recent International Trade Commission report estimated that our GDP could increase from $16.7 billion to $41.4 billion if barriers to digital trade were removed. This is the type of job-creating economic growth we cannot afford to ignore.
The implications for American businesses, big and small, are enormous.
Data over the Internet fuels basic business functions such as tracking goods through the supply chain, internal company emails, and international personnel management. Businesses are able to harness economies of scale and consumers benefit from the efficiencies created by cross-border data flows. And these advantages are particularly beneficial to small businesses, reducing costs and granting access to larger markets. Forced localization and other data flow restrictions impose a real cost that would be passed on to the consumer.
Each year, over $8 trillion in international commerce is conducted over the Internet. Companies of all sizes, not just the Googles and PayPals of the marketplace, spend $2 trillion annually on information technologies. One report estimates that 75 percent of e-commerce benefits traditional industries.
We should be clear that we are focused only on removing barriers to the commercial use of data. Very legitimate concerns have been raised about privacy and the protection of personal data, including when governments can access that data. Those are legitimate issues that must be promptly addressed.
But in the context of trade agreements, commercial data cannot stop at borders without seriously stunting the potential of the Internet to create jobs and grow our economy.
This weekend in Sydney, at a meeting of negotiators on the Trans-Pacific Partnership, there will be an opportunity for the United States government to take a strong stand in support of the free flow of data across borders. Other upcoming forums to plant this flag include negotiations on the Transatlantic Trade and Investment Partnership, Trade in Services Agreement, and United States-European Union Safe Harbor.
In all these meetings, American trade representatives must be full-throated in their support of the commercial benefits of cross-border data flows.
We are calling on them to be firm in requiring commitments to cross-border data flows and ensuring strong enforcement mechanisms. Every area of U.S. business is impacted and, in today’s global economy, restrictions anywhere in the world can cost jobs in Omaha, Burlington, or any other community. The approaching negotiations present an opportunity for our nation to defend e-commerce as we know it and ensure continued economic growth fueled by the free flow of commercial data around the world.
Image Credit: CC by Maria Elena