[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]



 
 EXPANDING U.S. DIGITAL TRADE AND ELIMINATING BARRIERS TO U.S. DIGITAL 
                                EXPORTS

=======================================================================

                                HEARING

                               before the

                         SUBCOMMITTEE ON TRADE

                                 of the

                      COMMITTEE ON WAYS AND MEANS
                     U.S. HOUSE OF REPRESENTATIVES

                    ONE HUNDRED FOURTEENTH CONGRESS

                             SECOND SESSION

                               __________

                             JULY 13, 2016

                               __________

                          Serial No. 114-TR03

                               __________

         Printed for the use of the Committee on Ways and Means
         
         
         
         
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]         





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                      COMMITTEE ON WAYS AND MEANS

                      KEVIN BRADY, Texas, Chairman

SAM JOHNSON, Texas                   SANDER M. LEVIN, Michigan
DEVIN NUNES, California              CHARLES B. RANGEL, New York
PATRICK J. TIBERI, Ohio              JIM MCDERMOTT, Washington
DAVID G. REICHERT, Washington        JOHN LEWIS, Georgia
CHARLES W. BOUSTANY, JR., Louisiana  RICHARD E. NEAL, Massachusetts
PETER J. ROSKAM, Illinois            XAVIER BECERRA, California
TOM PRICE, Georgia                   LLOYD DOGGETT, Texas
VERN BUCHANAN, Florida               MIKE THOMPSON, California
ADRIAN SMITH, Nebraska               JOHN B. LARSON, Connecticut
LYNN JENKINS, Kansas                 EARL BLUMENAUER, Oregon
ERIK PAULSEN, Minnesota              RON KIND, Wisconsin
KENNY MARCHANT, Texas                BILL PASCRELL, JR., New Jersey
DIANE BLACK, Tennessee               JOSEPH CROWLEY, New York
TOM REED, New York                   DANNY DAVIS, Illinois
TODD YOUNG, Indiana                  LINDA SANCHEZ, California
MIKE KELLY, Pennsylvania
JIM RENACCI, Ohio
PAT MEEHAN, Pennsylvania
KRISTI NOEM, South Dakota
GEORGE HOLDING, North Carolina
JASON SMITH, Missouri
ROBERT J. DOLD, Illinois
TOM RICE, South Carolina

                     David Stewart, Staff Director

                   Nick Gwyn, Minority Chief of Staff

                                 ______

                         SUBCOMMITTEE ON TRADE

                DAVID G. REICHERT, Washington, Chairman

DEVIN NUNES, California              CHARLES B. RANGEL, New York
ADRIAN SMITH, Nebraska               RICHARD E. NEAL, Massachusetts
LYNN JENKINS, Kansas                 EARL BLUMENAUER, Oregon
CHARLES W. BOUSTANY, JR., Louisiana  RON KIND, Wisconsin
ERIK PAULSEN, Minnesota              BILL PASCRELL, JR., New Jersey
KENNY MARCHANT, Texas                LLOYD DOGGETT, Texas
TODD YOUNG, Indiana
MIKE KELLY, Pennsylvania
PAT MEEHAN, Pennsylvania


                            C O N T E N T S

                               __________
                                                                   Page

Advisory of July 13, 2016 announcing the hearing.................     2

                               WITNESSES

Usman Ahmed, Head of Global Public Policy, PayPal Inc............    61
Robert Atkinson, President, Information Technology and Innovation 
  Foundation.....................................................     6
Michael Beckerman, President and CEO, Internet Association.......    38
Christopher Padilla, Vice President--Government and Regulatory 
  Affairs, IBM Corporation.......................................    31
Kavita Shukla, Founder and CEO, Fenugreen LLC....................    55

                       SUBMISSIONS FOR THE RECORD

Ebay.............................................................    91
Etsy.............................................................    95
Jennifer Topolski................................................   100
Public Knowledge.................................................   102


 EXPANDING U.S. DIGITAL TRADE AND ELIMINATING BARRIERS TO U.S. DIGITAL 
                                EXPORTS

                              ----------                              


                        WEDNESDAY, JULY 13, 2016

             U.S. House of Representatives,
                       Committee on Ways and Means,
                                     Subcommittee on Trade,
                                                    Washington, DC.

    The Subcommittee met, pursuant to call, at 10:04 a.m., in 
Room 1100, Longworth House Office Building, the Honorable Dave 
Reichert [Chairman of the Subcommittee] presiding.
    [The advisory of the hearing follows:]
    
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    Chairman REICHERT. The Committee will come to order. Good 
morning. The Subcommittee will come to order, and welcome to 
the Ways and Means Trade Subcommittee hearing on Expanding U.S. 
Digital Trade and Eliminating Barriers to U.S. Digital Exports. 
Before hearing from our witnesses, I would like to make a few 
points. Shocking. Huh? Politicians wanting to make a few 
points. We will all get an opportunity to do that.
    The United States is far and away the world's leading 
exporter of digital goods and services. This is a great 
position for the U.S. to be in because digital trade is growing 
at a rapid pace. And this means more jobs and more 
opportunities for Americans across the country.
    Our country is succeeding in digital trade because of the 
innovative spirit of the American people and American companies 
of all sizes. Our companies lead the world in creating digital 
products and content as well as in data storage and analysis. 
In fact, United States based Web sites represent more than half 
of the top 100 Web sites in every region of the world, except 
Europe.
    In order to remain the global leader of digital trade, we 
must maintain access to the world's expanding digital markets. 
Digital trade, including the use of online platforms data 
flows, benefits both high tech companies and traditional 
companies in a wide range of industries like manufacturers, 
retailers, and service providers. These businesses depend on 
digital platforms to export goods and services. Small 
businesses, in particular, benefit from the opportunities that 
digital trade provides through global digital platforms, 
including e-commerce Web sites such as Amazon, search engines 
such as Microsoft Bing, and payment systems such as PayPal. And 
when our companies are successful because of digital trade, 
they grow and create more jobs here at home.
    We must build on the great success of the United States 
companies. We need to do more to tear down barriers to U.S. 
digital exports so we can allow our job creators to grow. For 
example, too many of our trading partners have imposed or 
threatened requiring the storage of data in country, which can 
make it impractical for U.S. companies in various industries to 
serve or even obtain customers in those markets.
    Arbitrary blocking of cross-border Internet traffic, which 
effectively prohibits digital trade by U.S. companies, is 
another long-term problem in many countries throughout the 
world. China is a particularly extreme example. In addition, 
inadequate protection of intellectual property rights, such as 
digital piracy of media or software, hurts our innovative 
companies.
    Trade agreements can be an effective tool to lower these 
and other barriers in open markets for America's digital 
products. Many of the problems our digital exporters now face 
arose after our existing trade agreements were negotiated years 
ago. And that is why Congress set forth important new and 
expanded principal negotiating objectives relevant to digital 
trade in goods and services and cross-border data flows in the 
bipartisan Congressional Trade Priorities and Accountability 
Act that became law last year. That was a mouthful.
    Our future trade initiatives must reflect these priorities. 
In that regard, I believe TPP holds great promise to tear down 
barriers hurting digital trade. It would prohibit tariffs on 
digital goods, including software, video, and music. It would 
facilitate trade of both digital and physical goods by 
encouraging paperless trading and requiring the recognition of 
electronic signatures.
    TPP also includes commitments to ensure the free flow of 
global information and data at the heart of digital economy. It 
would prohibit data localization measures, but I share the 
disappointment of many Members of Congress and the Financial 
Services Committee that financial services were excluded from 
this localization commitment.
    I believe that the administration has heard our concerns, 
and I appreciate the administration is working constructively 
to address this issue. I welcome our continued work to create a 
clear and enforceable ban on localization requirements in this 
sector for all TPP countries. Resolving this issue and other 
outstanding issues, as well as developing implementation plans 
to assure that TPP will be fully implemented and enforced, is 
essential to getting congressional support for TPP.
    Finally, the negotiation of a trade agreement with the EU 
and the trade and services agreement with 22 parties both hold 
great promise for digital exports as long as they are 
comprehensive, high-standard agreements that address the 
barriers faced by digital exporters and do not exclude import 
sectors such as financial services.
    I will now yield to Mr. Rangel for his opening statement.
    Mr. RANGEL. Thank you, Mr. Chairman, for calling this 
hearing.
    And I welcome all of our witnesses and look forward to 
hearing your testimony.
    Gone are the days where trade simply meant reducing tariffs 
and limiting quotas for imported products. Trade policy now 
addresses much more difficult issues, as one can see from the 
length of modern trade agreements. One of our biggest areas of 
expansion have been on issues related to digital trade. U.S. 
trade policy now addresses issues such as cross-border data 
flows, enforced localization policies that some countries have 
implemented to force companies to store data within their own 
borders. These digital trade policies have been endorsed by a 
wide range of stakeholders.
    Not only have these provisions been applauded because of 
their commercial significance, but many NGOs, think tanks, and 
academies have also praised the revision because of the impact 
of maintaining a free and open Internet. This is one of the few 
areas in international trade policy where one can find very, 
very broad agreement. But we can't lose sight of the bigger 
picture. The public debate on trade today touches on a much 
broader range of issues and are much bigger and more 
controversial issues than the digital trade issues we will be 
discussing today.
    These issues range from who actually benefits from trade in 
our trade agreements, and to whether we have the infrastructure 
and training programs in place to take advantage of the 
opportunities that may arise as the result of our trade 
agreements. We need to be much more focused than we have been 
on addressing these bigger picture issues if we want to begin 
and establish a consensus in bipartisanship on trade.
    Mr. Chairman, there are some political questions as to 
whether or not the Congress is going to be dealing with the 
question of TPP. There is some political questions as to how 
many votes we will have. There are serious questions as to 
people being afraid that they are going to lose jobs. One way, 
in my opinion, that we can eliminate these fears would be to 
tie in the questions that we are raising today, and that is 
technology. Nobody can challenge the fact that, with TPP, we 
are going to have to have a workforce that is extremely 
talented in math, science, and technology.
    And in addition to that, the greatest trade agreement in 
the world cannot be effective without a strong infrastructure. 
The Congress refuses even to discuss these issues. It would 
seem to me that if the President and the Congress could find 
some way to bring these issues together where the person on the 
street may not see an opportunity for him or herself, but 
certainly for their children to know that there will be jobs in 
infrastructure, the kids will be educated to meet the needs of 
the future, I think that in this administration we can get 
something done. Nevertheless, this is such an important part of 
a trade agreement that we don't discuss. And I welcome the 
opportunity to listen to the witnesses.
    And I yield back the balance of my time.
    Chairman REICHERT. Thank you, Mr. Rangel. And we would 
agree, I think, on both sides of the aisle that trade 
agreements are normally a difficult process for us to work 
through. We want to get it right because it is about creating 
jobs across this country and having the ability to sell our 
products across the globe. And I do think you are correct in 
recognizing the importance of a highly educated force in our 
country and preparing them for especially the new jobs that 
will be supplied in the area of high tech, and especially as it 
relates to technology and trade.
    And that is really the purpose of today's hearing, is to 
really expose and educate those who may not know how the world 
works today regarding technology and trade, and the benefits 
that it provides to Americans and jobs and how we must begin to 
prepare to enter in that sort of a market. So today, we are 
joined by five witnesses who will help us understand this issue 
a lot more. We will have lots of questions for you after your 
testimony.
    The first witness is Mr. Robert Atkinson, president of 
Information Technology and Innovation Foundation. Our second 
witness is Mr. Christopher Padilla, vice president of 
Government and Regulatory Affairs of IBM Corporation. Our third 
witness is Mr. Michael Beckerman, president and CEO of Internet 
Association. Our fourth witness is Ms. Kavita Shukla, cofounder 
and CEO of Fenugreen. Finally, our fifth witness is Mr. Usman 
Ahmed, head of global public policy at PayPal.
    Before recognizing our first witness, let me note that our 
time is limited. So please limit your testimony to 5 minutes, 
and a reminder to members to keep their questioning to 5 
minutes.
    Mr. Atkinson, you are recognized for your 5-minute 
statement.

