Why a USTR Report Represents Another Step Back for Digital Trade



Amir Nasr | Disruptive Competition Project (DisCo)

On March 29, USTR released its 2024 National Trade Estimate Report on Foreign Trade Barriers, which can be found here. This article is a critique of provisions impacting U.S. digital exporters.

The release of annual federal agency reports are rarely given significant airtime beyond some select circles. This year, however, the release of the Congressionally-mandated National Trade Estimate Report (NTE) by the Office of the United States Trade Representative (USTR) and its decision to remove broad sets of barriers—including many significant measures harming operations of U.S. digital exporters—has sparked debate about the overall merits of identifying and challenging unfair trade practices abroad.

The issue surrounds the report that, under the 1974 Trade Act, USTR is required to publish to identify and analyze “significant barriers to, or distortions of” U.S. goods and services exports globally and, when possible, estimate the distortive impact they have on U.S. commerce.  This report serves as a key part of USTR’s mandate from Congress to protect U.S. businesses from unfair treatment abroad.  By chronicling the obstacles to operations and the cross-border delivery of goods and services in key foreign markets, the report lays down a marker for laws, regulations, and other policies abroad that are of concern to the United States.  

Through this process, USTR signals to the countries in question that these policies are being monitored by the United States government, are seen as problematic, and that further investigation or action—including, where appropriate, formal dispute settlement— could be forthcoming.  This is a crucial piece of USTR’s job assessing the global landscape for U.S. firms, targeting unfair treatment of U.S. goods and services exports, and addressing these barriers.  Inclusion of a barrier in the NTE does not necessarily mean enforcement action is forthcoming from USTR, but it is an indication that a rule or regulation is hindering international trade and puts that country on notice.

The problem at the heart of this year’s NTE is that USTR has removed a sizable collection of barriers from last year’s report (466 pages’ worth) in this year’s edition (392 pages’ worth)—with a particular and concerning deprioritizing of barriers to digital trade.  This is in direct contradiction to USTR’s statutory obligation to “identify and analyze acts, policies, or practices of each foreign country which constitute significant barriers to, or distortions of… United States electronic commerce” through the NTE.  More recently, this move also runs contrary to the Bipartisan Congressional Trade Priorities and Accountability Act of 2015 that directs USTR “to ensure that governments refrain from implementing trade-related measures that impede digital trade in goods and services, restrict cross-border data flows, or require local storage or processing of data.”  The recent trajectory of USTR also opposes the agency’s stated goal to “[d]efend U.S. interests in digital trade and digitally delivered services” that the agency outlined in its FY2025 budget request.  

In a previous article I covered the importance of digital trade to the U.S. economy—in 2022, digitally-deliverable services brought in $626 billion to the United States, with a $256 billion surplus in the sector.  Overall, the U.S. government estimates that in 2022, the digital economy brought in $2.6 trillion in value added, representing 10% of the U.S. GDP and supported 8.9 million jobs that generated $1.3 trillion in annual compensation.  Export strength in digital products and services also serves as a key foundation promoting U.S. competitiveness on the global stage.  

Further, restrictions to cross-border data flows, requirements to localize data, and obstacles to operate cloud services abroad all directly harm companies exporting goods and services across industries and of all sizes.  This is very much true for services providers, where 70 percent of U.S. services exports are made up of digitally-deliverable services and impacting sectors such as financial services and entertainment (where global markets have contributed to a boom in recent years).  However, companies in the goods world would also be hit by data localization mandates and cross-border data flow restrictions.  For example, automotive and pharmaceutical companies depend on data flows both to operate abroad as well as to conduct testing to ensure safety standards are met and strengthen their products.

USTR defended its decision to scale back inclusion of digital trade barriers by stating the agency is returning the report to “its stated statutory purpose” and that every government “has the sovereign right to govern in the public interest and to regulate for legitimate public policy reasons.”  

First, the claim that this reverts the report back to its “statutory purpose” is dubious—the 1974 Trade Act does not include any caveats in the section delineating the obligations for the NTE regarding whether a country behind any given barrier argues it is regulating in the public interest.

