[Senate Hearing 117-879]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 117-879

                    OPPORTUNITIES AND CHALLENGES FOR
                  TRADE POLICY IN THE DIGITAL ECONOMY

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






                                HEARING

                               before the

                  SUBCOMMITTEE ON INTERNATIONAL TRADE, 
                  CUSTOMS, AND GLOBAL COMPETITIVENESS

                                 of the

                          COMMITTEE ON FINANCE
                          UNITED STATES SENATE

                    ONE HUNDRED SEVENTEENTH CONGRESS

                             SECOND SESSION
                               __________

                           NOVEMBER 30, 2022
                               __________

                                     





               [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]                                      






            Printed for the use of the Committee on Finance
                                 ______

                   U.S. GOVERNMENT PUBLISHING OFFICE 

56-373--PDF                WASHINGTON : 2024 















                          COMMITTEE ON FINANCE

                      RON WYDEN, Oregon, Chairman
DEBBIE STABENOW, Michigan            MIKE CRAPO, Idaho
MARIA CANTWELL, Washington           CHUCK GRASSLEY, Iowa
ROBERT MENENDEZ, New Jersey          JOHN CORNYN, Texas
THOMAS R. CARPER, Delaware           JOHN THUNE, South Dakota
BENJAMIN L. CARDIN, Maryland         RICHARD BURR, North Carolina
SHERROD BROWN, Ohio                  ROB PORTMAN, Ohio
MICHAEL F. BENNET, Colorado          PATRICK J. TOOMEY, Pennsylvania
ROBERT P. CASEY, Jr., Pennsylvania   TIM SCOTT, South Carolina
MARK R. WARNER, Virginia             BILL CASSIDY, Louisiana
SHELDON WHITEHOUSE, Rhode Island     JAMES LANKFORD, Oklahoma
MAGGIE HASSAN, New Hampshire         STEVE DAINES, Montana
CATHERINE CORTEZ MASTO, Nevada       TODD YOUNG, Indiana
ELIZABETH WARREN, Massachusetts      BEN SASSE, Nebraska
                                     JOHN BARRASSO, Wyoming

                    Joshua Sheinkman, Staff Director
                Gregg Richard, Republican Staff Director
                                 ______

                 Subcommittee on International Trade, 
                  Customs, and Global Competitiveness

                  THOMAS R. CARPER, Delaware, Chairman
RON WYDEN, Oregon                    JOHN CORNYN, Texas
DEBBIE STABENOW, Michigan            CHUCK GRASSLEY, Iowa
ROBERT MENENDEZ, New Jersey          JOHN THUNE, South Dakota
BENJAMIN L. CARDIN, Maryland         ROB PORTMAN, Ohio
SHERROD BROWN, Ohio                  PATRICK J. TOOMEY, Pennsylvania
MICHAEL F. BENNET, Colorado          TIM SCOTT, South Carolina
ROBERT P. CASEY, Jr., Pennsylvania   STEVE DAINES, Montana
MARK R. WARNER, Virginia             TODD YOUNG, Indiana
CATHERINE CORTEZ MASTO, Nevada       BEN SASSE, Nebraska
                                     JOHN BARRASSO, Wyoming

                                  (II) 















                            C O N T E N T S

                              ----------                              

                           OPENING STATEMENTS

                                                                   Page
Carper, Hon. Thomas R., a U.S. Senator from Delaware, chairman, 
  Subcommittee on International Trade, Customs, and Global 
  Competitiveness, Committee on Finance..........................     1
Cornyn, Hon. John, a U.S. Senator from Texas.....................     4

                               WITNESSES

Bliss, Christine, president, Coalition of Services Industries 
  (CSI), Washington, DC..........................................     6
Feith, David, adjunct senior fellow, Indo-Pacific Security 
  Program, Center for a New American Security, Washington, DC....     8
Meltzer, Joshua P., S.J.D., senior fellow, global economy and 
  development, Brookings Institution, Washington, DC.............    10
Woodall, Patrick, policy and research director, AFL-CIO 
  Technology Institute, Washington, DC...........................    12

               ALPHABETICAL LISTING AND APPENDIX MATERIAL

Bliss, Christine:
    Testimony....................................................     6
    Prepared statement...........................................    37
Carper, Hon. Thomas R.:
    Opening statement............................................     1
    Prepared statement...........................................    46
Cornyn, Hon. John:
    Opening statement............................................     4
    Prepared statement...........................................    47
Feith, David:
    Testimony....................................................     8
    Prepared statement...........................................    48
Meltzer, Joshua P., S.J.D.:
    Testimony....................................................    10
    Prepared statement...........................................    53
Woodall, Patrick:
    Testimony....................................................    12
    Prepared statement...........................................    59

                             Communications

Center for Fiscal Equity.........................................    75
Computer and Communications Industry Association.................    81
E-Merchants Trade Council, Inc...................................    87
Engine Advocacy..................................................    91
PEN America......................................................    93
PILOT Inc........................................................    94
Public Citizen's Global Trade Watch..............................    95

                                 (III)

 
                     OPPORTUNITIES AND CHALLENGES FOR 
                   TRADE POLICY IN THE DIGITAL ECONOMY

                              ----------                              

                      WEDNESDAY, NOVEMBER 30, 2022

                           U.S. Senate,    
           Subcommittee on International Trade,    
               Customs, and Global Competitiveness,
                                      Committee on Finance,
                                                    Washington, DC.
    The hearing was convened, pursuant to notice, at 3:03 p.m., 
in Room SD-215, Dirksen Senate Office Building, Hon. Thomas R. 
Carper (chairman of the subcommittee) presiding.
    Present: Senators Wyden, Casey, Cortez Masto, Warren, 
Grassley, Cornyn, and Young.
    Also present: Democratic staff: Evan Giesemann, Staff 
Director, Subcommittee on International Trade, Customs, and 
Global Competitiveness; Andrew Smith, Legislative Aid for 
Senator Carper; and Daniel Kim, Trade Fellow for Senator 
Carper. Republican staff: Andrew Cooper, Legislative Assistant 
for Senator Cornyn.

       OPENING STATEMENT OF HON. THOMAS R. CARPER, A U.S. 
         SENATOR  FROM  DELAWARE,  CHAIRMAN, SUBCOMMITTEE 
         ON INTERNATIONAL TRADE, CUSTOMS, AND GLOBAL COM-
         PETITIVENESS, COMMITTEE ON FINANCE

    Senator Carper. It looks like there is standing room only. 
I am delighted to welcome you all here today. It is my pleasure 
to sit next to Senator Cornyn, a good friend and a wonderful 
colleague.
    I will call this hearing to order. This is a subcommittee 
of the Senate Finance Committee, and our focus is international 
trade; it is Customs; it is global competitiveness as well. And 
we thank our witnesses who have joined us. We have four 
witnesses who have joined us today, and I want to say a special 
``thank you'' to our subcommittee's ranking member--not just 
Senator Cornyn but also his staff and our staff and others who 
have worked with him on both sides of the aisle to plan this 
important hearing on digital trade.
    Today's hearing will offer an opportunity for us to answer 
not one, not two, but three central questions. The first is--
and this is my favorite question--what is digital trade, 
anyway? I remember, Senator Cornyn, many years ago when I was, 
I think, chairman of a subcommittee on, I want to say, Banking, 
and people were starting to talk about cryptocurrency and this 
and that, and I didn't understand it, and my staff did not 
understand it, and neither did our colleagues understand it. 
This was at least a dozen years ago. So we said, ``Why don't we 
hold a hearing?'' And so, we held a hearing on it. And when 
staff said, ``Why are you doing it this way?'' we said, ``We 
just do not understand it.''
    At the end of the hearing, they said, ``Well, do you 
understand it now?'' Not really. And there are some people who 
do not understand a whole lot about digital trade, why it is 
important, what it means.
    So the first question we are going to answer here today--
for folks who might be joining us, near or far, the first 
question is, what is digital trade, anyway? The second question 
is, why is it important to our country? Why is it important to 
Americans as well? And finally, how can we work with our 
allies, with other trading partners in order to strengthen our 
ever-changing digital economy?
    Today's hearing will also be the first Senate hearing in 
this Congress, I think, to specifically explore the importance 
of digital trade. And then we can take this dedicated time in a 
bipartisan way--that is the way Senator Cornyn and I like to 
work--to dive into what I think is a critical and ever-
important issue with leading experts across our Nation.
    When I first started learning about digital trade, I 
quickly discovered it is necessary for us to better understand 
and appreciate how digital technology and the Internet have 
transformed our economy.
    I will take a couple of moments to talk about this through 
an example. I love examples. I like to explain concepts with 
stories, and we are going to try to do that today--and we will 
see how it works. But we will provide an example, and we are 
going to show you something that we have all come to know well, 
and that is smartphones, smartphones. And let me see if I have 
mine. I do. And my guess is, for everybody in this room, I 
could ask you to show us your smartphone. If you have a 
smartphone, why don't you just hold it up if you have one with 
you. This is good. Almost all of us--this one lady back here 
does not have a smartphone. We will have to get her one. But 
smartphones are everywhere in our society. They have them in 
prisons for people who should not have them, and that is a 
story for another day. It is not in every prison that that 
happens, but it is certainly a concern when it does.
    But nearly everyone I know, and probably everyone that you 
all know, has one. It is almost impossible to imagine our lives 
today without them. We use them for just about everything, from 
checking work emails, to logging into a Zoom meeting, to 
purchasing goods from halfway around the world. Whether it 
happens to be booking a hotel in Dover, DE, or Dover, England, 
smartphones have made our lives more accessible for just about 
everything.
    These are just a few examples in our daily lives that show 
how digital connectivity can make it easier, faster, less 
expensive to trade goods and services across our globe. And 
this is all made possible because the Internet has made it 
easier for us to share information and data without geographic 
barriers.
    Without these tangible barriers, digital innovation has 
revolutionized nearly every industry across our country and our 
economy, ranging from manufacturing to agriculture to financial 
services to e-commerce--you name it. As a result, trading goods 
and services, with a lot of help from the Internet, has 
exploded in recent years.
    Just look at the numbers from 2005 to 2019. Real value 
added for the U.S. digital economy grew at an annual rate of 
more than 5 percent per year, outpacing the 2-percent growth in 
the overall economy during those same years. And the pandemic 
has spurred digital growth even more, with people staying home 
and turning to the Internet to access medical services, to 
stream their favorite movies, or book their next vacation in 
the First State, or in the Lone Star State, or around the 
globe.
    And this growth is not just benefiting consumers, it is 
also spurring job creation and enabling small businesses to 
thrive. The digital economy's small business that sells jewelry 
in Delaware, or Texas, or some other place can now sell the 
products just about anywhere in the world with ease.
    However, it is critical that as we examine the importance 
of digital trade for our economies, we must also acknowledge 
how digital technologies affect our national security. Right 
now, we are witnessing a global battle over the values that 
govern the digital economy. Foreign adversaries like China are 
using digital technologies to advance authoritarianism and 
crack down on freedom of speech and human rights. They are 
working overtime to shape the digital economy in a way that 
threatens our democratic values and jeopardizes our national 
security.
    Yet, as Albert Einstein once said--in fact, he used to say 
this not just once, but a lot--he used to say, ``In adversity 
lies opportunity.'' I say that a lot too. I always give him 
credit, but I think that is a great truth. It guides me in my 
life, and I suspect Senator Cornyn and a whole lot of other 
people in this room as well.
    That is exactly what we have before us today: a real 
opportunity to set the rules for digital trade that reflect our 
values. Those words were true then, ``in adversity lies 
opportunity,'' and they are even truer today.
    So far, the U.S. has taken a leadership role through 
negotiating ambitious digital rules in the USMCA agreement we 
have with Canada and Mexico--we used to call it NAFTA--and 
through digital trade, through cooperation with Japan. But that 
is not enough. Our work cannot stop there.
    That is why this past year my staff and I have worked 
closely with one of our colleagues from the other side of the 
aisle--Senator Young and his staff and other members of this 
committee--to introduce a bipartisan, bicameral resolution 
advocating for the United States to work with our allies across 
the globe to establish forward-looking digital trade policies.
    I am also eager to work with the U.S. Trade Representative, 
Katherine Tai, and the Biden administration to make progress on 
these important issues as they negotiate something called the 
Indo-Pacific Economic Framework and other economic engagements 
relating to digital trade.
    So today, I look forward to hearing from our esteemed panel 
of witnesses to pull back the curtain on the importance of 
digital trade and how we can work with our Allies in this 
country, but especially outside of this country, to advance 
thoughtful digital trade policies.
    With that, I am happy to turn it over to my wing man on 
this committee and others, Senator Cornyn. Thank you.
    [The prepared statement of Senator Carper appears in the 
appendix.]