STATEMENT OF ROBERT ATKINSON, PRESIDENT, INFORMATION TECHNOLOGY 
                   AND INNOVATION FOUNDATION

    Mr. ATKINSON. Thank you, Chairman Reichert, Ranking Member 
Rangel, and Members of the Committee. It is a pleasure to be 
here today to talk to you about this important issue.
    I would like to make three main points. The first point is 
that as information technology has improved over the last 
decade, it has become increasingly easy for companies to share 
data across borders. And not just easy, but necessary. As we 
have global supply chains, and as U.S. firms, even big and 
small become more global, they need to be able to move this 
data across borders.
    Companies that are doing this, though, as the chairman 
mentioned, are not just the high tech companies, some of who 
are on this panel, but firms in a wide array of industries: 
Agriculture, mining, retailing, banking. For example, consumer 
products companies like Proctor and Gamble, machinery companies 
like Caterpillar, retailers like Walmart, aerospace firms like 
Boeing, automobile manufacturers like Ford, and other 
manufacturers like GE for their aircraft engines, wind 
turbines, and industrial equipment, all of these companies rely 
on the ability to move data across borders for their 
competitive success.
    Unfortunately, though, dozens of countries now have put in 
place barriers and prohibitions that limit the ability to move 
data across borders, china being perhaps one of the worst 
examples. They, for example, prohibit firms from processing or 
storing offshore financial and credit data on Chinese citizens. 
Malaysia's Personal Data Protection Act requires that all data 
on Malaysians has to be stored on local servers. And South 
Korea has the same kind of policy. And these are just a few of 
the restrictions. Increasingly, we are seeing more and more 
countries adopt these policies, either because they think they 
are going to get jobs and protect and defend their domestic 
companies, or misguided orientation beliefs on privacy.
    This hurts the U.S. economy in three main ways. One is that 
data localization by definition means that economic activity 
that could be in the U.S. is now going to be overseas. You are 
not going to have a data center here if you have to put one in 
Brazil or Vietnam.
    Secondly, these cross-border data restrictions increase 
costs and limit innovation for U.S. firms. U.S. firms use this 
data to figure out new ways to improve their products and 
services. They use this data to cut costs. And if they can't do 
that, there will be a problem.
    And third, if they restrict U.S. firms from participating 
in these foreign markets, they are going to lose market share 
to these companies who are favored by the domestic countries.
    And I think most importantly is there is really no policy 
justification for data nationalism. Some countries are just, 
frankly, naked mercantilists. They just do this because they 
think they can and they want the jobs. Other countries, either 
they say or they believe that this is necessary for privacy. 
But it really, fundamentally, as we have shown in work, there 
is really no advantage from a privacy or commercial security 
perspective of keeping data in the country.
    To use an example, if a foreign company is in the U.S. 
providing healthcare services, they can't escape the 
requirements of HIPAA by storing the data somewhere else. They 
are subject to U.S. law. And anytime a U.S. company is in a 
foreign country doing business, they are subject to their 
privacy laws and their security laws. Where they put the data 
is irrelevant. It just has no effect.
    In fact, you could argue that the ability to store data in 
the best data centers in the world, the most secure data 
centers in the world, is actually more privacy protective than 
having to put it in every little data center in every country 
in the world. That is why I think the decision by the 
administration to exempt the financial sector from NTPP--from 
the relatively strong data localization prohibitions in TPP was 
ill advised. This rule which was at the insistence of U.S. 
financial regulators essentially sent a message that said 
something special about financial data. It is so important that 
you have to keep it local. In other words, it sent a message 
that moving data across borders was risky. And as we have 
shown, there really was no reason for that provision.
    There are already provisions in a number of different trade 
agreements and other provisions that would have let financial 
regulators get access to that data. To their credit, USTR is 
attempting to fix that and has indicated that they would not 
put it in future trade agreements. So I think they deserve 
credit for the fix.
    Lastly, this comes--what do we do in the future? I think, 
first of all, any new trade agreement that U.S. is engaged in 
shouldn't have that provision in it. And in addition, we should 
make sure that any new agreements, TiSA or TTP, and ideally, 
frankly, a new multilateral data services agreement in the WTO 
should ensure that there are strong prohibitions against data 
nationalism.
    And I will just close by saying with--Congressman Rangel's 
point about the loss of faith in trade in the U.S., and we see 
that in the current politics today. In our view, one of the 
reasons there is a loss of faith is because of other countries 
manipulating the trading system and, frankly, cheating and 
hurting U.S. companies and U.S. jobs. And I think that is why 
making sure we have these very strong prohibitions against data 
localization, data nationalization that are in the TPP and 
making sure that they extend to other agreements is going to be 
important, not just to help U.S. companies, but to restore 
faith in the trading system.
    Thank you for having me.
    Chairman REICHERT. Thank you.
    [The prepared statement of Mr. Atkinson follows:]
    
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    Chairman REICHERT. Mr. Padilla.

 STATEMENT OF CHRISTOPHER PADILLA, VICE PRESIDENT, GOVERNMENT 
            AND REGULATORY AFFAIRS, IBM CORPORATION

    Mr. PADILLA. Thank you, Mr. Chairman. A privilege to be 
here today on behalf of IBM.
    And I would make one point, and that is to say this from 
IBM as a technology company, the digital trade is not a 
technology company issue. It is about every industry, because 
every industry and all consumers are becoming increasingly 
digital. And to illustrate that point, I would like to use an 
example, a hypothetical example.
    Imagine that you as Members of the Committee were invited 
to Brussels by the European Parliament for an 
interparliamentary dialogue on trade. If you check in for an 
evening flight to Brussels via London, the minute you do so, 
the airline sends data ahead of you to Heathrow to facilitate 
the transfer of your baggage between flights, to send security 
and customs clearance information, and even to communicate your 
meal preferences for the next flight.
    While you are flying, the engines on your aircraft are 
automatically transmitting data ahead of you to ground crews in 
London via a satellite link through a data center in the United 
States saying that they need some minor maintenance when the 
plane lands. When you land at Heathrow, you might take 
advantage of your layover to use your U.S. ATM card to get some 
local currency. You might post a few photos on your Facebook 
account. You might check The Weather Channel app on your iPhone 
to see if it will be raining in Brussels, which it probably 
will be. And you might even use the app on your device to look 
at the Wimbeldon app and watch Serena Williams win another 
championship.
    You are not even in Brussels yet, and in less than 12 hours 
you have created, caused, or benefited from literally scores of 
cross-border movements of data. Your flight information, your 
baggage count, your meal preferences, your banking transaction, 
your Facebook post, your weather inquiry, and even your sports 
fix would not have been possible or as easy if data were not 
permitted to flow freely in the cloud.
    And at IBM we know this because we touched each one of 
those transactions through your airline reservation system, 
through engine maintenance systems, through banking networks 
all run and managed by IBM. Or the IBM Weather Channel app on 
your iPhone, which is the most downloaded app there is. Or if 
you watched Wimbeldon on your Wimbeldon app on your device, 
that came too from IBM. And we supported it through data 
centers in Toronto; New York; San Juan, Puerto Rico; Melbourne; 
and London.
    Now, imagine for a minute that your trip had proceeded, but 
there were onerous rules preventing your data from going ahead 
of you to Europe or if the data you generated while you were in 
Europe was required to stay there within the European Union. 
This is not a hypothetical risk. In fact, there was a very real 
possibility, just a few months ago, that transatlantic data 
flows might have been interrupted, absent a special US/EU 
privacy shield agreement signed just yesterday in Brussels to 
allow those flows to continue. There is continued pressure for 
digital protectionism from France to India to Brazil to China. 
Countless countries are seeking to restrict the flow of data or 
require that it be stored locally.
    So the point is that this is not just an issue for 
companies like IBM. It affects countless industries: Airlines, 
express delivery firms, retailers, banks, engine manufacturers, 
and every one of us as a consumer. The simple fact is this: If 
data cannot flow freely, 21st century commerce cannot happen. I 
am happy that Congress and the administration recognize this 
with language in Trade Promotion Authority supported on a 
strong bipartisan basis that made clear that this should be a 
strong negotiating objective of the United States in future 
trade agreements.
    And in TPP, the United States has negotiated the most far 
reaching, groundbreaking really, provisions regarding digital 
trade ever seen in a trade agreement. These protect the cross-
border movement of data and prevent regulations that require 
data to be stored locally. They also set a vital precedent for 
every future agreement, particularly our current negotiations 
with the European Union.
    American companies are leaders in digital trade, as you 
said, Mr. Chairman, and, therefore, we have the most to lose 
from digital protectionism or data nationalism. Data touches 
each of our lives every day. But by negotiating trade 
agreements and trade rules to keep that data flowing freely, 
not only do we protect commerce, but we protect the freedom of 
expression, as Mr. Rangel said. This is United States 
leadership, and we are once again leading toward a more 
prosperous, open, and interconnected future.
    Thank you for the opportunity to be here.
    Chairman REICHERT. Thank you.
    [The prepared statement of Mr. Padilla follows:]
    
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    Chairman REICHERT. Mr. Beckerman.

