The last decade has seen a fundamental shift in the way global trade is conducted. Globally competitive companies across all sectors rely on a vast array of data-driven digital technologies to produce, export, market, and sell goods and services. Global cross-border data flows grew by 45 times from 2005 to 2015.1 By that year, the global value of cross-border data flows had surpassed the value of trade in goods for the first time in history, with some 75 percent of that value accruing to companies outside the technology sector, primarily through increases in growth, productivity, and employment. Technology products and services drive growth and job creation in virtually every sector of the economy. The macroeconomic impact of these trends has been well-documented, with estimates that cross-border data flows have increased current global GDP by at least 10 percent, adding $7.8 trillion to the global economy in 2014 alone.2 By plugging into the global digital network, technology enables firms across the world to access international markets with limited asset footprints, leading to the emergence of “born-global firms” which quickly attain global reach through reliance on existing available digital technologies and with minimal cross-border investment. This connection between digital trade and entrepreneurship, and the importance of policy actions to enable the digitalization of entrepreneurship and the use of digital technology, have also been noted as key in fostering inclusive development.3
The United States is a global leader in the innovation and delivery of data-driven products and services and benefits greatly and disproportionately from technological innovation and digital trade. As the ITC has itself estimated, U.S. GDP was between $517 billion and $710 billion (3.4 to 4.8 percent) above the 2011 baseline as a result of digital trade, and that digital trade helped create 2.4 million jobs in the United States in the same year.4 In 2018, digitally-enabled services accounted for 55 percent of all U.S. services exports, 48 percent of all services imports, and 69 percent of the U.S. global surplus in trade in services. This trade in digital and digitally-enabled services also drives trade and production in other areas of the U.S. economy. For example, over half of the digitally-enabled services imported by the United States from the European Union (EU) are used to produce U.S. products for export, and vice-versa.5
Concurrent with recent, digitally-driven shifts in global trade, and in line with provisions contained in the Bipartisan Congressional Trade Priorities and Accountability Act of 2015 (TPA), the United States has been the global leader in the development and international promotion of strong, state-of-the art digital trade disciplines. As with modern rules developed and promoted by the United States in other areas, these disciplines have the effect of directly countering existing and prospective barriers to trade. However, as the ITC has noted, even where such rules do not directly reduce or eliminate existing barriers to trade, their economic impact can be quantified on the basis of the relative certainty they provide to digital and ICT-driven businesses operating across a range of sectors.
At the same time, perhaps no other organization is as familiar as the ITC is with the challenges of measuring the digital economy. Owing to these challenges, and the relative novelty of the most commercially meaningful digital trade provisions, the beneficial impacts of digital trade and other modern U.S. FTA provisions must also be considered using more qualitative metrics. We would also emphasize the important role of domestic structural supports that mitigate potentially disruptive impacts of trade liberalization on workers and specific sectors of the U.S. economy. Such mechanisms are part and parcel of an inclusive, socially sustainable national trade policy, and are necessary to maximize the benefits of modern U.S. FTA provisions to the U.S. economy.
The remainder of ITI’s submission will seek to highlight qualitative and, to the extent feasible, quantitative impacts on the U.S. economy of FTA commitments negotiated in a sample of select areas of importance to the technology sector. We appreciate the ITC’s continued efforts to assess the economic impact of U.S. FTA provisions and to develop economic methodologies that ensure that U.S. policymakers can pursue evidence-based approaches to facilitate U.S. trade, competitiveness, and innovation.
2020.11.05ITIITCResponseTo read the full report, click here.