            OPENING STATEMENT OF HON. JOHN CORNYN, 
                   A U.S. SENATOR FROM TEXAS

    Senator Cornyn. Thank you, Mr. Chairman, for organizing 
this hearing. And it has been a pleasure, as always, working 
with your staff. And thanks to all of our witnesses for being 
here and sharing their expertise and knowledge.
    I like the three questions that you plan to ask and have 
teed up here. This subcommittee has consistently focused on the 
threat that China poses to our national security through its 
weaponization of trade, contrary to the international rules-
based system that we thought they were joining when they became 
part of the WTO.
    On that note, I want to express my concerns with regard to 
reports that our allies in Europe may retaliate for provisions 
of the recently passed Inflation Reduction Act, in the face of 
existential challenges posed by the Chinese Communist Party and 
its allies in the Russian Federation. A strong relationship 
with our partners in Europe is more important than ever.
    Unfortunately, legislation passed on a purely party-line 
vote like the Inflation Reduction Act has moved us in the wrong 
direction. I hope the administration will work to limit the 
trade ramifications from this bill with regard to Europe and 
our other Allies.
    We all know that the results of protectionism helped in the 
past to put us into the Great Depression nearly a century ago, 
and we simply cannot afford to repeat it or get anywhere near 
it.
    On this subcommittee, we have advocated for the U.S. to 
join the CPTPP. It was a mistake for us to walk away in the 
first place. I was with Senator Hagerty, the former Ambassador 
to Japan, now a member of the U.S. Senate, and Senator Cardin, 
a colleague on the Finance Committee, in Japan recently. Every 
single meeting we had with our Japanese Government 
counterparts, they mentioned the TPP. And Senator Carper and I 
have written and spoken together on what a mistake it was for 
us to walk away from that. And my hope would be that at some 
point we would get back in the game in Asia with the CPTPP----
    Senator Carper. Would my colleague yield for just a moment? 
Self-inflicted wound.
    Senator Cornyn. Yes.
    Senator Carper. That's what I discovered. I'm sorry. Thank 
you.
    Senator Cornyn. Unfortunately, so far the Biden 
administration has refused to reopen negotiations on that 
agreement, so we need to look to sectoral-specific free trade 
agreements focused, for example, on digital trade, which is 
also part of the conversation we had with Ambassador Emanuel in 
Japan when we were there.
    As each of our colleagues know, free trade agreements 
passed through Congress are insulated from domestic political 
pressure. They provide long-term certainty for our businesses 
and reinforce the key economic relationships that we have with 
our friends and allies.
    We have also focused on China's use of censorship as a 
barrier, to digital trade in particular. We see today how China 
is weaponizing its digital infrastructure against its own 
citizens for simply protesting in the streets.
    One of the first tasks we should explore is how to define 
``digital trade,'' which is what Chairman Carper--the question 
he raised first, and appropriately so. For everything digital 
or virtual, from the cloud to artificial intelligence, there is 
obviously an underlying physical element. For digital trade, 
that medium is semiconductors.
    So maybe we should start by using that physical apparatus 
as a starting point for our discussions.
    The second area we should explore is how digital trade 
agreements help to solidify our relationship with our friends 
and allies against the threat posed by the Chinese Communist 
Party. So, I believe any digital trade agreement with our 
allies and partners should include provisions that incorporate 
disciplines on semiconductors as part of it. That includes 
things like coordination of semiconductor incentives, 
harmonization of our export controls with regard to China, and 
supply chain resiliency.
    Finally, and most importantly, we should find common areas 
of agreement amongst all stakeholders, to include business, 
labor, and national security. That includes topics like 
preventing data localization and enforced technology transfers. 
We should have free and open digital trade facilitation with 
clear rules of the road.
    For example, we should not be taxing electronic 
transmissions between our borders, or forcing data centers to 
be located in one nation or another. As with all issues 
pertaining to China, that will require a fair amount of 
discussion and debate, and even compromise.
    So, I look forward to hearing from our witnesses today who 
represent a facet of each of those. I would like to welcome Mr. 
Feith for the national security perspective, Mr. Woodall for 
the labor community, Ms. Bliss from industry, and Dr. Meltzer 
from the think tank community that is important to give us the 
intellectual firepower we need to make good decisions here in 
Congress.
    So, thank you all for being here today, and I look forward 
to hearing from you.
    [The prepared statement of Senator Cornyn appears in the 
appendix.]
    Senator Carper. Thank you, John.
    I would introduce as our first witness Christine Bliss, who 
is the president of the Coalition of Services Industries. I 
always like introducing the president. My wife will say to me 
when I get home tonight, she will say, ``Who did you meet with 
today?'' And I will say, ``Well, the president.'' And she will 
say, ``In what capacity?'' ``She was a witness before our 
committee.'' She will say, ``You mean the Vice President?'' 
``No, no, the president.''
    But anyway, Madam President, we are glad that you are here 
and your colleagues with you. You are actually the president of 
the Coalition of Services Industries, I am told. And the 
Coalition for Services Industries represents the interests of 
the American services economy, which employs over 75 percent of 
the American workforce and generates some three-quarters of 
national economic output. That probably would surprise a lot of 
people.
    Previously Ms. Bliss served as the Assistant U.S. Trade 
Representative for Services, Investment, Telecommunications, 
and E-Commerce. She also served in numerous roles in the World 
Trade Organization, including the lead negotiator in the DOHA 
services negotiation.
    Ms. Bliss, you have the floor. Welcome. Thank you for 
joining us.