  STATEMENT OF MICHAEL BECKERMAN, PRESIDENT AND CEO, INTERNET 
                          ASSOCIATION

    Mr. BECKERMAN. Thank you, Mr. Chairman and Ranking Member, 
Members of the Committee. I appreciate the opportunity to 
testify on digital trade.
    My name is Michael Beckerman, and I am president and CEO of 
the Internet Association. Internet Association represents 
nearly 40 of the world's leading Internet companies. And our 
mission is to foster innovation, promote economic growth, and 
empower people through the free and open Internet.
    I will focus my testimony this morning on two key points. 
The first being that the importance of the effective digital 
trade policies will provide a frictionless access to global 
markets. And second, I will talk about the Internet 
Association's trade policy recommendations that I think will 
help grow the economy. And I ask that my full written testimony 
be submitted for the record.
    Internet platforms are the global engine of the innovation 
economy. The Internet sector represents an estimated 6 percent 
of U.S. GDP in 2014, totaling nearly $1 trillion and nearly 3 
million American jobs. In addition to the economic contribution 
to the Internet industry, our member companies are transforming 
the way we do business at home and abroad by lowering barriers 
to entry and providing unprecedented growth opportunities for 
American businesses, large and small, and entrepreneurs.
    The Internet, I believe, is the greatest American exporter 
of the 21st century, and cross-border trade is no longer only 
defined by shipping containers or freight lines. Today, trade 
is just as likely to be data flowing freely across borders or 
even a swipe of an app.
    In addition to borne Internet industries, the Internet is 
yielding dramatic benefits for traditional industries that have 
nothing to do with technology at all. In a recent study, we 
found that more than 75 percent of the economic value that has 
been generated from the Internet is being captured by companies 
in traditional industries. Many of them are small businesses 
from agriculture to manufacturing and beyond. And it is no 
accident that many of the world's leading Internet companies 
have been born and are scaled here in the United States, 
something that we should be proud of and encourage.
    But while the Internet has become a major driver of 
economic activity and global growth around the world, 
governments have continued to engage in harmful policies that 
we think need to be addressed. These include activities that 
block and censor content or mandate that data be stored 
locally. These activities directly threaten the free and open 
nature of the Internet and act as digital protectionism that 
stifles trade and investment.
    The ability of Internet platforms to export innovative 
online services to new markets is also dependent on a foreign 
country's ability to promote balanced and equitable enforcement 
of intellectual property rights. Without adequate limitations 
and exceptions in copyright law, such as fair use, the Internet 
industry would face significant barriers to entry in foreign 
markets, and U.S. creators would lack sufficient freedom to 
create and distribute new works abroad. Outside the area of 
intellectual property, intermediary liability protections, 
reflected in Section 230 of the Communications Decency Act, 
provide the backbone of Internet policy by enabling U.S. 
companies to host user-generated content without being held 
liable.
    The Internet ecosystem flourishes when users and content 
creators are empowered through an open architecture that 
promotes free expression and unrestricted exchange of ideas and 
information. The Internet Association strongly supports 
including intermediary liability protections and trade 
agreements like TiSA and others to promote e-commerce and 
democratic discourse.
    Historically, pro-Internet policies have been absent from 
trade agreements. While we recognize there may be a diversity 
of views on TPP, we feel that the TPP does acknowledge the 
benefits of the full balance of copyright law, requiring 
countries to adopt innovation critical limitations and 
exceptions, as well as safe harbors to protect the basic 
functionality of the Internet. The TPP also promotes a more 
inclusive trade economy by supporting the ability of small 
businesses to use the Internet to serve customers and users in 
key markets globally by streamlining the customs process and 
increasing the de minimis limits for small businesses.
    We believe that the true test of any trade agreement should 
be judged by its implementation. And we look forward to working 
with both the Committee and the administration to ensure that 
digital trade provisions in TPP and other agreements 
thoughtfully are implemented.
    And finally, as I close, we hope that the Committee will 
continue to work closely with the Internet community to find 
ways to create a more inclusive system for negotiating trade 
agreements, such as creating a chief digital trade negotiator 
that will better reflect the realities of today's digital 
Internet economy.
    And with that, I want to thank you for having me testify 
today. And I look forward to any questions the Committee may 
have.
    Chairman REICHERT. Thank you.
    [The prepared statement of Mr. Beckerman follows:]
    
    
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    Chairman REICHERT. Ms. Shukla, you are recognized.

   STATEMENT OF KAVITA SHUKLA, FOUNDER AND CEO, FENUGREEN LLC

    Ms. SHUKLA. Chairman Reichert, Ranking Member Rangel, and 
Members of the Committee, thank you so much for the opportunity 
to be here today and to share my story.
    My name is Kavita Shukla. I am the founder and CEO of 
Fenugreen FreshPaper, which is a social enterprise taking on 
global food waste with a really simple innovation. FreshPaper 
actually began as my middle school science project. It was 
inspired by a trip to visit my grandparents in India. And when 
I accidentally drank some unfiltered tap water, my grandmother 
gave me a homemade mixture of spices as a remedy. And when I 
didn't get sick, I became really curious.
    So back home in Maryland, I started tinkering around with 
different spices and jars of dirty pond water. And I started to 
observe that it seemed like some of the spices were slowing 
down the growth of bacteria and fungus. And one day, when I was 
at the grocery store with my mom and I saw some moldy 
strawberries, I began to wonder if perhaps I could apply my 
spice mixture to keeping food fresh.
    And so to make a long story short, after spending most of 
my high school years meticulously rotting fruits and vegetables 
in my garage, I created FreshPaper, infused only with organic 
spices that can keep food fresh for up to two to four times 
longer.
    Today, we lose more than 25 percent of our world's entire 
food supply to spoilage. FreshPaper poses a really simple and 
sustainable solution to the massive global challenge of food 
waste.
    I was a senior in high school when I found out that I would 
be issued a patent for FreshPaper. It was a pretty unlikely 
outcome to my story, possible only in this country. I was 
aware, even at that age, that my grandmother, with all of her 
brilliance, she never had the opportunity to pursue her ideas. 
And here I was 17, I had a patent, and I was on my way to 
Harvard to pursue mine.
    So as soon as I got to college, I set out to build a 
nonprofit. But what I really ended up learning is how hard it 
can be to give something away for free. And like many aspiring 
entrepreneurs, I started to believe that I would need more 
experience, more money, more resources, just more than I had 
and more than I was. And I stopped believing that I alone would 
ever be enough to bring my idea out into the world.
    So it wasn't until the summer of 2011, nearly a decade 
after I first started working on my science projects, that I 
finally had the courage to take just one more step with my 
idea. And I decided to take it to my local farmers market in 
Cambridge, Massachusetts. I stayed up all-night and handmade a 
batch of FreshPaper in the kitchen of my tiny studio apartment. 
And early the next morning, my cofounder and I stood on the 
streets just handing out sheets to anyone who would stop by. 
Our hope, really, was to help our local community have greater 
access to fresh, healthy food.
    But as the weeks went on, we were amazed by the response. 
What we really started to hear from people was that FreshPaper 
was making it possible for them to afford eating fresh, healthy 
food and feeding it to their families. And so I was inspired to 
think a little bit bigger.
    I set up an online store, and on a whim we enabled 
international markets. In less than a minute, FreshPaper was 
available worldwide. And while we were only selling FreshPaper 
in one local store, the Harvest Co-op, we were shipping 
FreshPaper to places like Spain, Australia, Canada, the U.K., 
Indonesia, Japan, and Brunei. I now joke that we went global by 
accident. With just a few errant clicks, my farmers market 
stand had access to an almost infinite global market.
    But, of course, at the time we had no idea how to ship 
globally. But at every roadblock we Googled our way out, and we 
discovered that there were digital tools to actually make this 
a reality. We found that PayPal could collect foreign payments, 
that Intuit QuickBooks could help us keep track of our 
earnings, and that UPS had a program, Mail Innovations, that 
really simplified customs.
    So even though we had started with less than a thousand 
dollars, we had no outside funding, no marketing budget, and 
really no experience, within a few months, we were carting 
wheelbarrows of orders to our local post office and shipping 
our made-in-USA product to places I could have never imagined. 
Those international orders helped us keep our fledgling 
business alive, giving us time to build our customer base 
locally.
    Today, FreshPaper is on the shelves of some of the largest 
retailers in the world, from Whole Foods to Walmart. And we are 
working with international distributors to bring FreshPaper to 
more retailers, farmers, and families across the globe. And 
just recently, FreshPaper became the first product to be 
launched globally by Amazon as part of Amazon Launchpad, which 
made our simple idea available in 180 countries overnight. The 
Internet took my farmers market stand global.
    But my story is not unique, and I don't believe that it 
should be. I have seen the power of international markets in an 
open global Internet. I am here because I believe we have to 
reduce barriers to unleash our country's entrepreneurial 
talents and to encourage small business owners to think global 
from day one.
    Entrepreneurs live to work hard, to hustle, to spend 
sleepless nights figuring out how to make the impossible a 
reality, to push through resistance, the naysayers, and the 
doubt. And in the unlikely event of our success, share the 
benefits with our communities, to create American jobs, to 
build factories, and to design organizations that will outlive 
us. But we cannot do it alone. We need your help. Give us 
access. Help us reduce barriers to the spread of our ideas, and 
we will work hard to figure out the rest.
    Thank you so much for the opportunity to be here.
    Chairman REICHERT. Thank you.
    [The prepared statement of Ms. Shukla follows:]
    
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    Chairman REICHERT. Mr. Ahmed.

STATEMENT OF USMAN AHMED, HEAD OF GLOBAL PUBLIC POLICY, PAYPAL 
                              INC.