Second, and more importantly, the argument regarding what is suggested as justifiable discrimination is problematic and could have repercussions.  Of course, it is true that every country has the power and right to issue laws, rules, and regulations in the public interest—however, ceding such broad discretion regarding discriminatory or otherwise unfair practices in foreign markets undermines the very purpose of trade norms and rules—to voluntarily refrain from implementing policies that harm trade partners.  “Legitimate” is often in the eye of the beholder.  Governments generally adopt laws and regulations in the furtherance of what they would likely label as “legitimate public policy reasons,” even if those policies are harmful to imports from a specific or all other countries.  For governments enacting distortive industrial policy strategies, the discriminatory or harmful nature of the policy may actually be a central aspect of what the government sees as a legitimate public policy reason, whether that is to catalyze local production or boost employment in certain industries.  The removal of specific barriers from this report with the explanation implies that governments can pursue targeted or otherwise harmful policies for U.S. exports and claim it is in the public interest to be deemed justified and evade USTR scrutiny.  

More concerning in the near-term, the exclusion of such a broad swath of digital trade barriers with the suggestion that they are legitimate declares to these countries that they are justified in these actions and demonstrates to third-party countries that they are free to impose similar obstacles to U.S. digital products and services.  Of course, if the goal is to lay the foundation for protecting one’s own, newly-designed glass house, to shield it from attack by one’s trade partners, one might discern a certain logic. But, at least in the digital sphere, U.S.-proposed laws, regulations, or policies that would invite such challenges are absent, and thus declining to address foreign barriers only hurts U.S. interests, with no corresponding benefit.

The Barriers that USTR Removed Are Harmful to U.S. Economic Interests 

Looking closer at the barriers that were removed between the 2023 and 2024 reports, a broad trend that barriers to the cross-border delivery of digital products and services are now seen as reasonable becomes clear.  To the extent these laws, proposals, or regulations are now seen as acceptable by the United States, it can carry consequences for companies not only in these markets but others that may decide to adopt similar restrictive policies.  It is unclear why these barriers are now seen as justifiable by the U.S. government.  

Below are some of the most prominent trade barriers that appeared in the 2023 NTE and that clearly disadvantage U.S. firms that have since been dropped by USTR:

Online News

References to laws that require online services providers to make mandatory payments to news publishers for the presence of any news content, including hyperlinks, have been removed in this year’s NTE after being included in the last few iterations.  Specifically, Australia’s News Media Bargaining Code and Canada’s Online News Act, both of which exclusively target U.S. digital exports and pose threats to the online ecosystem writ large, are no longer listed as significant barriers to trade in the report, despite neither law changing in any meaningful way to alleviate concerns. 

European Union

References to the EU’s Digital Markets Act (DMA) have been removed from the report entirely.  The law is still highly experimental and disproportionately affects U.S. companies—the European Commission has designated six companies as so-called “gatekeepers” under the DMA, and five out of those six companies are from the United States, while the sixth is Chinese.  Meanwhile, this still-burgeoning concept of “gatekeeper” is being applied to industrial data markets through the DATA Act and is being considered for the online banking realm through the Payment Services Regulation, thereby restricting U.S. companies from these sectors.  As such, the threat of this law to U.S. exports, and massive compliance burden it entails is very much a live issue, but is no longer labeled a significant barrier through the NTE—suggesting free reign for the application of the “gatekeeper” label to spread to other sectors, shutting out U.S. companies, and empowering other governments to adopt regulations where the consequences are not yet known.  The DMA is clearly a barrier and in concert with the Digital Services Act would reportedly impose vast costs on U.S. businesses and smaller companies, but whether or not it is justified is not yet known—deleting it, therefore, is a premature stamp of approval on a policy for which the potential harms or benefits have not yet materialized.  The Digital Services Act has also been cut significantly from detailing the different obligations under the law for “Very Large Online Platforms” to instead solely focusing on the law’s impact on intellectual property rights such as copyrights and trademarks.