    STATEMENT OF CHRISTINE BLISS, PRESIDENT, COALITION OF  
         SERVICES INDUSTRIES (CSI), WASHINGTON, DC 

    Ms. Bliss. Thanks very much, Mr. Chairman. And I also 
appreciate the participation and comments from Ranking Member 
Cornyn.
    I appreciate the opportunity to appear before you today and 
be part of this distinguished panel of witnesses. I am 
Christine Bliss, the president of the Coalition of Services 
Industries, a nonprofit association representing U.S. firms on 
services and digital trade issues.
    Our members include distribution, logistics, financial 
services, professional services, and IT services companies, 
including manufacturers of consumer technology, 
telecommunications equipment, and health and nutrition 
products. Our members operate in all 50 States and over 200 
countries, and represent both large, medium, and small firms.
    The digital economy is not just about benefits to the 
information technology sector. And I think too often that 
narrow view, and maybe misunderstanding, is out there. So 
hopefully we can correct that. The digital economy is essential 
to companies, both large and small, and economy-wide, including 
manufacturing--and I think, as you mentioned in your opening 
remarks, agriculture, health, education, environment, 
transportation, logistics, communication, finance, 
distribution, media, and entertainment. And it is a major 
source of existing and future jobs.
    To ensure that all Americans, including more workers, small 
businesses, and communities enjoy the benefits of digital 
trade, the U.S. must address growing digital protectionism 
abroad through high-ambition trade initiatives, particularly in 
the Indo-Pacific and Europe, that include binding and 
enforceable digital disciplines and remove discriminatory 
barriers and promote economic inclusivity.
    Working together, Congress, the administration, industry, 
labor, farmers, environmental groups, and other stakeholders 
can shape a digital policy that is both ambitious and 
inclusive.
    The digital economy, as you so aptly pointed out in your 
opening remarks, touches all aspects of our lives, from texting 
friends, to working or shopping online, using digital 
technology, services and software on the factory floor; from 
design and production, to after-sales and service of autos, 
tractors, planes, consumer goods, and other products, to 
doctors conducting heart surgery with the aid of digital 
services and technology.
    In 2021, the digital economy generated $3.7 trillion in 
growth output, over 10 percent of total U.S. GDP, and supported 
8 million U.S. jobs. Many U.S. jobs, both blue and white 
collar, are now requiring digital skills. And it is critical 
that workers get the digital training they need to take 
advantage of those job opportunities.
    Digital trade was and is a key source of resilience during 
the pandemic. From 2019 to 2021, digitally traded services 
exports increased by $74 billion, while in a number of service 
sectors exports actually declined.
    Senator Carper. Repeat those numbers again.
    Ms. Bliss. So, from 2019 to 2021, digitally traded services 
exports increased by $74 billion. And it is notable because, I 
think as we know, services exports in a number of sectors 
actually declined during that period. And, Mr. Chairman, in 
Delaware in 2021, services exports exceeded their 2019 level on 
the strength of digitally tradable exports, including financial 
and insurance services.
    One-third of small businesses state that they would not 
have survived the pandemic without access to digital tools. 
Cloud services allowed manufacturers to continue their 
operations. The health-care industry was able to expand its 
reach through telemedicine. Now Optics, a small business in 
Indiana, now provides virtual eye exams to patients across the 
U.S.
    The digital economy also enables proliferation of small 
business. Estate Auctions, Inc., a Delaware-based small 
business with 14 employees, exported products to 62 countries 
using a digital eBay platform. Olaris, a woman-owned life 
sciences lab in Boston used AI to develop a noninvasive kidney 
transplant test. Marketing for Greatness, a Texas-based email 
sole-proprietor digital marketer led the international 
expansion of a Fortune 500 company. And Cloud to Street in New 
York, a woman-based, woman-owned small business uses digital 
tools to analyze flood risk and climate-vulnerable communities 
internationally.
    Digital services allow small businesses in every single 
State to engage in global trade at a large scale. Good digital 
trade policy promotes American values like democracy and 
freedom, as was reflected in your remarks and Senator Cornyn's 
opening remarks. China and other authoritarian regimes are 
imposing their own digital rules of the road, which are at odds 
with these values and present national security concerns.
    Like-minded trade partners should be standing shoulder to 
shoulder to defend democratic values through a rules-based 
trade system that adheres to longstanding norms of 
nondiscrimination and openness.
    And we commend you, Mr. Carper, and Senator Young for your 
leadership in the resolution you introduced encouraging 
cooperation and coordination with allies, and also lifting 
digital trade barriers. We think that was incredibly useful.
    We must address discriminatory services and digital trade 
barriers through strong digital disciplines that include AI 
principles, good regulatory practices for digitally enabled 
services standards, SME digital capacity building, and worker 
digital upscaling.
    My written testimony lists CSI-specific recommendations, 
and IPEF seems to provide the most immediate opportunity to 
create these binding and enforceable rules. And it may also be 
a building block toward rejoining CPTPP. And we share the 
concerns and views that both you and Senator Cornyn expressed 
in that regard.
    Congress has an important role to play in shaping these 
disciplines, and CSI supports a bipartisan extension of Trade 
Promotion Authority.
    I thank you for this opportunity, and I look forward to 
answering your questions.
    [The prepared statement of Ms. Bliss appears in the 
appendix.]
    Senator Carper. Madam President, thank you for those words.
    Now, turning to our next witness, sitting on your left, is 
David Feith. David is the senior fellow of the Indo-Pacific 
Security Program at the Center for a New American Security. Do 
I have that right? Good. Center for a New American Security is 
a bipartisan think tank that focuses on developing strong and 
smart national security and defense policies.
    Prior to his time at the Center for a New American 
Security, Mr. Feith served as the U.S. Deputy Assistant 
Secretary of State for East Asia and for Pacific Affairs. I am 
sure there is a lot more that I could say about you, but we are 
going to go on to give you the opportunity to talk.
    With that, you have the floor. Welcome. We are glad to see 
you. I am looking forward to hearing your testimony.

      STATEMENT OF DAVID FEITH, ADJUNCT  SENIOR FELLOW, 
        INDO-PACIFIC SECURITY PROGRAM, CENTER FOR A NEW 
        AMERICAN SECURITY, WASHINGTON, DC

    Mr. Feith. Thank you, Mr. Chairman. Thank you for your 
invitation and that of the ranking member, and I thank the 
whole subcommittee for this opportunity.
    My written statement addresses digital trade and China, and 
in particular, the national security problem of China's open 
access to American data. It explains that America should not 
only work overseas to expand digital trade with our friends, 
but also move urgently at home to curb massive unregulated 
flows of sensitive data to China.
    Now I would like to stress immediate action possible in 
three areas. First, to ban TikTok. Second, to begin controlling 
exports of Americans' biodata. And third, to implement a 
process endorsed by both the previous and current 
administrations, but not yet in use to limit U.S. data flows to 
China.
    Now, in our unfortunately polarized politics, it is a sign 
of health that there is strong bipartisan support for 
countering China's threats. A major one is China's approach to 
digital trade, which is a key element of China's national 
security strategy.
    China's leader Xi Jinping says that data in the 21st 
century is like oil in the 20th century--the critical input for 
economic strength and national power. About a decade ago, Xi 
declared: ``The vast ocean of data, just like oil resources 
during industrialization, contains immense productive power and 
opportunities. Whoever controls big data technologies will have 
the upper hand.''
    Under Xi, the Chinese Communist Party has made a strategic 
priority of exploiting data both inside China and around the 
world. This includes personal health records, genetic 
sequences, and online browsing habits. It includes corporate 
trade secrets, supply chain records, and financial accounts. 
And it includes the photos, voice recordings, and mapping 
imagery pulsing through the world's smartphones--as the 
chairman noted--and drones and smart cars.
    Data control is also critical for China's global influence 
and censorship operations; hence, Beijing's aggressive 
regulation of Chinese apps such as TikTok. Through that app, 
Beijing harvests massive amounts of American data and transmits 
favored messages, gives censorship guidance, and can influence 
young Americans in ways that are without precedent for a 
foreign power in history.
    All this is the stuff of digital trade. Yet there are 
effectively no rules governing any of it--not international 
trade rules, and not domestic regulations.
    My written testimony cites some additional issues, such as 
the importance of Japan's admirable initiative in this field 
known as Data Free Flow with Trust. But in the time available, 
for immediate focus I will note that U.S. policy can prioritize 
at least three areas.
    First, TikTok, and the TikToks to come. The Biden 
administration is reviewing national security dangers posed by 
TikTok. Republicans Marco Rubio and Mike Gallagher have urged 
legislation to enable a ban. Democratic Senator Mark Warner, a 
member of this committee, recently endorsed a TikTok ban in 
principle, calling the platform an enormous threat.
    The TikTok issue is a test of our seriousness about data 
privacy, counterintelligence, election integrity, and 
democratic sovereignty. No hostile foreign power is entitled to 
control a leading U.S. media platform, and keeping hostile 
foreign powers from wielding such influence is a safeguard of 
our free speech. But TikTok is also a test for the data threats 
still looming on the horizon, like China's ambition to export 
metaverse companies to the U.S. market, as it has for social 
media.
    A second immediate matter: biodata. Clearly, Americans 
should protect their health and genomic and medical data to 
safeguard both privacy and national security. Yet our laws and 
policies do not do this. President Biden has announced measures 
to promote domestic biotech, but we still have effectively no 
protections regarding exports of biodata.
    While we struggle with this, Chinese companies such as WuXi 
AppTec and BGI are expanding operations in the United States. 
These companies answer to Beijing's party-state and military. 
China's access to U.S. health data, and especially DNA, 
threatens harms with multigenerational consequences.
    Third and finally, the importance of the new regulatory 
mechanism known as ICTS. This may be the best tool Washington 
has for all these issues. It could address a range of problems, 
including, for starters, data centers.
    But the Commerce Department has not yet taken enforcement 
action against Chinese firms that may be improperly accessing 
so-called ``large data repositories,'' despite a 2021 executive 
order threatening action. In drones too, the Pentagon has tied 
Chinese drone giant DJI to China's military. Yet DJI still 
dominates the U.S. commercial market. There are other Chinese 
players in the U.S. commercial market, such as Autel. Drones 
have not been the subject of any known ICTS enforcement action 
or even investigation.
    Then there are autonomous vehicles and digital mapping. 
Many leading U.S. companies in these fields rely on Chinese 
financing and engineering, yet they can freely export sensitive 
data about U.S. roads, maps, and critical infrastructure.
    ICTS, led by the Commerce Department, has a mandate to 
address all these issues--data centers, drones, autonomous 
vehicles, and more--but has not yet taken action. This issue 
would seem to warrant attention from the White House and the 
Congress.
    As we have said, digital trade and China's threats to U.S. 
security are overlapping fields of bipartisan concern. So, it 
is a privilege to appear today. The stakes are very high, and I 
thank you for holding the hearing.
    [The prepared statement of Mr. Feith appears in the 
appendix.]
    Senator Carper. And we thank you. Thanks for joining us. It 
is very nice to meet you, and welcome.
    Our third witness--we have four; three witnesses in person. 
Our third witness in person is Dr. Joshua Meltzer, who is a 
senior fellow at the Brookings Institution, where his research 
focuses on international economic relations and the 
intersection of technology and trade policy. Is that right? 
Good. Dr. Meltzer also leads the Digital Economy and Trade 
Project and co-leads the Forum for Cooperation on Artificial 
Intelligence.
    Prior to Brookings, he spent 8 years at the Australian 
Department of Foreign Affairs and Trade as a trade negotiator 
and as a diplomat at the Australian Embassy in Washington, DC.
    Are you a native of Australia? Oh, good. Well, Dr. Meltzer, 
we are delighted that you are here. The floor is all yours. 
Thank you, and welcome.