    Mr. AHMED. Chairman Reichert, Ranking Member Rangel, and 
Members of the Subcommittee, I would like to thank you all for 
giving PayPal the opportunity to testify today on the important 
topic of digital trade and its impact on U.S. exports.
    PayPal operates an open, secure, and technology agnostic 
platform that businesses use to transact with customers around 
the world. With our 170 million customer accounts and 14 
million merchant accounts, PayPal is a truly global payments 
platform that is available to people in more than 200 
countries, allowing customers to get paid in more than 100 
currencies.
    About 25 percent of the volume on PayPal is cross border. 
Our PayPal PassPort tool is a free online resource designed to 
educate and empower small businesses to expand their reach by 
uncovering new peak sales opportunities outside their own 
borders. PayPal's purchase protection program offers cross-
border buyers peace of mind by reimbursing the full purchase 
price plus any shipping costs if there are any complaints. And 
this includes the purchases of services as well as digital 
goods. We also offer a seller protection program, meaning that 
both the buyer and the seller can transact with confidence. 
This trust is essential to the digital marketplace.
    Finally, PayPal's core innovation is security. PayPal does 
not expose the merchant or the consumer financial information, 
meaning that both sides of the transaction feel safe, 
particularly when transacting across borders. At PayPal we have 
sat at the center of the digital trade revolution since 1998. 
And this is a revolution that has profound impacts on the 
concept of trade as we know it. PayPal helps businesses like 
Home Depot, Uber, and Subway with their global transactions. 
But more importantly, we help hundreds of thousands of small 
businesses across the United States to go global.
    Traditionally, international trade was solely the domain of 
the largest businesses. But a small business can now use the 
Internet in combination with a host of online services 
providers to engage in trade at a geographic scale similar to 
the largest businesses. This democratization of trade has 
tremendously positive development, inclusion, and growth 
implications.
    Digital technology has helped business owners like Stan 
Carson from Wenatchee, Washington, who operates a sporting 
goods equipment store and employs 28 people, as well as Jamie 
Wankum from South Sioux City, Nebraska, who employs 10 people 
in his electronic business, to export their products to 
countries around the world.
    Over 65 percent of U.S. merchants that use PayPal and 
operate in digital trade, of our top merchants, 65 percent 
operate in digital trade. Compare this with numbers from the 
U.S. Department of Commerce, which finds that less than 1 
percent of America's companies export. When we surveyed 170 
U.S. small- and medium-size enterprises that have an online 
presence, we found that those that engaged in digital trade had 
double the sales revenue of those who only sold domestically. 
These amazing developments, though, are tempered by the 
barriers that limit the benefits of digital trade.
    In our survey of U.S. small businesses, we learned that 
shipping, regulatory compliance, and customs were the top 
barriers to small business cross-border commerce. Digital trade 
has also brought on a new wave of localization requirements, 
captured most poignantly by regulatory requests for digital 
companies to store data in country. Trade policy represents an 
opportunity to resolve some of these issues.
    The U.S. Government has already taken important steps to 
enhance the environment. The Congress passed the Customs 
Reauthorization Act, making it easier to move small e-commerce 
shipments across borders. This is actually an export promotion 
issue because U.S. online businesses often struggle with retail 
returns. The U.S. International Trade Commission has sought to 
measure the value of international trade, and the Commerce 
Department's export.gov contains templates designed to educate 
small businesses on how to engage in digital trade. Moreover, 
the United States Trade Representative has been promoting 
important language on national treatment for cross-border 
financial services, as well as small business trade 
facilitation. But more can be done.
    Customs and duties regimes can be simplified. De minimis 
levels can be raised, and a prohibition on data localization 
requirements can be expanded to cover cross-border financial 
services. The U.S. must continue to look for opportunities to 
open up the market for digital trade and create rules that 
provide certainty for small businesses and consumers that 
engage in the cross-border digital marketplace.
    Thank you again for the opportunity to address this 
Committee on this important issue. And I look forward to 
answering any questions.
    [The prepared statement of Mr. Ahmed follows:]
    