Elsewhere in the NTE, references to the EU’s AI Act and the DATA Act have been greatly diminished, restricted to narrow references to trade secrets and proprietary information.  As both develop, it is critical that the U.S. government remains wary of tiered oversight models whereby U.S. companies receive higher levels of scrutiny or punishment compared to those of European or third-party origin.  This is particularly visible for the DATA Act, which features prescriptive rules on when, where, and how companies should be able to access, process, and share non-personal and personal data with other companies and governments. The DATA Act would prohibit U.S. companies from becoming third parties to receive IoT data in Europe if designated as “gatekeepers;” create a separate regime for non-personal data, and in practice has the potential to also sweep in personal data, transferred internationally for cloud services providers subject to third party countries’ data access requests; and by potentially empowering national regulators to oversee aspects of the proposal, it would raise the possibility of duplicative enforcement throughout the 27 member states. Such regulation could leave U.S. companies at a distinct disadvantage compared to Europeans in a constantly innovating and growing IoT market—all of which is left out of this year’s NTE.


This year, USTR removed references relating to:

  1. barriers to building and maintaining submarine cables
  2. digital taxation and duty reporting requirements
  3. financial services regulations that require data localization for certain banking data
  4. the Personal Data Protection Law No. 27, which was described by USTR in last year’s report as imposing “requirements for data collection, processing, and transfer, as well as criminal and administrative penalties for violations, and may restrict cross-border data flows.” 

USTR did include a regulation (​​MOF Regulation No. 190/PMK.04/2022) that imposes obligations for customs declarations within 30 days of receiving payment for the importing of digital products (which could sweep in potentially all software downloads).  However, the NTE language has been significantly adjusted: last year its focus was on “cybersecurity, privacy, and data protection concerns,” noting the impact on small-and-medium sized enterprises, and potentially undermining the moratorium on customs duties on electronic transmissions at the World Trade Organization; this year the harms are most glossed over, to a much more scaled-back “paperwork retention requirement that is undefined and uncertain.”


This year’s NTE removed reference to the Act on Improving Transparency and Fairness of Digital Platforms and the two reports on “competition for mobile operating systems and for voice assistants and wearables, with the eventual goal of possible regulation under the Transparency Act” published by the Digital Market Competition Headquarters.  Similar to the concerns regarding the DMA, the fact that USTR has removed this barrier at such a nascent stage of the regulation signals a lack of U.S. concern regarding the experimental regulatory proposals suggested in these reports, which include forcing digital platforms to share data with third parties and to provide third parties access to analytics (such as click-and-query search data); restrictions on platforms using data across services; and harming intellectual property by imposing obligatory sharing of trade secrets and copyright.


This year’s NTE has removed reference to the 2016 Law on the Protection of Personal Data, which was previously described by USTR in last year’s report by explaining that “[r]estrictions on the flow of data have a significant effect on the conditions for the cross-border supply of numerous services and for enabling the functionality embedded in smart devices.” Circular 2019/12—a data localization measure—and the Law on Regulation of E-Commerce (Law No. 6563) were also excluded in this year’s report after inclusion last year. 


Although USTR included the highly-problematic Law on Cybersecurity as a barrier, it downplayed a data localization measure issued under the law—Decree 53—in this year’s report after including a lengthy explanation of the data localization hurdles last year.  Last year, USTR noted that the Decree required all domestic companies, including subsidiaries of foreign investors, to “store a copy of Vietnamese user data on servers located within Vietnam and establish a physical office in Vietnam that would be under the jurisdiction of Vietnamese law enforcement. If international firms, that do business in Vietnam are found to be in violation of the Law on Cybersecurity, then Vietnam’s Ministry of Public Security (MPS) could force the firms to localize their data as well, following a 12-month notification period.”  This year, the report focused more on “uncertainty around the scope of specific requirements for businesses as they apply broadly to domestic and foreign enterprises that provide services on telecommunications networks or the Internet, or that provide other value-added services in cyberspace in Vietnam.”