     STATEMENT OF JOSHUA P. MELTZER, S.J.D., SENIOR FELLOW, 
       GLOBAL ECONOMY  AND  DEVELOPMENT,  BROOKINGS  INSTI-
       TUTION, WASHINGTON, DC

    Dr. Meltzer. Chairman Carper, Ranking Member Cornyn, and 
members of the subcommittee, I thank you for the opportunity to 
testify today. I am a senior fellow at the Brookings 
Institution, where I work on digital trade issues, as well as 
on emerging technology such as artificial intelligence.
    Today my testimony will address the opportunities of e-
commerce and digital services trade for the U.S., with a focus 
on small and medium-sized enterprises. I will also discuss 
evolving global AI regulation and how trade policy can support 
digital trade consistent with U.S. values and strategic 
objectives.
    As you noted, Senator, there is no globally agreed 
definition of ``digital trade.'' However, it is a term 
increasingly used to describe an ecosystem that is more 
expansive than e-commerce, and includes cross-border data flows 
and how data and digital technology such as cloud computing and 
AI enable trade.
    Trade agreements now have digital trade chapters instead of 
e-commerce chapters that include new commitments, such as not 
to prohibit cross-border data flows and required data 
localization as a condition for doing business, subject to 
GATTs Article XIV style exceptions.
    Digital trade chapters aim to encourage regulation that 
builds trust in cross-border data flows. Digital trade 
commitments can deliver significant economic gains for the U.S. 
The 2019 U.S. ITC assessment of the economic impacts of USMCA 
found that the digital trade chapter is a key driver of the 
economic gains for the U.S. These rules were found to have 
significant positive impacts on industries that rely on cross-
border data flows, including for firms in the services' 
economy, manufacturing, and agricultural industries.
    One aspect of digital trade is e-commerce, which represents 
a real opportunity for small businesses to export and reach 
customers globally. A key development has been platforms such 
as eBay, Amazon, Etsy, Mercado Libre in South America, and 
Lazada in Asia, to mention a few.
    These platforms solve many of the barriers that have 
previously prevented small businesses from exporting by 
providing integrated payment solutions, trust mechanisms, cheap 
and effective dispute settlement, and links to express delivery 
services.
    The opportunity for small businesses to engage in digital 
trade has been enabled by trade policy. The WTO Trade 
Facilitation Agreement reduces the costs of getting goods 
through Customs. USMCA raised the de minimis Customs duty 
levels in Canada and Mexico, which has led to increased e-
commerce sales. Commitments on electronic signatures and 
electronic authentication provide important legal frameworks 
that allow for digital cross-border transactions, and 
commitments to not restrict data flows and to encourage 
interoperability among digital payment systems also enable e-
commerce.
    Services exported online are another growth opportunity for 
the U.S. The U.S. has been exporting more services than it 
imports for over 30 years, and services now comprise around 40 
percent of total U.S. trade. But services are an even more 
significant share than that. This is because around 30 percent 
of U.S. goods exports comprise value-added services used in the 
production of goods, the net result being that over 60 percent 
of total U.S. exports comprise services. And a lot of these 
services can be exported online.
    Recent OECD data shows that the U.S. is the world's largest 
exporter of digitally deliverable commercial services, over 
three times larger than its nearest competitor, Germany, and 
2.2 times larger than the UK.
    While digital trade is an opportunity for U.S. businesses, 
the OECD Digital Services Trade Restrictiveness Index shows 
high levels of digital trade restrictions globally. This 
includes in countries such as India and Indonesia that are 
participating in the Indo-
Pacific Economic Framework negotiations, and the digital trade 
restrictions in these countries pale in comparison to China, 
which is one of the world's most restrictive digital trade 
regimes.
    Digital trade also affects access to and the development of 
key digital technologies such as AI. Recently, U.S. National 
Security Advisor Jake Sullivan identified three families of 
technologies including computer-related technology that 
includes AI, which he described as ``force multiplied'' 
throughout the tech ecosystem, where U.S. leadership is needed 
from a national security imperative.
    While the U.S. is a world leader in AI, many countries are 
moving to regulate AI and expand AI R&D cooperation. China, 
second only to the U.S. in terms of AI capacity, has begun to 
roll out its own AI governance framework, which includes 
regulations on the development and deployment of AI algorithms, 
as well as increased control over Chinese technology firms 
leading in AI development. China is also exporting its model 
for AI regulation to other countries in the Indo-Pacific and 
globally.
    Some countries are now using trade agreements to support AI 
specifically, but the U.S. has yet to do so. The U.S. certainly 
is the largest and most innovative digital economy that creates 
opportunity for digital trade for both small and large 
businesses. The U.S. has led development of digital trade rules 
in the USMCA and CPTPP, but renewed U.S. leadership is needed 
to develop rules that govern digital trade more broadly.
    Yet, while the U.S. decides what to do, the world is not 
standing still. China is leading the development of rules in 
digital trade in RCEP and is seeking to join the CPTPP, where 
it will be able to influence the next generation of digital 
trade commitments.
    The forthcoming IPEF negotiations are the next opportunity 
for the U.S. to reengage in the development of digital trade 
rules that support economic opportunities for U.S. firms and 
workers, and to shape the global context.
    Thank you.
    [The prepared statement of Dr. Meltzer appears in the 
appendix.]
    Senator Cornyn. We are in the process of voting, so Senator 
Carper stepped out. So I will introduce our final witness, Mr. 
Patrick Woodall, the policy and research director at the AFL-
CIO Technology Institute. He also serves as a board member for 
the Trade Justice Education Fund, which is a nonprofit that 
sponsors public education programs designed to expand awareness 
about the worker rights, environmental and climate, and public 
health implications of U.S. trade policy. He has been a policy 
expert and researcher for 3 decades, advocating for economic 
and social justice.
    Mr. Woodall, you have the floor.

       STATEMENT OF PATRICK WOODALL,  POLICY AND RESEARCH 
         DIRECTOR, AFL-CIO TECHNOLOGY INSTITUTE, WASHING-
         TON, DC