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    Chairman REICHERT. Thank you, all of you, for your 
testimony. Thank you for being here today. And we will have 
some questions for you, and I appreciate you staying for the 
questions. Like you were going to get up and leave anyway. 
Right?
    Ms. Shukla, your testimony is inspiring in this Committee 
and others. You know that, on the Ways and Means Committee, we 
have heard some pretty inspiring stories as we sit here and 
listen to the testimony of Americans who have realized the 
American dream, and still have dreams and hopes ahead. So 
congratulations on your success.
    And thank you to all of you for your testimony again today.
    You mentioned that selling on Amazon's global platform 
helped you make sales in export markets. Can you explain a bit 
more how Amazon has helped you make the most of your export 
opportunities?
    Ms. SHUKLA. Sure. You know, when I first began, I really 
just was able to click a button and make my product available 
on a lot of international markets. But one of the most 
difficult things I realized was actually getting the product to 
the end customer. And there have been so many incredible 
digital tools that have helped us. But the time was still 
actually very, very long. It would sometimes take somebody in 
Switzerland 6 to 8 weeks to get our product. And that is 
obviously a very long time. And there were significant 
regulations that we had to work out.
    So one of the amazing things about Amazon Launchpad--and we 
are still in the very early stages. So we are just starting to 
see all of the traction that is coming out of that. But one of 
the amazing things is that they helped us go through the 
compliance for all of the markets that we are selling in. So it 
was made available in all of Amazon's countries that they sell 
to, which is over 180 countries, I believe. But it also made 
the time that it takes for the customer to receive it much more 
efficient. And for a small business like ours, that is 
incredible. We can't possibly have that kind of speed or that 
efficiency in getting the product to customers. And that, I 
think, really will unleash a whole new set of opportunities for 
us, because there are so many more people we can reach. As they 
get it more quickly there is a lot of other opportunities that 
come out of that, including repeat purchases, the ability to 
work with larger customers, and farmers as well.
    Chairman REICHERT. Are there any other digital platforms 
that you have used?
    Ms. SHUKLA. So we have used Shopify and BigCommerce. We 
have used PayPal, of course, to help us do our payments. Every 
credit card company has been helpful in figuring out, from AmEx 
to Visa and MasterCard, they have all been very helpful in 
figuring out how to accept foreign payments. Because that was a 
challenge I certainly didn't foresee. Of course, it was easy to 
get an order, but then customers wanted to pay in different 
ways. We had to make sure if we needed to process a refund, 
there was as way to do that, if the product didn't show up or 
got caught in customs.
    But I think the opportunity right now with Amazon 
simplifies kind of all of that because all we do now is ship it 
to one of their warehouses abroad or even domestically, and 
they will take it abroad. So I think we are excited to see what 
happens as we launch on Launchpad, because I think it will be a 
very different way of doing business for us. A lot less hassle, 
a lot more efficiency.
    Chairman REICHERT. Thank you.
    Mr. Ahmed, in your testimony, you shared a great example of 
a small business from my district that benefited from selling 
its good internationally, businesses like Performance Equipment 
in Wenatchee, Washington. It is in the central part of the 
State. Kind of in a rural area of the State. They need a 
convenient, secure payment system in order to export. And this 
is true for businesses of all sizes, obviously.
    Restrictions on cross-border data flows clearly would make 
it difficult to maintain an efficient payment network that is 
global in scope. Can you identify any other barriers that make 
it difficult or impossible for PayPal to operate in a certain 
market?
    Mr. AHMED. Cross-border data flows are certainly a central 
piece of the underlying certainty that businesses like ours 
need when approaching other markets. Other issues that are 
actually addressed in the Trans-Pacific Partnership that are 
quite important include the bar on duties for digital goods. It 
is an important provision, as you want digital goods to flow 
freely across borders and not be stopped at a border to collect 
duties. So that particular provision would be quite impactful 
and quite important.
    Chairman REICHERT. Has the United States had success in TPP 
or other negotiations in addressing such barriers?
    Mr. AHMED. Yes. Thank you, Chairman. The digital goods 
issue has been in previous free trade agreements, including the 
Korea Free Trade Agreement, and is now a part of the Trans-
Pacific Partnership as well. And so that is an important 
protection.
    Chairman REICHERT. Could you describe how important it is 
to ensure that these commitments are enforced?
    Mr. AHMED. Certainly. The certainty comes from the 
enforceability of the agreement. There are many diplomatic 
negotiations that may occur. But the benefit of a trade 
agreement is that it is enforceable and that countries that 
feel that the agreement has been violated can bring a dispute 
and get that dispute resolved in a binding form.
    Chairman REICHERT. All right. Thank you.
    Mr. Rangel, you are recognized.
    Mr. RANGEL. Thank you, Mr. Chairman. And again, I thank you 
for bringing this exciting panel to us to hear their testimony. 
I wish I could staple them to every town hall meeting that I 
attended just so that you can shatter the fear and the 
ignorance of people not having the slightest idea as to where 
our country is going with trade, what are you up to when you 
talk about putting--I remember when I came to Congress, I 
pulled up a friend of mine's name in the computer. He said, how 
could you possibly have my background in a computer? And you go 
to a foreign country people, don't want you to take their 
picture.
    And quite frankly, there is a fear of what you don't know. 
And there is a feeling that you don't want people to know what 
you don't know. And privacy is a good thing. That is yours. And 
I just hope that there is some way for our country to take 
advantage of this competitive edge that we have, because to me, 
we are talking a new language.
    We have been fortunate that the international community has 
adopted English in trade agreements. But it seems to me that 
technology is the new international language. And I would think 
that there are at least 100 Congressional districts that if you 
talked about science, technology, and trade, the first thing 
Americans say: What is in it for me? And if you are 60 years 
old, it is hard for us to have an imagination as to what could 
possibly be in it for them. Technology has just passed them by.
    But, boy, if we knew that our kids and our grandkids would 
learn this new language, to see how easy it is for them to 
manipulate games and gadgets and how their minds are receptive, 
and to see how grandparents can learn so much from the younger 
people, if only we had an educational system that would allow 
everyone to see what trade with the European Union, what trade 
in the Pacific could mean to them.
    Mr. Padilla, you talk about technology and your outfit like 
all America knows what is going on. But in our school system, 
they haven't the slightest idea as to the opportunities they 
have. It breaks racial barriers. It breaks cultural barriers. 
It makes you a potential successful citizen of the world. And 
yet when we talk about trade, people say: How many jobs are we 
going to lose this time?
    So I don't know what question to ask you, except I wish 
that your testimony could be the preamble to TPP. I wish people 
could see the opportunities to TPP.
    And the other bookend should be infrastructure. Because 
without communication, without transportation, I don't care 
what is in TPP, it just won't work.
    And your message, especially you, Ms. Shukla, in breaking 
down the new world of technology to your grandmother and to 
your mother with things that everyone understands, and all of 
you have done a remarkable job there, leads me to believe that 
we in the Congress have to have a better way of interpreting 
what world trade and technology means for the future of our 
great Nation.
    So, Mr. Chairman, I thank you for this illuminating panel, 
and yield back the balance of my time.
    Chairman REICHERT. Thank you.
    Mr. Smith.
    Mr. SMITH. Thank you, Mr. Chairman. Thank you to our panel. 
Some inspiring stories obviously, Ms. Shukla. I am glad that 
your grandmother shared her intellectual property with you and 
that you have taken that globally. I am trying to think back if 
I could take any of my grandparents' intellectual property and 
pursue some economic opportunity.
    But this is such an important topic. And what I like about 
technology, digital technology, is the opportunity it presents 
consumers through utilizing so much of the technological 
infrastructure that is out there, and market opportunities, but 
also an entry into the marketplace for the little guy. And it's 
just--I mean, the stories are many. And I don't want to take up 
my time describing all of those, but it is just truly amazing 
what we can do, what the little guy can do, to access the 
world, as Ms. Shukla has certainly spoken very well about.
    The empowerment of producers--and when I say ``producers,'' 
I happen to mean agriculture producers, as a representative of 
the largest agriculture district in America where producers 
themselves have been able to be more efficient for the world 
marketplace. And I think there are great examples of how 
utilizing resources more efficiently, whether it is water, 
land, or even chemicals, that there is economic opportunity 
associated with that as well.
    Mr. Atkinson, could you discuss why digital trade is 
important to industries, such as agriculture, and maybe reflect 
a little bit on those uses?
    Mr. ATKINSON. I am sorry. Was the question about 
agriculture?
    Mr. SMITH. Agriculture, right.
    Mr. ATKINSON. So one of the things--dynamics that is 
happening in agriculture is we are moving to smart agriculture, 
precision agriculture, both on sort of the biological side, but 
also on the IT side where farmers now are planting crops and 
the ability to know down to actually the square meter each part 
of land, does it need a little more water, a little less. And 
this notion of precision agriculture is critical. But to really 
maximize that benefit you have to have large data sets.
    And one of the things that is going to happen with 
agriculture and many other industries is what is called machine 
learning or cognitive computing or artificial intelligence, 
where we not just learn from one farmer, but the ability to 
have a lot of farmers together. And again, the data would be 
anonymized, so there would be no risk to an individual farmer. 
But if we could know how, in general, all cotton farmers or all 
wheat farmers around the world, how this is working, that would 
really, really provide a lot of innovation and improvement. But 
again, if you have this requirement that the data can only be 
in one small place, you are giving up this big opportunity for 
machine learning and artificial intelligence to really advance 
the field.
    Mr. SMITH. Right. Very well. Thank you.
    Mr. Beckerman, how do your companies help ag producers 
navigate the barriers and challenges of international trade?
    Mr. BECKERMAN. Thank you for the question, Congressman. The 
Internet is all about reducing friction and connecting people 
around the world and connecting supply and demand in a seamless 
instantaneous way. And that happens in every single industry, 
including agriculture. Everything you see, what happens on the 
payment side from companies like PayPal and others. There are 
technology Internet companies like AgLocal that provide almost 
like an eBay for agriculture.
    And what you see in every single industry, including 
agriculture, is our companies in the industry and digital 
trade, it is just making it easy cutting out the middleman and 
making--you know, you can focus on farming and reach customers 
around the world.
    Mr. SMITH. All right. Very good. Thank you.
    And again, I want to add emphasis to the fact that while 
Uber and Lyft might make our lives easier, what I find even 
more inspiring is that someone can pursue opportunity on the 
other end of that by being a driver or providing various 
services in the shared economy. It is certainly the way of the 
future, and I find it exciting and inspiring. And I am glad you 
are here today.
    I yield back.
    Chairman REICHERT. Mr. Doggett.
    Mr. DOGGETT. I am fortunate to represent Rackspace, which I 
believe, Mr. Beckerman, is one of the members of your 
association. And I would ask you, for them and for other 
members of your association, to just comment a little more 
about the importance of getting an agreement that can be fully 
implemented with Europeans on privacy.
    Mr. BECKERMAN. Thank you. Rackspace is a terrific company. 
Europe is obviously a huge market and an incredibly important 
one. And we applauded the Privacy Shield Agreement that was 
just inked this week because it does help data flows across the 
Atlantic between Europe and the United States. And that is key 
for all of our companies, large and small, to be able to have 
customers in Europe. And our companies obviously take privacy 
and security of all the users very seriously. And this 
agreement and being able to do business in Europe is critical 
for companies like Rackspace and others.
    Mr. DOGGETT. If that agreement is fully implemented, you 
have referenced the TPP, of which there are some good 
provisions and some very troubling provisions, but what is to 
be gained in other parts of the world by having similar 
agreements to that that we have entered with the European 
Union?
    Mr. BECKERMAN. Well, there are 3 billion Internet users 
around the world. And for most of our member companies, they 
have more users now and more people using the services abroad 
than they are in the United States. And so the more that we can 
have trade agreements globally around the world that take into 
account some of the policies I talked about on intellectual 
property, copyright, on intermediary liability, and generally 
having data be able to flow seamlessly across borders and not 
having forced localization of servers throughout the world, 
those provisions are going to be key in other markets too.
    Mr. DOGGETT. Would you envision, and I think Mr. Ahmed may 
have referenced this as well, that we do this through the World 
Trade Organization to deal with these issues in one agreement 
for the entire world?
    Mr. BECKERMAN. Well, there are certainly updates that will 
need to be made. The last time, I think, they did a WTO 
negotiation was back in the 1990s, and most of our member 
companies didn't exist.
    Mr. DOGGETT. Right.
    Mr. BECKERMAN. And we certainly wouldn't have a hearing 
like we are today and stories like we are hearing today back in 
the 1990s. And so we definitely need updates and improvements.