The Positive Aspects of this Year’s NTE Report: The Issues Included by USTR

Despite all of the above, it is important to note that USTR did include several barriers to digital exports in this year’s report.  This reflects commendable, continued work in important areas including problematic policies on cloud services providers, online streaming requirements and obligatory funding mechanisms, and network usage fees, among other specific data localization and cross-border data flow restrictions.  The following measures were included in USTR’s 2024 NTE report:

  • Australia’s online streaming funding obligations.
  • Canada’s online content funding obligations through the Online Streaming Act and Digital Services Taxes.
  • The European Union’s EU Cybersecurity Certification Scheme for Cloud Services (EUCS), network usage fees, and Digital Services Taxes.
  • Indonesia’s GR 71/2019 which requires “private sector electronic system operators (ESOs) to facilitate supervision by government agencies, including by granting access to electronic systems and data for monitoring and law enforcement purposes.”  Also included, with adjusted language as previously mentioned, was Regulation No. 190/PMK.04/2022 on mandatory digital product customs declaration.
  • Korea’s network usage fees, restrictions on the export of geospatial data, and barriers to the public secret market for cloud services providers posed by the Cloud Security Assurance Program (CSAP).  However, although the original CSAP regime was included by USTR in this year’s report, the 2023 amendments to the program that have since meant that no foreign supplier has been able to provide service under the program were not included.
  • Vietnam’s online content proposals for over-the-top radio and television in Decree 71; the Revised Telecom Law; the Law on Cybersecurity and Decree 53 with adjusted language as previously discussed; strict online content restrictions implicating free speech and online services providers’ ability to operate in Decree 72; and the Personal Data Protection Decree (Decree 13/2023/ND-CP).

The Scaling Back of Digital Trade Language in the National Trade Estimate Report is Part of a Continuing and Concerning Trend

This move to trim the NTE of barriers in the digital space does not come in a vacuum.  In the past year, USTR has significantly receded from defending U.S. interests in the digital trade space.  In October, USTR announced that the United States was withdrawing support for key digital trade rules at the World Trade Organization’s Joint Statement Initiative on E-Commerce (JSI) to ensure that participating countries’ firms receive reasonable treatment with respect to cross-border data flows, data localization, and the protection of companies’ source code.  Then, in November, it emerged that the United States rescinded those same digital trade rules at the Indo-Pacific Economic Framework (IPEF).  

The United States is alone in this regard when compared to its allies in the region that are also members of the IPEF initiative that the United States itself was central to generating with the goal of “restoring U.S. economic leadership in the region and presenting Indo-Pacific countries an alternative to China’s approach to these critical issues,” as Secretary of Commerce Gina Raimondo told reporters at the launch of the framework.  IPEF members are themselves seeking strong digital trade rules with partners.  For example, Kevin Rudd, Australian Ambassador to the U.S., told an audience in July when discussing IPEF: “Some say in the case of digital trade that it only benefits big corporations. We in Australia don’t see it this way.”  Additionally, Singapore has signed Digital Economy Agreements with several other fellow IPEF members (New Zealand, Australia, and South Korea) with strong provisions since 2020.  Japan has been a leader in digital trade, including in partnership with the United States by striking a Digital Trade Agreement in 2019.

The United States has abdicated leadership in this realm with the argument that it must provide “policy space” for domestic and foreign legislators and regulators “examining their approaches to data and source code, and the impact of trade rules in these areas.”  Jonathan McHale has detailed why such arguments are flawed and should not result in abandoning digital trade rules on the international stage.  Countries have been free to regulate in the public interest since the onset of trade rules through the General Agreement on Tariffs and Trade—so long as those rules do not discriminate against a supplier or producer from a specific country through thresholds or other means.  This remains true today, and despite hundreds of trade agreements globally, governments have continued to legislate and regulate.

To read the full article as it appears on the Disruptive Competition Project’s website, click here.