    Mr. Woodall. Thank you very much, Ranking Member Cornyn, 
and Chairman Carper, and members of the committee. It is a 
great opportunity to testify today. I am here on behalf of the 
AFL-CIO Technology Institute, the AFL-CIO, and the more than 12 
million union members working in every State and every sector 
of the economy.
    The labor movement is deeply interested in international 
trade policy. Trade deals have cost millions of manufacturing 
and 
service-sector jobs, upending the economic security of working 
families, and worsening America's economic and racial 
inequality. But we are focused on digital trade as well. The 
digital discussion frequently sounds like it has no grounding 
in the physical world, which Ranking Member Cornyn referred to. 
It is Internet-enabled commerce, and big data, and cloud 
computing. It is all of those things, but it affects real 
workers in the physical world, because cross-border digital 
commerce has offshored tens of thousands of U.S. call center 
and back-office jobs, and this low-road offshoring has fueled a 
digital underclass of gig workers in the developing world that 
power artificial intelligence systems. These ghost workers tag 
images and code information for low pay, including in India and 
the Philippines, which have notoriously poor working conditions 
and weak labor laws. And digital trade powers automated 
decision-making and algorithmic management software that 
increasingly hires, controls, evaluates, monitors, and even 
fires workers in the United States.
    These technologies can shortchange workers' earnings, 
expose workers to unsafe conditions on the job, infringe on the 
right to form unions, and exacerbate employment discrimination. 
All these workers are directly impacted by global digital 
commerce on the job, but they are also impacted at home.
    Big tech companies collect, combine, and can modify vast 
troves of personal data that compromise everyone's privacy. The 
algorithms, the power of social media, have pushed online hate, 
spread political disinformation, and harmed the mental health 
of young people.
    But the existing trade model makes it harder to safeguard 
workers, consumers, and society from the known and emerging 
downsides of the digital economy.
    First, the current digital trade deals grant broad, 
unfettered powers to companies to shift data and deploy 
software worldwide. These authorities over data and software 
are more expansive than for trade rules on physical goods.
    Second, the digital trade rules rigidly limit or forbid 
government oversight of the technology sector, as well as its 
data and its software products. The technology industry appears 
to view any oversight, including efforts to safeguard digital 
privacy, as illegitimate trade barriers. The digital provisions 
almost read like high-tech commandments: thou shalt not limit 
cross-border data flows; thou shalt now require any data to be 
maintained domestically; thou shalt not look at the source 
codes that power software that affects workers and consumers. 
Since the 1990s, trade agreements have constrained domestic 
governance to curb so-called non-tariff trade barriers. 
Longstanding regulatory approaches have been subjected to trade 
tests to determine if they are permissible rules or illegal 
trade barriers.
    At the WTO, fewer than 5 percent of challenged regulations 
have been upheld in trade disputes. The stringent regulatory 
restrictions in digital trade are fundamentally different 
because we are just starting to grapple with meaningful 
oversight of these technologies. It will be easier to challenge 
efforts to rein in the downside to these technologies as 
illegal trade barriers because of our limited legal and 
regulatory foundation.
    Bipartisan efforts to protect personal data or address 
anticompetitive platform practices could run afoul of existing 
digital trade language. So the combination of unilateral 
corporate powers and narrow regulatory constraints in digital 
trade can lock in a largely unregulated technology landscape.
    It is time for sort of a strategic reset to create a 
worker-centered digital trade policy. This is not a binary 
choice between China's Great Firewall and a totally unregulated 
technology sector. We must be able to protect personal 
information in critical sectors by establishing restrictions on 
vulnerable cross-border data flows.
    Digital trade deals should encourage rather than deter 
government efforts to protect personal data inside and outside 
the workplace. Safeguarding critical infrastructure and 
personal data not only protects the security of the economy and 
people, but it also helps keep good jobs here in the U.S.
    We must be able to meaningfully oversee source codes and 
algorithms to robustly enforce current labor and employment 
laws, and enact new laws to address emerging issues like 
electronic workplace surveillance and digital privacy.
    The Congress and the public should decide the rules of the 
road for technology. It cannot be left up to big tech companies 
and international trade tribunals.
    Thank you for the opportunity to testify, and I am happy to 
answer any questions.
    [The prepared statement of Mr. Woodall appears in the 
appendix.]
    Senator Cornyn. Thank you, Mr. Woodall.
    Senator Carper, the chairman, is not back, so I will 
proceed with some questions, and I am sure I will turn it over 
to him when he returns.
    Dr. Meltzer, I am looking at your testimony here. I was not 
here for the beginning of the answers to Senator Carper's 
questions, but I will just read this.
    You say, ``There's no globally agreed definition of digital 
trade. However, it is a term increasingly used to describe an 
ecosystem that is more expansive than e-commerce, which is 
focused on trade in goods and services purchased online. 
Digital trade includes the important role of cross-border data 
flows and how data and digital technologies such as cloud 
computing and artificial intelligence can enable trade.''
    Did I read that correctly?
    Dr. Meltzer. Yes, Senator.
    Senator Cornyn. And let me just ask our other witnesses. 
Ms. Bliss, do you agree with that definition? Or do you have 
any differences?
    Ms. Bliss. No, I do not have differences. And I think that 
Dr. Meltzer has adequately described it. And in my written 
testimony, we tried to elaborate that, in our digital economy 
certainly, are what are referred to as the pipes--the 
infrastructure, the fiber-optic cables, the technology that 
enables the Internet--and then the platforms, technologies, 
software, and services that build onto that to enable the 
functioning of the digital economy itself.
    And then of course all the various apps that are being 
developed and the emerging technologies in that space. And 
then, I guess at the core you could say that it is about 
electronic transmission of data across the Internet and the 
content that is included there. But I would be in agreement.
    Senator Cornyn. Mr. Feith, I know you focused on national 
security aspects of this issue. Obviously the Internet has 
proved to be a boon to businesses and individuals to share 
information, and of course we are a free society where people 
are free to communicate. But our adversaries, particularly the 
People's Republic of China and the Russian Federation, use 
information warfare essentially to steal our data, and then to 
do everything from engaging in disinformation or active-
measures campaigns like they did in 2016 during the 
presidential election.
    Talk to me about the benefits of us entering into some 
digital trade agreement with our democratic allies, and how 
that plays into this sort of split personality when it comes to 
digital information in a free society versus autocratic 
societies.
    Mr. Feith. Thanks, Senator. I think the split personality 
point is well put. And I think that some of your definitional 
questions, and the answers we have heard, also highlight a 
really valuable and important quality of this whole discussion, 
which is that some of what makes this difficult and dangerous 
as an issue--when it comes to the role of hostile adversary 
countries in digital trade and in our domestic digital 
economy--is that the nature of so much of digital trade is 
unlike the nature of traditional trade that passed in physical 
goods by truck and ship and horseback over the years, where 
fundamentally there was a structure among nations where the 
trade was controlled at borders and arranged between countries 
according to agreements.
    The Internet was born and then established with none of 
that. There was no need to go open any other countries. We all 
allowed the Internet to emerge all over the world. And as we 
have said, there were enormous benefits to this in matters of 
prosperity and quality of life and all the rest.
    And yet it caused also the national security challenges 
that we face today. In a way completely without analogy to the 
physical trade in goods, we have adversary country state actors 
and state-backed actors operating in our telecommunications 
networks, across our digital economy--meaning in our pipes, in 
the platforms of the delivery of these digital goods and 
services, and in our politics through the use of platforms like 
TikTok and other social media platforms--where not only can 
data be harvested, but the export of the censorship and 
propaganda objectives of the Chinese Communist Party, for 
example, can be done at scale and in a fashion that was simply 
impossible in the pre-digital age. And we do not have 
mechanisms in our international trade rules, and we really do 
not have mechanisms even in our domestic regulation, for 
dealing with this.
    We have the Committee on Foreign Investment for handling 
inbound foreign investment. We have export controls for 
licensing and restricting the traditional export overseas of 
goods and services and some technologies. We have Federal 
procurement restrictions that restrict what Federal departments 
and agencies and their contractors can purchase.
    But our Federal regulatory structures have traditionally 
been just silent on an enormous range of domestic digital 
commerce that has international digital trade implications. And 
that has to do with what people put on their phones, what 
companies do when it comes to their drones or their 
surveillance cameras. It has to do with the handling and 
sharing overseas of our most absolutely sensitive data, such as 
our genomic DNA information.
    These things have been effectively untouched by the 
traditional tools that we know for national security--you know, 
restrictions and approaches to matters of commerce. And that is 
partly why we have such a challenge here.
    It is also partly why this new ICTS regime represents such 
a potentially valuable and important new element of the 
national security regulatory mix, because we now have had on 
paper the creation of this institution. It is like CFIUS, but 
it is for cross-border data flows. And instead of being led by 
the Treasury Department, it is led by the Commerce Department.
    It was put out initially in the waning period of the last 
administration, endorsed in the first months of the current 
administration, but it exists only on paper. It has never 
actually taken action, not against data centers, not against 
drones, not against autonomous vehicles and digital mapping, 
and not against anything relating to the biodata-particular 
priority. And it would appear that the case for that is really 
just very strong and rather overdue.
    Senator Cornyn. Thank you.
    Senator Carper. I thank my colleague. I think, since I was 
off voting, we have been joined by our chairman of the full 
committee, Senator Wyden. Welcome. Thank you for joining us. 
Catherine Cortez Masto, Catherine, it is wonderful to see you. 
Thank you so much for joining us. And also, we are joined by a 
new member of our team, Senator Grassley, a new member of the 
Senate. [Laughter.] He has been here actually as long--how many 
years have you served in the Senate now?
    Senator Grassley. Forty-two.
    Senator Carper. Forty-two, but who is counting? That is 
great. You have seen a lot----
    Senator Grassley. It is just a number.
    Senator Carper. It is just a number. That is great. Well, 
congratulations to both of you on your re-elections, and I am 
delighted you were able to join us today.
    My first question is pretty easy. Several of our witnesses 
have used the term ``ICTS regime.'' People watching us on 