    Mr. DOGGETT. Thank you very much.
    Thank you, Mr. Chairman.
    Chairman REICHERT. Ms. Jenkins.
    Ms. JENKINS. Thank you, Mr. Chairman, for holding this 
hearing. And we thank our experts for their testimony today. It 
has been very informative.
    Last year, I had an opportunity to visit a small engine 
parts supplier in Basehor, Kansas, called R&S Equipment. They 
ship parts all over the U.S. and also sell parts globally. They 
shared with me that day some of the challenges with their 
products clearing customs shipment tracking when they sell 
internationally. But even with their challenges, they want to 
continue to grow their international customer base. So this 
testimony this morning has been very helpful to me.
    My question maybe first is for Mr. Beckerman, kind of as a 
followup to Mr. Smith who has a district very similar to mine, 
a very rural district. Can you just tell us how your member 
companies enable small businesses located in rural districts 
like mine to get online and begin exporting? And then what are 
the most significant barriers for these small businesses from 
our trading partner nations when they make their first sale 
overseas?
    Mr. BECKERMAN. Thank you for the question. You know, I 
think stories like we heard about FreshPaper and others exist 
in every single one of your congressional districts in 
industries where you might not expect. And again, our companies 
are platforms that are helping to connect people around the 
world. And it is everything from on the payment side with what 
we are hearing from PayPal and Amazon. Amazon just had their 
Prime Day yesterday. And my guess is there are probably sellers 
and small businesses in every single State that were able to 
benefit from that and sell around the world.
    The problem is it's--typically, it has been very 
complicated with customs and duties and what you owe and 
currency and things like that, and Internet companies are just 
about reducing the friction, getting rid of the middleman, and 
making it easy for a constituent, with a click or a swipe, 
being able to sell around the world. And I think, you know, if 
we had this hearing back in the 1990s, you wouldn't have had 
small businesses talking about how easy it is to be a global 
seller or accessing a global market. And it is easy if you are 
a two-person business, you are able to access the Internet and 
be able to reach customers in any country almost.
    Ms. JENKINS. Okay. Thank you.
    Since I still have time, Mr. Ahmed, can you elaborate on 
what PayPal can do to help small exporters in rural areas like 
mine and some of the challenges facing your company?
    Mr. AHMED. Certainly. So to the example you just raised of 
the auto parts company, one of the solutions that we have is a 
product called PayPal PassPort, which addresses the issue of 
seasonality. So different product lines have different seasons 
in different countries where they are going to be purchased 
more likely. And so we provide that business with intelligence 
on where those products are going to be most likely to sell 
around the year so that they can have a steady income from 
global customers.
    And then on the policy side, the issue that might most 
address the concern of R&S Equipment would be raising the de 
minimis level, and that is the level below which imports are 
not subject to duty. So I would imagine many of these auto 
parts are below $800, for example. And that is the duty level 
that the Customs Reauthorization Act has raised the U.S. de 
minimis level to. And so the Customs Reauthorization Act 
encourages the United States Trade Representative to get other 
countries to raise their level as well. And if we can do that, 
that would probably really benefit a company like R&S Equipment 
accessing global markets.
    Ms. JENKINS. Thank you.
    I yield back, Mr. Chairman.
    Chairman REICHERT. Thank you.
    Mr. Kind.
    Mr. KIND. Thank you, Mr. Chairman. Thanks for holding this 
hearing.
    And I want to thank the witnesses for your testimony here 
today on such a crucial topic, as far as trying to break down 
or eliminating the barriers to digital trade.
    We have an important trade agreement pending before 
Congress right now, Trans-Pacific Partnership. And sometimes, 
with all due respect to Mr. Padilla here and your testimony, 
sometimes these trade agreements are perceived as being done in 
the interest of the multinational, the Fortune 500 companies, 
but as we heard from you today, Ms. Shukla, the tremendous 
impact it has on new startups and small businesses.
    And, Mr. Atkinson, I was struck by your testimony where you 
wrote that, if I got this right, 82 percent of the top grossing 
apps in the United States industry are created by small 
companies and startups. That is tremendous. So could you just 
take a minute and kind of explain the significance of making 
sure that we get cross-border data rules done right and the 
impact it can have on the startup community and small 
businesses throughout our country?
    Mr. ATKINSON. Yes. First of all, I would just have to 
reiterate the point, I do think sometimes we forget that large 
business still employs the majority of Americans. And they pay 
certainly a significantly higher average wage, they are more 
likely to provide benefits, they are more likely to be 
unionized, they are more likely to provide health care.
    Mr. KIND. Right.
    Mr. ATKINSON. So I don't think we can--I don't think we 
should dismiss the fact that if trade agreements help large 
companies, that is also helping American workers.
    But clearly, one of the advantages of cross-border data 
flows and all of these Internet tools we have been hearing 
about is they give small companies tools that they couldn't 
otherwise have. IBM doesn't need any of these tools. They have 
got experts all around the world. They know how to do this. But 
for a small company it is quite difficult. And one of the 
challenges is that as more and more of the global economy 
becomes traded, in other words the ability to have competition 
for all of this, if we are not having the ability to get in 
those markets, it is going to come back. And it is not just 
that our small companies won't have the business, it will be 
that their small companies will have the business and it will 
be some FreshPaper from some other country that we are buying 
from rather than selling our FreshPaper. So that is why it is 
critical.
    I think we have real advantages, being arguably the most 
entrepreneurial nation on the planet. This is really important 
for us for our small business community going forward.
    Mr. KIND. In fact, the Trans-Pacific Partnership is 
something that hopefully we will have a chance to consider and 
vote on later this year. But, you know, we took a very serious 
run when it comes to cross-border data rules, the localization 
issue. I think we are going to have an announcement shortly on 
the landing zone as far as the financial services and the 
localization issues that many of us have been working on. So I 
think it is a significant step in the right direction where we 
need to go with global digital trade. It literally is the 
lifeblood right now of the global economy.
    Could you, Mr. Atkinson, speak to the consequences if 
somehow this Congress can't figure out a way to get TPP done 
and the agreement falters and falls apart?
    Mr. ATKINSON. Well, I think we are at a critical inflection 
point, at least with digital trade in the world, because at one 
level we are poised on a knife edge. We can go one of two ways. 
We can go the way of openness and globalization, and that 
inherently will advantage the U.S. because that is our core 
strength right now compared to other countries in the world. If 
we don't pass the TPP, with these very strong provisions to 
have digital openness and digital trade, I would predict that 
what we are going to see is the tipping point just going the 
other way to essentially a regime of digital nationalism, sort 
of a pre-World War II Balkanized digital economies. And that, 
first of all, that is going to be bad for the global economy, 
but in particular it is going to be bad for us. So TPP to me is 
a very important signal to get this right.
    Mr. KIND. I think the other thing to consider here is TPP, 
in reality, is not going to just be limited to the 12 nations 
that are at the table negotiating, there are many others that 
are expressing interest in joining, including possibly at some 
time in the future, China. And if we can get the rules done 
right now embodied in this agreement, then that is something 
that China will have to adopt.
    And I commend the administration's announcement today. They 
are taking another aggressive WTO action against China for 
illegal export subsidies on nine raw materials that are holding 
domestic manufacturers back in this country. That is 13 cases 
they have taken against China. We have won every single one of 
them. Twenty-two total through the WTO. We have won every 
single one of them. So it is not just important to get the 
rules done right in the agreement, it is the followup.
    Mr. Ahmed, as you said, the enforceability of this is going 
to be very important as we move forward. Again, we thank you 
for your testimony today.
    I yield back, Mr. Chairman.
    Chairman REICHERT. Thank you.
    Dr. Boustany.
    Mr. BOUSTANY. Thank you, Mr. Chairman, for holding the 
hearing, and I want to thank all of you. This is a really 
important hearing.
    And to Mr. Kind, I really appreciate your line of inquiry 
and the concerns you raised, because I fully agree with you 
here.
    I have been struck by how getting digital trade and the 
rules of the road correctly crafted is so important because 
digital trade is the grand enabler for small businesses to 
really participate fully in a global economy, which plays to 
our strength in this country. And I was made aware of this 
report by Sandvine estimating that legitimate audiovisual and 
music services account for 70 percent, 70 percent of Internet 
bandwidth during peak hours. And the U.S. Chamber's Global IP 
Center looked into this connection between strong protection 
for copyright and the digital economy, and not surprisingly 
found a number of important correlations.
    Economies with stronger copyright protection have greater 
access to digital technologies and creative content than 
economies with less favorable IP environments. Pretty 
intuitive. And also they have seen more than double the amount 
of online creativity than that of economies with weaker 
copyright environments.
    So with regard to this, I mean, clearly copyright 
protections are vital as we go forward. And I just invite some 
commentary with regard to that.
    Mr. Atkinson, if you want to----
    Mr. ATKINSON. Yeah. Well, thank you for that question. It 
is important to get the balance right. I think the U.S. has 
gotten the balance right with the Digital Millennium Copyright 
Act and Section 230, and at the same time strong protection for 
copyright. We have done our own studies, for example, 
correlating strong copyright protection with strong innovation, 
as well as strong content production. And they are strongly 
correlated, as you rightly note.
    So I would agree with Mr. Beckerman that trade agreements 
should include some kind of provisions like Section 230 for 
intermediate liability protection. But also for safe harbor 
kind of on both sides, safe harbor and liability protection for 
if you are hosting content inadvertently from someone else. But 
at the same time, safe harbor if you take it down because you 
think it is infringing, you shouldn't have risk on that if you 
are doing it in good faith.
    But I would caution the Committee on one regard, and that 
is with regard to exporting fair use. Fair use is a really very 
specific term that is in U.S. jurisprudence around a number of 
cases that have evolved over the years. And the fair use 
provision evolves over time.
    One of the challenges is really that one person's fair use 
is another person's piracy. And what we see in the countries, 
particularly in the TPP, very troubling rates of piracy. For 
example, software piracy rates in the U.S. are at 19 percent, 
but in Malaysia are 55 percent, Mexico 57, Chile 61, Vietnam 
81. And so I would worry that if we just put fair use into that 
agreement or other agreements, that we are giving consensually 
these countries a get out of jail free card that they can 
justify already rampant levels of piracy just by, you know, 
saying, well, this is fair use, which it clearly isn't.
    Mr. BOUSTANY. Right. And I understand the Second Circuit 
has described fair use as one of the most troublesome concepts 
in copyright law. And it seems innocuous, two words, but 
hundreds and hundreds of cases, some 1,100 pages to explain 
what this means. So you are saying it is not advisable to use 
this concept going forward in----
    Mr. ATKINSON. Yeah, I wouldn't use this concept. It is 
really unique to the U.S. system. And other countries don't 
have the same kind of legal system that we have. I think it is 
important to recognize that USTR included provisions around 
exceptions and limitations in the TPP. This has been from what 
is called the Berne Convention over the years. And we can work 
to strengthen those. But I think sort of exporting fair use per 
se would be ill-advised.
    Mr. BOUSTANY. I appreciate that. And with regard to the 
Privacy Shield agreement that was just negotiated and 
completed, I would be certainly interested in understanding, as 
I look at this more closely, is this really state of the art? 
Is this what we need? Are there things missing that we need to 
consider as we continue to look at this very rapidly evolving 
field? If there is any commentary now, I would appreciate it.
    Mr. BECKERMAN. I think the privacy shield is incredibly 
important, particularly for companies that are small or mid-
size companies that want to be able to have data flows across 
the border to Europe. And we are happy it got done. And I think 
that was something that was probably in the way for getting 
other trade deals done.
    And if I may, I would like to comment a second on the 
copyright conversation. Our members are on the front lines 
every day fighting piracy and copyright violations around the 
world. And what we have sought for in this trade agreement and 
in others is to have the same balanced copyright policy that we 
have here in the United States, with fair use exceptions 
limitations. That is the U.S. balance that I think works very, 
very well here for creators. We think that should be part of 
trade deals around the world, and we think it is an important 
component that needs to be included.
    Mr. BOUSTANY. Thank you.
    Mr. PADILLA. Mr. Boustany, if I could add on privacy 
shield, it is vitally important to every company engaged in 
transatlantic commerce, not just small- and medium-sized 
companies. But in fact, any business that moves data across the 
Atlantic can benefit from privacy shield. The administration 
has done a very good job in negotiating a successor to the Safe 
Harbor agreement that was in place for 15 years. This agreement 
is likely to be challenged in European courts again in the near 
future. And this issue won't go away. And it underscores why it 
is so important for us to move ahead with digital trade 
provisions in the TTIP negotiations with the European Union. We 
have to lock these things in, otherwise there will be 