television probably have no idea what you are talking about. I 
am not very good at acronyms.
    How would you, Mr. Feith--how would you explain that to 
your grandmother?
    Mr. Feith. The unpronounceable acronym happens to stand for 
Information and Communications Technology and Services, which 
is not how I would begin the explanation for my grandmother, 
though.
    Senator Carper. Is your grandmother still alive? Is she 
still alive? She might be watching us.
    Mr. Feith. No, unfortunately not, but we have a daughter 
who is named for her, so that is an alternative.
    Senator Carper. That is good. The next best thing.
    Mr. Feith. This is meant to be a structure inside the U.S. 
Government that pulls together expertise from all the relevant 
parts of the executive branch--national security departments 
and agencies, commercial and economic departments and 
agencies--and the intelligence community, in order to assess 
the national security implications and risks of all of the 
enormous flows of data that could go cross-border, especially 
between the United States and the so-called foreign adversary 
countries, beginning with China and Russia.
    Senator Carper. All right. I think your grandmother would 
probably say, ``That's my grandson. I am so proud of him.'' All 
right; thanks for doing that.
    I have a question, really for all of our witnesses. I think 
we will lead off with Ms. Bliss, by asking you to respond to it 
initially.
    As the leaders of this subcommittee, Senator Cornyn and I 
have long advocated for engagement with our allies in the Asia-
Pacific region--you mentioned this--after the previous 
administration abandoned multilateral cooperation.
    Now, as the Biden administration works to reclaim a seat at 
the table with our Indo-Pacific Economic Framework, digital 
trade presents a clear opportunity for U.S. leadership in this 
critical region.
    We know that both our allies and our adversaries in the 
region are racing to write the rules of the road on digital 
trade, and our allies have been clear that they welcome our 
partnership on the digital trade in order to advance our shared 
values.
    Here is my question for each of you: what specific digital 
trade policies should the United States advocate for in the 
Indo-Pacific Economic Framework? I will say that again. What 
specific digital trade policies should the United States 
advocate for in the Indo-
Pacific Economic Framework in order to advance our economic, 
security, and geopolitical interests? Ms. Bliss, would you be 
our lead-off hitter there? And then Mr. Feith, and then we will 
go down the line.
    Ms. Bliss. Thank you, Mr. Chairman. And we did supply to 
the committee, as an annex, our specific recommendations with 
regard to IPEF--and more generally in terms of what we believe 
should be included in the digital chapter. But let me highlight 
some areas.
    That is, we think about the provisions that were included 
in the bipartisan USMCA digital chapter, and then building on 
that, the U.S. and Japan also looking to some of the 
innovations that have been made by our trade partners in the 
region. Australia, Singapore, and others provide important new 
elements that can be included. At its core--and I think you 
have listed this in your resolution--we need to certainly 
address cross-border data flows. And I would point out that it 
is not the case that there is an absolute allowance of cross-
border data flows in all circumstances. There is provision for 
deterrence from that, where there are legitimate public policy 
objectives. And that is certainly something that we would want 
to see continued.
    Too, data localization is pernicious and increasing, and 
has wide implications, particularly in respect to challenges 
posed by China. And I think it also relates to the data issues 
that have been raised here today.
    And I also believe that the source code provisions, which 
again are not absolute--it is not an absolute prohibition on 
mandatory transfer of source code. There are exceptions to that 
for law enforcement for not just judicial processes but also 
regulators, inspections, and other circumstances. So I just 
want to correct the record that that source code provision is 
not absolute.
    I also want to emphasize the importance of a permanent 
moratorium on e-commerce duties, and also new provisions that 
we have suggested, including things like AI best practices 
principles, which we think can address some of the issues that 
have been raised, particularly in Mr. Woodall's testimony, with 
regard to concerns about potential abuses of AI in the 
workplace.
    We also think it is very important that there be a 
commitment to worker upscaling in the digital area. We also 
think that inclusion of tools for small businesses is 
incredibly important. And certainly, greater inclusivity is 
very important. And I also should mention addressing the 
pernicious problem of censorship that I think is another area 
that should be addressed.
    Senator Carper. Good. Thank you for that comprehensive 
response. My time has expired, and we will come back later in 
the hearing, and we will have an opportunity to invite our 
other witnesses to respond to the same question.
    The next person to recognize for questions is Senator 
Grassley, and then Senator Cortez Masto. So, Senator Grassley, 
you are up, followed by Senator Cortez Masto.
    Senator Grassley. Thank you.
    I am going to start with Mr. Feith. We are all concerned 
about national security and protecting the data flow, and we 
are concerned about consumers, making sure that their 
technology is protected. And obviously we think mostly about 
the Chinese Communist Party and China generally in this regard.
    So my first question is, you have stated the need to ban 
TikTok and digital platforms that are similar. Could you 
explain why this is necessary?
    Mr. Feith. Thank you, Senator. The threats posed by 
TikTok--and, as your question suggests, by other platforms, and 
there are many that are subject to the same Chinese Communist 
Party influence and control and subversion--involve both data 
that would flow out of the United States to China, and the data 
in a sense that flows from Beijing and its political edicts 
into our digital economy.
    In that first category, you have the sort of relatively 
more commonly recognized data privacy concern, which is that 
TikTok is on the phone of 100 million or more Americans. TikTok 
in public statements and in congressional testimony has given a 
whole range of often contradictory and questionable answers 
about how they can possibly keep that data that is on American 
phones and in the TikTok app from the Chinese Communist Party, 
given the nature of Chinese law.
    It would appear completely impossible, because the laws--
including the National Intelligence Law of China, the 
Cybersecurity Law of China, more recently the Data Security Law 
of China, and others--make absolute the demands of the Chinese 
Communist Party to unchecked access to data that touches 
Chinese platforms like TikTok. And so the risk of the 
harvesting of that data from all the American users is 
enormous.
    There is also, though, the somewhat less widely recognized 
set of risks involving the effect of the export of censorship 
from the Chinese Communist Party to the American public when so 
much of the American public relies on this platform for news--
news about the world, news about our elections, and possibly 
the news in future circumstances that might involve Taiwan, 
might involve different actions in which the U.S. and China are 
adverse. And the ability of TikTok to be a platform for the 
mass manipulation and even mobilization of American users--
dictated by and consistent with the hostile political aims of 
the Chinese Communist Party to which TikTok has to answer by 
virtue of Chinese law--is a very grave threat.
    Senator Grassley. What other countries are there that we 
have to worry about getting into Americans' data? Are there 
other countries that pose the same problem as China or near 
that?
    Mr. Feith. There are certainly other countries that pose 
similar problems. There would not appear to be any other 
country that poses the problems at the magnitude and severity 
of China.
    I would note, for example, that the Biden administration 
put out in June of 2021 an Executive Order on Protecting 
Americans' Data From Foreign Adversaries. That ``foreign 
adversaries'' category, I believe, pursuant to some regs from 
the last administration, affects six countries: China, Russia, 
Iran, North Korea, Cuba, and perhaps Venezuela. I would want to 
check that, but I believe that is the set of foreign adversary 
countries.
    Several of the questions we have discussed have mentioned 
China and Russia together. Certainly those two would appear to 
stand out on the list of six, but even still, there are not 
Russian platforms with a presence in the United States anything 
like the Chinese platforms. And the Chinese platform concern, 
and the Chinese digital economy and digital trade concern, is 
hardly limited to TikTok. You know, TikTok's parent company, 
ByteDance, has a new virtual reality company, a subsidiary 
called PICO, which has ambitions for the U.S. metaverse market 
to compete here domestically against Facebook and Apple and all 
the others.
    There are a wide range of social media payments and other 
platforms that come from China. They are widely used because 
they are good apps. But they also pose these enormous 
challenges that are often difficult for consumers to keep track 
of. They are often really only a threat in the aggregate, when 
you talk about the aggregate of all of this data and what a 
foreign adversary government can do with it.
    But that is why it seems to pose these national security 
concerns that warrant attention here.
    Senator Grassley. My time is up.
    Senator Carper. Senator Cortez Masto, you are up. Thanks 
for joining us today.
    Senator Cortez Masto. Thank you. Thank you for this great 
subcommittee hearing, and I appreciate everybody who is 
participating today.
    Let me, Mr. Feith--is it Faith? Feith?
    Mr. Feith. Feith.
    Senator Cortez Masto. Mr. Feith. Let me start with you, 
because you talked about data harvesting. How long would you 
say data harvesting has been going on? How many years?
    Mr. Feith. Roughly as long as we have had data.
    Senator Cortez Masto. And so, do you think it is too late 
to start putting in regulatory regimes to protect, let's just 
say, an individual's PII?
    Mr. Feith. No. Some harm is irreversible, but a lot of harm 
is still ahead of us.
    Senator Cortez Masto. And when you are talking about 
``harm,'' identify that harm. What does it look like?
    Mr. Feith. I think we can talk about it in various ways. 
There is the exposure of private information that is of 
potential intelligence value.
    Senator Cortez Masto. So, national security. That is 
something we always would address. But let's talk about 
individuals, because one of the things you talked about, which 
I am very concerned about--but I am also concerned that it 
might be too late--is protections for biodata. We definitely 
need to do something, as you have said. But is it too late? I 
mean, that information is already out there for many, and you 
cannot pull it back. So how would we address that?
    Mr. Feith. I think the observation that there have been 
transfers here that are harmful and that that harm cannot be 
remedied, I would agree with completely, for transfers that 
have already happened. And yet I would also be inclined to say 
that there are uses of biodata that are currently devised but 
are imperfect and will still need to be fed by enormous amounts 
of data that companies and governments will seek to ingest over 
time. But some will seek to do so in ways that are generally 
consistent with democratic values and the rule of law, and some 
will do so in the way that the Chinese Community Party 
functions.
    Preventing the future ingestion of that sort of data over 
time for these uses of biodata already devised would seem to be 
a major interest of ours. There are also, one would think, 
infinite uses of biodata not yet devised that will come about 
in the future----
    Senator Cortez Masto. That we do not even contemplate. With 
new technology and everything that is out there, it will be 
there. I agree with you. I agree with you. And I think this is 