uncertainty about whether or not commerce across the Atlantic, 
the single biggest trade relationship we have, can continue.
    Mr. BOUSTANY. Thank you. I yield back.
    Chairman REICHERT. Mr. Paulsen.
    Mr. PAULSEN. Thank you, Mr. Chairman, also for holding the 
hearing. And this has been great testimony and very helpful. 
And it was mentioned earlier about TPP now prohibiting the 
localization measures for data in all sectors except for 
financial services, of course, and government procurement, 
allowing those specific exceptions to achieve legitimate public 
policy objectives. But, you know, I guess I am pleased that 
most of those localization measures would be prohibited under 
TPP. But I hope that clear and enforceable commitments are also 
made in that financial services sector, as was mentioned.
    I am really encouraged that the administration and USTR 
have been moving forward with that fix addressing those 
deficiencies in TPP. But I think a lot of us, and myself in 
particular, are very interested in knowing and learning more to 
ensure that the proposed fix, that has been talked about, is 
actually going to be enforceable, that it is going to be 
operational in all 11 TPP countries because you have got four 
countries that are obviously not in the TiSA fix potentially 
that have to be addressed. And so we are going to be looking 
for that.
    But we were just talking about the Atlantic and Europe, and 
so I just want to shift and ask a question here, because I do 
understand that progress has been made on digital, you know, 
digital issues. It has been a little slower in the TTIP 
discussions in general so far. And we have got to see really 
solid commitments there, if it is going to get, you know, my 
support, I think the support of others as those TTIP 
negotiations move forward. So here is the question. Can you 
just describe maybe what are some of the barriers right now 
that U.S. digital exporters face unique to the EU? Expand a 
little bit what our conversation was just going, but what are 
some of the unique barriers that we have right now as you look 
at trade with the European Union?
    Mr. PADILLA. I could give a real-time example, Congressman, 
actually just from yesterday. The biggest thing that we are 
seeing in Europe is demands to store data within the European 
Union. And as Rob mentioned, there is this view within Europe, 
particularly in the last few years that somehow if the data 
remains within Europe, that it is going to be more secure. That 
is just not true. The geographic location of the data doesn't 
really make a difference with regard to what privacy or 
security laws apply.
    But IBM makes a software product that we sell to a Belgian 
bank. It is a cyber security product so that when people do 
their online banking, they are more secure. That data that in 
order to update malware and virus threats, we call on databases 
in the United States and in Israel. And just yesterday, we met 
with the Belgian data protection authority that said we don't 
want you to do that. We don't want you to get the updates on 
the malware from Israel because we don't trust Israeli 
surveillance laws. We don't trust American surveillance laws 
either, for that matter. And this is an increasing trend. You 
know, this doesn't just happen in China. This is an example 
from Belgium. And I would imagine that many companies are 
probably experiencing similar things.
    Mr. PAULSEN. Anyone else have any feedback in that area 
that--is there any other progress being made?
    Mr. BECKERMAN. I mean, I would agree with that. I think 
when you look at what forced localization is, it is nothing 
more than protectionism, really. And it hurts trade and 
investment. And the way the Internet works is the free flow of 
information across borders and not requiring companies to build 
data centers. And that is a perfect example of yours, and so 
that needs to be fixed.
    Mr. ATKINSON. So Mr. Padilla brought up the point of 
Israel. I just can't resist pointing out, I think it is ironic 
that the Europeans have gone after us with regard to safe 
harbor inadequacy. At the same time, they don't trust Israel, 
and yet Israel still has a safe harbor with Europe and has 
agreed to cut us off. So the Israelis cut us off. There are no 
cross-border data flows between Israel and the U.S. now under 
the new Israeli rule because they wanted to gain the favor of 
the Europeans, even though the Europeans don't trust the 
Israelis.
    So if the Europeans want to be consistent about this, they 
shouldn't just be talking about us, they should be talking 
about all the other countries that they have agreements with 
and whether their security systems are adequate. And they have 
not done that. So from the outside it appears that the 
Europeans are singling out the U.S. perhaps for reasons because 
we are the dominant IT player in the world.
    Mr. PAULSEN. Thank you, Mr. Chairman.
    Chairman REICHERT. Thank you.
    Mr. Pascrell.
    Mr. PASCRELL. Thank you, Mr. Chairman. And we certainly--
you have certainly selected a great panel, without exception.
    Mr. Atkinson, the administration just didn't wake--I can't 
picture this--just didn't wake up one morning and say and come 
to the conclusion that within financial data or digital trade 
that we are going to protect financial communication. I mean, 
you were very specific about this. And I want you to tell me, 
as I ask many panelists on many different issues, what is the 
administration's position or why did they come to that 
position, do you think? And what specifically do you object to?
    Mr. ATKINSON. So I think the administration came to that 
position for several different reasons. One is, I don't think 
they had fully enough understanding of how digital trade--trade 
in data work and the security systems involved. So I think 
there was that problem. The other more legitimate issue was 
that they were concerned about what is called resolution. If 
there is a U.S. bank and there is a problem with it and they 
have to resolve it and the data is perhaps in another country 
and the other country says, you can't have that data for some 
reason. That is a legitimate concern that financial regulators 
would have.
    But the answer to that legitimate concern is to not 
prohibit Citibank or some other bank from storing data in 
Canada or some other country, it is to make sure that every 
country in the TPP agrees that when there is a resolution 
issue, that they will not block that data flow.
    Mr. PASCRELL. And how would that be resolved? How would 
that be--what oversight could we have on that? We have a 
difficult, difficult time in carrying out what we place in 
these trade deals, regardless of what the product is, and 
bringing justice to bear. Why would this be any different? In 
fact, wouldn't it be more difficult to oversee those kinds of 
things, financial data?
    Mr. ATKINSON. Well, first of all, there are already some 
other--and I apologize, we wrote a report on this and I didn't 
write the report, but there are other provisions in there that 
as well that would help them. And we already have a global 
financial system where we rely on other countries to do certain 
things. And we don't say that all finance has to be national. 
So I see this as relatively similar to many other financial 
issues.
    Mr. PASCRELL. You do?
    Mr. ATKINSON. Pardon me?
    Mr. PASCRELL. You do see the similarity. You say that this 
should be handled like everything else.
    Mr. ATKINSON. Well, my point was we do have an 
internationalization of the finance system, that Treasury and 
other regulators allow certain things to be international. That 
is because we have trust and we have global agreements. And I 
don't see that as any different. I just also see this as a 
relatively modest, low risk problem that if it were to occur--
and by the way, I would say, by the way, the fact that USTR is 
proposing a fix suggests that USTR at least has come to the 
realization that cross-border data flows here are viable.
    Mr. PASCRELL. From the latest numbers that we have, the 
size of this digital growth in cross-border data has been 
relatively--was 45 times what it was in 2005. I mean, that is a 
huge number. We trade in goods. That has been relatively flat. 
This technological trade has been a boon to tech companies, no 
question about it. Many small- and medium-sized businesses that 
have been able to expand their market overseas in an 
unprecedented way. We know that the U.S. is by far the global 
leader in digital trade. Our companies lead the world in 
creating digital products and providing data storage. We are 
talking about $400 billion in services that we have exported. 
Fascinating number.
    So as this technology continues to innovate and become more 
and more integrated into our daily lives, the average American, 
which is very frequently forgotten in every trade deal, we want 
to make sure our trade agreements continue this expansion in a 
way that provides access and maintains security, privacy, and 
jobs by the way.
    So I want to ask you this question as a followup. We have 
strong innovation protections built into U.S. laws, but we know 
that more U.S. companies now have a majority of users and 
consumers overseas. What do you think we can do through the TPP 
implementation to advance gold standard U.S. laws about 
copyright and about digital trade?
    Can we get an answer on this, Mr. Chair? It will only take 
a few----
    Chairman REICHERT. If you could--we are already over time--
if you could make your answer quick, please.
    Mr. PASCRELL. Thank you.
    Chairman REICHERT. Who are you asking?
    Mr. PASCRELL. Mr. Atkinson.
    Mr. ATKINSON. Well, I think the TPP agreement has struck a 
good balance with regard to the need for openness, the need for 
intermediaries to have some liability protection, and the need 
to protect copyright. I do think, though, that one of the 
challenges, and when we look at the global economy, is there 
are many, many countries who are copyright scofflaws and who 
are just engaged in systemic stealing. And as a big producer of 
IP in content as the U.S. is, that directly hurts U.S. jobs.
    Mr. PASCRELL. Thank you very much.
    Thank you, Mr. Chairman.
    Chairman REICHERT. You are welcome.
    Mr. Kelly.
    Mr. KELLY. Thank you, Mr. Chairman. I thank the panel for 
being here.
    Ms. Shukla, I got to tell you, your story is one of those 
stories that people look at and say, you know what, this is an 
incredible thing that you have been able to do. And the fact 
that you were able to do it, I think, gives great encouragement 
to everybody.
    Listen, last month I had an opportunity to go to a 
Transatlantic Legislators' Dialogue meeting at The Hague with 
Representatives Diaz-Balart and also Costa. And we had an 
opportunity then to talk about trade with some of the EU 
parliamenters. Angela was with me. And I think that when we 
look at how we try to form trade agreements, and then we look 
at the digital part of what it is that we are trying to do----
    And, Mr. Ahmed, you talked about automobiles and how we are 
able to do things. I have got to tell you, this has changed 
completely the way everybody does business. And the access to 
global markets I think is the thing that is probably the most 
stimulating about this.
    Mr. Atkinson, you talked about how this is growing and 
growing and growing, and every day we seem to find other 
markets that we can get into and we see other opportunities 
that are there that were never there before. And I got to tell 
you, from a guy who had operated a small town business in a 
little town of about 25,000 people, you can take that 
opportunity when it comes to parts or automobiles or anything--
I am an automobile guy--you can sell that product almost 
anywhere right now globally--for me it is the United States, I 
have to stay with that, I am not going to get shipping 
overseas--but the other part of it is there for everybody.
    But when it comes down to these agreements, and we talk 
about access to a global market, and we talk about--and I think 
my experience with the EU was different, because I think it is 
the intent, if we are really going to do trade agreements, that 
they have to be fair. And so tell me, and each of you, if you 
could, talk about the barriers that are put in place any time 
we try to put an agreement together.
    And I think, Mr. Ahmed, you said something that was really 
good, you said certainty comes from enforcement. So all these 
things may be well intentioned as we talk about building these 
agreements and, you know, certainly, I look at the global 
opportunity, but I also look at we are the strongest economy in 
the world. So whenever it comes time for us to sit down and 
hammer out agreements, and USTR is trying to do those things 
right now, tell me, the digital--in that market, the challenges 
are there and the barriers that actually exist for you that 
somebody may look at and say, no, I don't see that, but it is 
there.
    If you can, just kind of run through it so we can explain 
how difficult it is to actually have a fair and balanced field. 
While the intent may be there, the actual final result is not. 
And I know we have had conversations about this already and the 
scope of the hearing is about how difficult it is. For you to 
compete globally, and for you to have trade agreements globally 
that are fair and balanced, tell me some of the things that can 
take place that the average person wouldn't see and how it is 
affecting your businesses.
    Mr. ATKINSON. Well, to be clear, I don't have--actually, I 
do have a business. I have a business that employs 15 people, 
and we actually are global. We get some revenues overseas, if 
you will.
    But I think the key issue here is twofold. One, TPP is an 
important agreement because it has enforceable provisions that 
are not in other agreements. One of the reasons China can get 
away with what it gets away with is because the WTO framework 
is still quite weak, particularly in these new areas. So that 
is number one.
    Number two, I fully agree with your concern about 
enforcement. And we have long been on the record that we need 
to have more enforcement, we need USTR to do more in these 
spaces, they need more resources to do better enforcement. But 
you are right, trade agreements without enforcement are not 
worth as much.
    Mr. PADILLA. As a large company, the biggest barrier we 
face is every country we go to, we get the request to build a 
data center locally, even if it is not necessary. I mentioned 
the Wimbledon app, which we supported from five or six data 
centers around the world, it shows the global nature of it.
    Mr. KELLY. Just to interrupt, isn't that the beauty of the 
Internet? You don't have to have bricks and mortars in the 
place that you are doing business.
    Mr. PADILLA. That is correct. You don't need to. We 
shouldn't have to have a data center in Brazil in order for a 
Brazilian to watch Serena Williams on the Wimbledon app, but 
there are regulations proposed that would require that.
    Mr. BECKERMAN. It is a great question. And I think going 
back to also with what Mr. Pascrell was asking, he said why are 
the most innovative companies, the Internet companies that we 
represent, why have they been born here in the United States 
and grown here in the United States and the lion's share of the 
value from the Internet sector, which has been the fastest 
growing part of our economy in the last few years, why has it 