part of our challenge: trying to figure out what this 
regulatory regime looks like, and what data--what we are trying 
to protect.
    Mr. Feith. And if I could just note, in addition to the 
ICTS process, which is an administrative instrument that is out 
there and that has an important mandate to go implement, I 
would note--Senator Wyden was here and has left, I see, but he 
introduced a bill that has several Republican cosponsors--and I 
think also Senator Whitehouse might be on the bill as well--
back in June to create a new export control category for bulk 
American data. And so this would essentially take the export 
control system that we have long had at the Commerce 
Department, led by its Bureau of Industry and Security, and 
create a new element of it to focus on the bulk transfer of 
American personal data, in principle, to try to combat all of 
these sorts of risks.
    There are enormous complications for how exactly this would 
be done. I would just observe that it is notable--and I think 
unfortunate--that that bill pointing at a really important 
national security China-related concern that we have, is not 
the subject of more debate and consideration, including, for 
example, in the major legislative process that you all 
completed this summer with the CHIPS Act. And so it would seem 
another opportunity in the new Congress, presumably, to look at 
that effort and other ways of getting at that same very 
important problem.
    Senator Cortez Masto. I agree. Thank you. And so, what I am 
hearing from you today is, the ICTS committee concept on the 
white paper is a good start, it is where we should be starting 
here?
    Mr. Feith. Yes, ma'am.
    Senator Cortez Masto. Is there any state--I am curious--is 
there any state that you guys are aware of that has put in 
protections that we should be looking at, that is a good model?
    Mr. Feith. I will happily defer to colleagues as well. I 
would just note that the short answer would appear to be 
``no.'' The Europeans, through their GDPR, have a much more 
aggressive and mature and advanced data privacy framework. But 
they have been mostly directing it against the United States 
and our big tech players and questions about the Privacy 
Shield, and what the U.S. Government might do with European 
personal data that gets sent across the Atlantic.
    The European approach to data, for all of its vigor, has 
been rather uninterested in the fact that the data protections 
for Europeans in China are nil. And the Chinese platforms, of 
course, operate in Europe as well.
    Senator Cortez Masto. Thank you.
    Thank you, Mr. Chairman.
    Senator Carper. Senator Cortez Masto, I thank you.
    Senator Casey was here, and he had to leave. He may be 
back, and when he comes back, I will recognize him. Senator 
Wyden was here and had to leave for a while. I think he will be 
back, and I will recognize him.
    But meanwhile, live and in person, Senator Young. Welcome. 
He is somebody who shares my passion for these issues, and we 
appreciate very much his leadership and allowing me to be his 
wing man on some of them. Thank you.
    Senator Young. Thank you, Mr. Chairman.
    I want to thank our panelists for speaking to this 
important issue of digital trade. I see incredible 
opportunities and some risk as we try and plot our way forward. 
The risk, I think, emerges because there is a sense of 
urgency--at least I feel it--for the United States to work with 
partners and allies to kind of further refine our rules in this 
area. And as it relates to this area, as with so many other 
international policies, we need to come up with rules that are 
somewhat flexible, that are consistent across international 
boundaries.
    So there are a lot of commonalities between the work that I 
think is going to be required here and what we do in other 
areas. We also need to make sure that we are effective. We have 
to make sure our digital trade rules can prevent the bad actors 
from purloining our data and preventing us from growing to the 
extent we otherwise would, and landing market shares, since the 
United States leads in some of these areas, from digital 
platform to digital services, and so forth.
    And I think we can do a real service to many of our allied 
countries across the Indo-Pacific in particular, and others. 
There has been much conversation about that here today.
    The administration, I think appropriately, has recognized 
the importance of the Indo-Pacific. The digital trade pillar 
within IPEF recognized the importance of this issue. But I feel 
like a more targeted approach is necessary. And I know 
colleagues on both sides of the aisle agree with me with 
respect to that. The chairman and I have just introduced a 
resolution, in fact, indicating our belief in the importance of 
this area, and we hope that continues to gain more support.
    My first question would be of Ms. Bliss. We have some 
recent experience in this area of digital trade rulemaking with 
USMCA. I am just looking at a punch list of things that are 
included there. USMCA prohibits Custom duties on digital 
products. There is a commitment to nondiscrimination, 
localization requirements, no forced disclosure of source codes 
and algorithms. It requires parties to establish civil and 
criminal procedures and penalties for trade secret theft. And 
it recognizes risk-based approaches and the need for strength 
and cooperation between governments on cybersecurity. Those are 
among the things that are called for in the USMCA.
    How is this different, as we look at the Indo-Pacific 
context? Just very briefly, what differences will be required 
to cater to the Indo-Pacific countries?
    Ms. Bliss. Well, first of all, I want to commend you, as I 
did Senator Carper, for your leadership in introducing your 
resolution on digital trade, and working with allies, and 
listing barriers. That has been very effective and important.
    But to your point, I think that because we are not in an 
FTA negotiation, and we are looking at a different kind of 
initiative that does not directly offer market access, one of 
the challenges is going to be how we convince some of our 
countries that may not be like-minded but that are 
participating in the trade pillar on the digital piece to come 
on board in the high-level standards.
    So one of the differences I would point to is, I think it 
is going to be very important that we do build in incentives 
like capacity building, hopefully encouraging countries like 
Indonesia, Thailand, Vietnam, Malaysia, to create environments 
that will attract foreign investment, which we know they 
desperately want.
    The other thing I would point out is that I think another 
difference is that we think it is really important to include 
some new provisions that go beyond what was done in USMCA and 
U.S.-Japan. And I have outlined that to the committee 
previously, but just, for example, I think we absolutely need 
to include principles on AI. I think that is very important.
    I think we also need to include something on digital worker 
upscaling. I think that is important for U.S. workers as well, 
as it is for IPEF countries.
    I think we need to include something on SME digital tools, 
and something on greater inclusivity, just to name a few. And I 
also want to highlight for the discussion, particularly some of 
the remarks that Mr. Feith had made, that cybersecurity, I 
think, is a very important area that we need to build on as 
well.
    Senator Young. Thank you for that. There is just so much 
here. It is a very broad topic, and good subcommittee hearings 
typically are based on broad topics that give us an opportunity 
to move into a number of areas.
    So one of the areas that I know my constituents are 
interested in is the national security implications of digital 
trade, and maybe not getting the rules right as we try and 
address certain challenges.
    So I would like to ask Mr. Feith some questions in this 
area. Mr. Feith, specifically I am interested in the challenges 
some of my colleagues have brought up with China. China is one 
of the most digitally restrictive economies in the world, but 
it is also one of the largest consumer markets in the world.
    And in your testimony, you covered many examples to show 
how the Chinese Communist Party is accumulating and exploiting 
data, and pushing policies that allow them to selfishly advance 
their own authoritarian interests.
    So, Mr. Feith, I will just ask you an open-ended question 
here. What is at stake if we sit back and we let China dictate 
standards in digital trade? What is at stake if the United 
States fails to boldly solidify some international standards, 
especially as we look at the Asia-Pacific area?
    Mr. Feith. Well, thanks, Senator. As with many things 
China, taking seriously the words of the Chinese Communist 
Party leadership and of Xi Jinping can be instructive on this 
issue.
    What he has said is at stake in the contest over data, and 
over which countries and political systems are best able to 
recognize the significance of data and exploit data--he has 
said it is the matter of the upper hand in future world power.
    He has been saying this actually for quite a while. It was 
10 years ago that he compared data in our century to oil in the 
last century as the most important component of economic and 
therefore national power.
    Senator Young. And do you agree with his assessment?
    Mr. Feith. Yes. Not because it is his, but because there is 
an insight there.
    Senator Young. In fact, I think each of us would be wise 
not to dismiss his assessment because it happens to come from a 
Chinese Communist leader, right?
    Mr. Feith. Yes, sir.
    Senator Young. Thank you, Mr. Feith.
    Mr. Chairman, I yield back.
    Senator Carper. There was a great song I heard the other 
day, ``You've Gotta Have Faith.'' There is no song that has 
ever said you've got to have Feith. Has anybody ever 
mispronounced your name, Mr. Feith?
    Mr. Feith. It has been done.
    Senator Carper. Even today. I like to say ``Feith'' as in 
``wife.''
    Senator Young. It is an excellent mnemonic device.
    Senator Carper. We are rejoined by our committee chairman, 
Senator Wyden. Thank you so much for being here.
    Senator Wyden. Thank you, Senator Carper. The election is 
supposed to be over, but things are just as hectic as before.
    I am going to ask you a question, if I might, Dr. Meltzer. 
Obviously businesses and workers and consumers understand that 
in our country, the Internet is free and open. And having come 
to the United States Senate when virtually nobody knew how to 
use a computer, that was something that I have been dedicated 
to, that proposition, ever since I had the honor of coming 
here.
    So our Internet is free and open. Communist China builds 
its Great Firewall higher and higher year after year, shutting 
out our businesses and crushing dissent. We are obviously 
watching on our TV screens today the way the regime censors 
protests, pushes back against the COVID lockdown, and brutally 
cracks down on dissent.
    My view is that we are watching, every night, a human 
rights disaster unfold, and it is spreading like wildfire with 
our trading partners in India, Vietnam, and Indonesia. All 
across the world, for example, surveillance is becoming the new 
normal, and technology is used to monitor worker communications 
and stamp out dissent and organizing.
    So I thought, because of your expertise, Dr. Meltzer, it 
would be helpful to have you briefly outline several of the 
smartest reforms that could be made to our trade policy to put 
the United States in a position to push back as effectively as 
possible against the human rights crackdowns.
    Dr. Meltzer. Thank you, Senator, for the question. And I 
certainly agree with your observation in terms of what is 
unfolding at the moment. It is a dynamic space. And there is 
clearly an important role, I think, for U.S. leadership on 
digital trade policy issues as a key component of building an 
ecosystem--I think particularly in the Asia-Pacific region--
which reaffirms the norm of an open and free Internet.
    In many respects, this is sort of the center of where this 
broad or strategic conflict, I think between the U.S.--and I 
should say the West, really--and China is going to play out on 
the ground. And we see this happening in versions of trade 
policy which China is advocating, compared to what would be a 
preferred, I think, U.S. approach.