happened here in the United States? And a lot of it is because 
of policy that people don't see and they take for granted every 
single day. And that is the balanced U.S. copyright laws that 
we have, that is the intermediary liability protections that we 
have here in the United States. Those are two of the most 
fundamental and key components of the Internet economy and why 
you have seen companies like Amazon and Facebook and Google and 
Etsy and PayPal, all the other great Internet companies that 
exist born in the United States, grown in the United States, 
and now serving 3 billion people around the world. And without 
exporting also those copyright policies, balance, including 
fair use and intermediary liability protections like we have in 
the U.S., CDA 230, those are key, and people don't see it, and 
they take it for granted every day.
    Chairman REICHERT. The gentleman's time has expired.
    Mr. KELLY. Thank you. Ms. Shukla, I really would have liked 
to hear from you because this does make it possible for 
somebody your size to actually compete globally. It is a market 
that was never there before. I think the beauty of it all is 
the fact that you don't have to have large sums of capital to 
actually compete in a global economy. Thanks so much.
    And I yield back.
    Chairman REICHERT. Mr. Neal.
    Mr. NEAL. Thank you, Mr. Chairman.
    I just finished a really good book, The Rise and Fall of 
American Growth, by Robert Gordon, he is a professor at 
Northwestern University, in which he lays out a series of 
events that he argues occurred between 1870 and 1970, which he 
says is the great period of economic achievement in American 
history because of innovation. And he formulates a number of 
positions, including the combustible engine, including 
sanitation, including the radio, electricity and basic things, 
and he makes the argument in the post-1970 period that we have 
had some big achievements, but really nothing comes close in 
terms of what the polio vaccine did or penicillin.
    But he also makes a pretty important argument that has been 
consistent with what you have offered today in which he says 
that our patent system was second to none, and that it was the 
rule of law that really gave us this elevated position in terms 
of achievement, innovation, and creativity. And he argues that 
as we have proceeded to a globalized economy, that is a lot 
harder to do. So for the panel, maybe discussing the nexus 
between intellectual property rights and digital trade, the 
whole notion of who has a proprietary interest in protecting 
their own achievement.
    Mr. ATKINSON. Well, thank you, Congressman. By the way, my 
sympathy for having to go through that 700-page book, which I 
have read myself. I just have to say I am not anywhere near as 
pessimistic as Bob Gordon is about our future. I think our 
future around innovation and productivity is still very bright. 
He is really very much of a pessimist. But you are right in the 
sense of his analysis linking intellectual property to growth.
    This is, I think, important to the U.S. in particular 
because as the global innovation leader, innovation relies on 
intellectual property. And we just wrote something yesterday 
from a colleague of ours, Jason Potts, who is a professor in 
Australia, who has argued that what we are seeing essentially 
is gunboat intellectual property theft. In other words, it is 
not just companies that steal U.S. intellectual property, it is 
foreign nations. And they aid and abet the theft of U.S. 
intellectual property solely for competitive reasons, solely to 
gain advantage on us. And that is really a unique thing that 
hasn't really occurred before in the global economy, using IP 
strategically and illegally.
    And again, I stress that that is why trade agreements have 
to have strong IP protections, because there are just so many 
jobs. I think it was the Department of Commerce report a few 
years ago that showed that something around 30 to 35 percent of 
U.S. jobs were IP-dependent. So this is a very important thing 
to get right in the trade agreements. And TPP does take 
important steps in that direction.
    Mr. PADILLA. If I could mention, Mr. Neal, one other 
provision of TPP that goes to this. IBM certainly believes in 
innovation. We are the largest recipient of U.S. patents for 23 
years in a row. The newest way for people to steal intellectual 
property is through cybercrime, through breaking into people's 
systems and exfiltrating data rather than just through copying 
things, as used to be the way in the past. And interestingly, 
TPP has some good provisions in it that require cybersecurity 
cooperation between the signatories. That is an important new 
area. And as we talk about digital trade and all these 
benefits, ensuring security not only of data but of 
intellectual property online is essential. And I think TPP 
takes some initial steps in that positive direction.
    Mr. PADILLA. Thanks. I will have to check that book out 
also. It sounds good.
    You know, the United States obviously has done something 
right that has allowed for these companies to grow and have all 
the benefits for creators around the world. And we think TPP is 
taking steps in the right direction in that regard. But 
obviously, for all future trade deals, this is going to need to 
be included, and we are going to have to look at what has the 
U.S. done right that has enabled such incredible innovation 
here for creators and everybody.
    Ms. SHUKLA. Well, I certainly don't know much about 
intellectual property policy, but all I can speak to is my 
personal experience. I do feel like the benefit I had of 
getting a patent at that young age changed everything for me. 
It made it possible for me to actually even think about 
creating a business when I was ready. And today, I am able to 
use that business to get FreshPaper to people in the developing 
world, to do more with it based on my own personal mission. I 
think that has been incredibly valuable and gave me a chance.
    Mr. AHMED. I would say that one of the interesting 
additions in the Trans-Pacific Partnership is a chapter at the 
end called small business, the small business chapter. It is 
the first small business chapter. And it is designed to educate 
small businesses on how they can take advantage of the Trans-
Pacific Partnership. And so provisions that are there to help 
them can now be, you know, made clear to them how they can take 
advantage of them. And so I think that is a very important 
provision that is new there.
    Chairman REICHERT. Mr. Meehan.
    Mr. MEEHAN. Thank you, Mr. Chairman.
    And I want to thank the panelists. It has been a terrific 
panel.
    One of the realities of being the last to ask questions is 
we have been through a lot of territory here. So I don't want 
to be redundant, but I have certainly--we have, many of us have 
worked together on things, from cybersecurity to other areas 
over the time. And I think there is just some recurring themes. 
And so my question would be to use it to either jump on any of 
these with something that you would like to communicate before 
you go or is there one particular thing we ought to be focused 
on in your ideas that would help us more effectively move?
    When I see themes, the things that concern me the most are 
the inability for us to reach the kinds of agreements that 
create rules of the road in which we start to get common 
standards that serve as a check against the recalcitrant 
countries like China or Russia or others, that if we fail to 
create these agreements, they will step in. The second, of 
course, is the protectionism and the concern that what you are 
having is countries that may from time to time use data 
localization and other things as a way to sort of protect 
against the incursion of good new products coming into their--
they are worried about losing market share because of more 
innovative progress. So how much are we using these things as 
barriers that actually have another intention, which is to 
protect their own?
    And, of course, the last is the protection of these 
properties once we go. If we have a system that is organized in 
a way in which people are respecting the data flow, we have 
standards, there is more of a system that is in place to 
protect the integrity of that information, both companies that 
may steal as well as nations that may steal.
    So with that, what are your thoughts with respect to the 
overarching themes, or if there is some specific thing we ought 
to be focused on to assure that we create a safer world of 
opportunity for intellectual trade? Why don't I just go right 
across.
    Mr. ATKINSON. Well, thank you, Congressman. I don't have 
anything specific other than, I think, two broader general 
points. One is, a number of countries who are problematic in 
this space, they are doing it not out of malice but out of 
maybe ignorance, if you will. And that is why a TPP framework 
and expanding it into TiSA and others is important because it 
just sets the rules of the road that they know they have to do 
these things and it is the right thing to do. There are other 
countries who are doing it, they know quite well what they are 
doing, and they are doing exactly as you said, they are 
protecting domestic businesses, they are going after U.S. 
companies. And there it is important, again, to get these 
countries in trade agreements, but also really to focus more 
significantly than we have had in the past on enforcement. So I 
think these two things are critical.
    Mr. PADILLA. I would say, as you said, Congressman, much of 
the history of the post-war trading system has been about 
removing barriers that were already in place, particularly 
tariffs and things like that. These provisions are about 
preempting barriers, preventing them before they are put in 
place, by and large. And that is why it is so important that we 
try to move ahead on TPP as quickly as possible and then 
replicate these provisions in other agreements. Because if we 
put this off 2, 3, 4 years, what we will be doing is trying to 
take down barriers that are already disrupting commerce rather 
than what we are trying to do today, which is to prevent them.
    Mr. MEEHAN. Thank you.
    Mr. BECKERMAN. Thank you. Specifically, when you are 
looking at China and Russia, obviously two major concerns are 
censorship and forced localization and ensuring that we have 
data flows. And just generally speaking, I think what we have 
heard from probably everybody is, you know, we don't want to 
see a Balkanization of the Internet and have different sets of 
policies in different countries. And we don't want to have----
    Mr. MEEHAN. Because sometimes forced localization can also 
be termed forced utilization, in which you are required to go 
through portals or gates that they will set up with competitors 
of yours.
    Mr. BECKERMAN. Exactly. So we just want to reduce friction, 
you know, connect supply and demand seamlessly. That is 
important.
    Mr. MEEHAN. Thank you.
    Mr. AHMED. Well, first, thanks to Congressman Kelly, 
Congressman Kind, and others who have really raised the profile 
of this financial services data flows issue because that is a 
very important issue going forward to resolve. And then I would 
also add that in the Customs Reauthorization Act and in future 
trade agreements, addressing this issue of de minimis will be 
really impactful for small businesses because they are often 
dealing in, you know, low denomination items that can be 
tremendously benefited by raising de minimises around the 
world.
    Mr. MEEHAN. Ms. Shukla, the closing comment is yours.
    Ms. SHUKLA. I really appreciate the opportunity to be here. 
And I think it has been very inspiring for me to hear about 
everything that goes into making this opportunity for me 
possible and for all the entrepreneurs like me, everything that 
goes into making the opportunities that we have today here. And 
I think I would just encourage you to remember the millions of 
entrepreneurs across the United States who have these 
innovations and ideas, who have access to these incredible 
tools, and we just need a little bit of help being able to 
access global markets so that we can really unleash those 
energies. Thank you. I appreciate your help.
    Mr. MEEHAN. Well said.
    Mr. Chairman, I yield back.
    Chairman REICHERT. Thank you.
    And thank you again to the witnesses for your attendance 
today and taking time out of your busy schedules to be here. 
Excellent testimony, as you heard from both sides of the aisle.
    Mr. RANGEL. Mr. Chairman?
    Chairman REICHERT. Yes, sir.
    Mr. RANGEL. Because their testimony was so important, I 
wonder whether any of you have any suggestions to how this 
panel could be more effective in getting this message out to 
our country. Because, believe me, between your lips and our 
constituents' ears there is a gap.
    Chairman REICHERT. How about one of you tackle that one?
    Mr. BECKERMAN. I am happy to try.
    Chairman REICHERT. All right.
    Mr. BECKERMAN. I mean, I think probably the best thing, as 
you know, Congressman, all politics are local. And I think 
there are multiple FreshPaper stories in every single 
congressional district, regardless of rural or urban or coast 
to coast, and there are many stories exactly like this. And 
that is, I think, what we want to tell, you know.
    Mr. RANGEL. Let me thank the panel. You have done a great 
job.
    Chairman REICHERT. Thank you, Mr. Rangel. As the ranking 
member knows and members of the panel know, there are national 
business organizations and employee organizations that are out 
there helping us get out the word about the positive effects of 
trade across the country. In fact, some businesses have taken--
I think Caterpillar has a sticker that they put on each one of 
their products as to which country they are headed to let the 
employees know that, you just made this piece of machinery and 
it is headed to Colombia, or wherever. There are other 
countries that put on their paychecks, X percent of your 
paycheck this week has been as a result of a trade agreement 
with country whatever. So there are those efforts ongoing, but 
I think sometimes that the rhetoric across the country 
overtakes the common sense and the reality of what trade really 
does for America.
    Your testimony today, the hearing today was really designed 
in a way to help educate America. And we have to continue on 
with that process. And I am going to be looking forward to the 
next product that Ms. Shukla comes out with, because 
FreshPaper, some of the members up here were whispering whether 
or not that might work on our face rather than an apple or a 
peach. Mr. Kelly, he wasn't asking me that question. But 
anyway, thank you so much for your presence today and your 
excellent testimony and answers to our questions.
    I am required to say please be advised that members will 
have 2 weeks to submit written questions to be answered later 
in writing. Those questions and your answers will be made part 
of the formal hearing record. Our record will remain open until 
July 27. And I urge interested parties to submit statements to 
inform the Committee's consideration of the issues discussed 
today.
    With that, the Committee stands adjourned.
    [Whereupon, at 11:46 a.m., the Subcommittee was adjourned.]

                       Submissions for the Record

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