    And one need only look at, for instance, the RCEP, the 
Regional Comprehensive Economic Partnership, which on one level 
is not a bad agreement, but includes a lot of loopholes and 
exceptions for China's approach to the Internet and 
restrictions on data flows, and so forth. And we have a lot of 
important countries in the region that are now party to that 
agreement, which has become a baseline for them. And you know, 
it refers specifically to the ASEAN countries, which are 
obviously part of the RCEP agreement. They are negotiating a 
digital economy framework agreement, probably starting next 
year, and that will be their starting point. And moving them 
towards a view of digital trade which is more consistent with 
the view that the United States has of what would be an 
appropriate way forward, in terms of data regulation and free 
flow of data, I think is an important objective here.
    And part of achieving that is going to be U.S. 
reengagement, I think, on digital trade policy in the region.
    Senator Wyden. My time is going to run out shortly.
    You are a member of this committee in a hypothetical 
question. What kinds of changes to our trade policy would you 
advocate, to our digital trade policies, in order to allow our 
country to push back as effectively as possible on these human 
rights violations?
    Dr. Meltzer. Well, I think that it would require starting 
with what we have got and then using the full weight of access 
to the U.S. market to incentivize the region to adopt an 
approach to data flows and data regulation----
    Senator Wyden. What would be an example of such an 
incentive?
    Dr. Meltzer. Well, I honestly think, Senator, that the IPEF 
may get us part of the way there, but I think it would take a 
comprehensive sort of trade agreement that built in a set of 
digital trade rules that build on USMCA. But I think we need a 
lot more. We have heard a lot on this panel about what that 
might comprise, so I will not repeat that, but I think that the 
rules which are combined with enforcement, plus the incentive 
of access to the U.S. market as kind of the key piece, that 
kind of incentivizes compliance with the rules that are kind of 
the comprehensive----
    Senator Wyden. We are very much interested in incentives 
here in the Senate Finance Committee. The reason we got a 
breakthrough with respect to clean energy policy is, we wrote a 
piece of legislation that said the more you reduce carbon 
emissions, the bigger your tax savings.
    So, you had us at ``hello'' on the proposition that 
incentives are a good thing. So we will hold the record open, 
with Chair Carper's permission, and I would be very interested 
in a couple of examples of your ways to tie these incentives. 
And open markets are certainly one possibility. But if we are 
going to actually put them down in the policy, we are going to 
need to be able to lay this out in a straightforward way.
    That is what we did with respect to clean energy. After 20 
years of gridlock, we said, ``Hey, we are going to make this 
pretty simple. It is going to be technology-neutral. It is 
going to be market-
oriented. Everybody is going to have a chance to be part of a 
new system. But the incentive is, you get the tax savings if 
you do what the public needs so desperately, which is to reduce 
carbon emissions.''
    So, if you can give us something that resembles that as it 
relates to digital trade markets, we will give you a parade and 
a hot fudge sundae. Okay?
    Dr. Meltzer. Well, that is a great incentive for me, 
Senator. And I will add, on the incentive front, that there is 
an infrastructure component here, which is really a development 
issue in a lot of the world. When we talk about digital trade 
issues for a lot of the world, getting access to the Internet, 
sufficient broadband, is very crucial. And I think there is a 
role here for the U.S. to take a more significant place in 
supporting the infrastructure build and the investment that is 
needed in the digital space as well, which would then support 
the apps and the content services after that.
    Senator Wyden. Well, thank you.
    Senator Carper. Mr. Chairman, thank you so much for coming 
back and not being here just once but twice. We very much 
appreciate that and the help of your staff in putting this 
hearing together.
    We have been joined by Senator Warren. It is great to see 
you. Thank you for joining us.
    Senator Warren. Well, thank you very much.
    Senator Carper. Please proceed. You are recognized for 2 
hours. [Laughter.]
    Senator Warren. Thank you, Chairman Carper. And thank you 
very much for holding this hearing.
    So, giant corporations use bad trade deals to pad their 
profits and to chip away at protections for workers and for 
consumers. And now that the U.S. and other governments are 
trying to rein in big tech, their lobbyists and lawyers are 
trying to rig digital trade rules to undermine those new 
regulatory laws.
    They wrote some of the digital rules in the new NAFTA 
agreement, and now they are trying to rig the Indo-Pacific 
Economic Framework negotiations as well.
    So, take artificial intelligence, or AI. Companies 
increasingly rely on AI, even though AI, for example, can 
discriminate systematically, rejecting a job or loan for an 
applicant for having a Black-sounding name, or penalizing a 
worker for a disability, or misidentifying women of color in 
police footage.
    This raises big concerns. And Congress and regulators are 
now taking a very close look at what is going on. But big tech 
wants to keep its code in a black box where nobody gets to look 
at it.
    Mr. Woodall, you are the policy director at the AFL-CIO 
Technology Institute. You are an expert on digital trade. Under 
the source code secrecy rules that big tech is now pushing as 
part of its digital trade agenda, could Congress pass pending 
legislation requiring that companies submit their AI code to 
the government, or to third parties say, to assess it for 
potential bias?
    Mr. Woodall. Senator, obviously Congress could pass those 
laws to address the discriminatory impacts of AI in the 
workplace, but they could run afoul of the digital trade rules 
and be vulnerable to a challenge or a trade dispute. Obviously, 
the sort of reliance on this ``necessary and legitimate'' 
clause, as a justification would be, I think, a little thin 
reed to hide behind. The question is, legitimate to whom? 
Necessary to whom? And recognizing that, in the digital and 
technology world, our sort of regulatory landscape is very, 
very thin.
    Most of the other trade areas that have been built were--
really, the WTO went into effect decades after we had 
environmental protections and workplace safety rules. So this 
is a very different sort of environment, where the digital 
trade has a different impact on the ability to address the 
known downsides of technology on workers and people.
    Senator Warren. Okay, so that is a really powerful point. 
Now, you know, tech lobbyists like to say that source code 
secrecy is about protecting trade secrets from China. But they 
have written the trade rules to apply to everyone, including 
U.S. regulators. Now the tech lobbyists will say the language 
includes exceptions that ensure that regulators can still get 
access.
    So what I want to do is just take another, closer look at 
the fine print on this. Regulators can look at source code or 
algorithms for, quote, ``a specific investigation, inspection, 
examination, enforcement, action, or judicial proceeding.''
    Mr. Woodall, could regulators really use this exception? Is 
this going to solve the problem?
    Mr. Woodall. I think it is a real concern, Senator. And the 
reason--there are a couple of reasons.
    One is that this sort of flags the VW problem, right, where 
EPA got a whistleblower to send the source codes to EPA that 
flagged that there was a problem with VW spoofing emissions 
tests. Now the question is whether there would be an ability to 
know to pursue these kinds of investigations. It is really a 
``chicken and egg'' problem, right? You have to know enough to 
be able to pursue the investigation. And so this specificity 
language could make it hard to really know whether to launch an 
investigation without being able to see under the hood.
    And then the second sort of problem with respect to 
specificity language is, it pretty much precludes sector-wide, 
or practice-wide investigations that regulators frequently 
pursue to see how consumers are protected, or what is going on 
in the workplace. So I think the recognition that there is a 
legitimate role for government is good, but narrowing it into a 
specific case really is a concern for us.
    Senator Warren. Okay. So I get your point. So big tech 
wants to protect whatever is in the black box from AI, and they 
not only want it protected from China, they want to protect it 
from U.S. regulators.
    But of course big tech companies only care about secrecy 
when it is their secrets that they want to protect. Meanwhile, 
they are fighting to protect their ability to collect, to 
store, and to sell your data anywhere else that they want in 
the world. And that is why the tech lobbyists behind the trade 
rules prohibit any limits on the international transfer of 
data.
    So what if we wanted, here in the United States, to put 
limits on the transfer of sensitive data, say period tracking 
data, or location data for people who visited abortion clinics? 
Especially we want to put limits to countries with poor data 
protections.
    Mr. Woodall, big tech says we should not worry, because 
countries can still pass laws to protect data, so long as they 
fit under standard trade agreement language called the 
``legitimate public policy exception.'' But how often have 
countries actually succeeded in using this language to defend 
their laws protecting consumers or workers or the environment?
    Mr. Woodall. It is quite infrequent. Less than 5 percent of 
the cases at the WTO where regulations were challenged as 
illegal trade barriers were upheld under the necessary and 
legitimate type tests. So it is very difficult to survive under 
these particular policy caveats. But as I said, I think it is 
going to be harder with digital because we have so little 
regulatory infrastructure and foundation upon which to defend 
the legitimacy and necessity of the regulations.
    So as we are sort of--look, this is a world where we are 
just beginning to confront the concerns with this. And there 
are a bunch of laws that are being considered in Congress that 
would affect the digital privacy and monopolistic platform 
practices that could run afoul of these digital trade rules.
    I would add, on the privacy issue, that language in the 
USMCA specifically says it must be necessary and proportionate 
to the risk, which is sort of an even higher threshold to 
defend future privacy rules.
    So, all of this--look, there is a good reason to consider 
protecting privacy and protecting the data that is behind 
privacy for things that have been said on this panel already, 
on things like biometrics, on health data, on financial data. 
There are good reasons to exclude those kinds of personal data 
from the free flow of data and data localization, and there are 
good reasons to exclude things like critical infrastructure, as 
has also been said today.
    So I think, thinking about exceptions to these data 
provisions is essential going forward.
    Senator Warren. Okay. So, thank you. It is a very powerful 
point you make. We are barely at a 5-percent success rate on 
trying to enforce the exception, so you are saying it could be 
even worse under the conditions if we go forward in the digital 
area here.
    You know, it is not a surprise that big tech is trying to 
weaponize digital trade rules. They know that the U.S. Congress 
is now considering bipartisan legislation to try to rein in big 
tech. So this is a move to fight back.
    And let's be blunt. Big tech has a lot of friends. I have 
raised concerns about the revolving door between big tech and 
the agencies like the Commerce Department that are leading our 
digital trade negotiations.
    We cannot let big tech hijack current trade negotiations 
like the Indo-Pacific Economic Framework. Voters want Congress 
to strengthen their digital rights, and our trade agenda must 
reflect that approach.
    Thank you very much, Mr. Chairman, and I appreciate your 
indulgence for the long questions and answers.
    Senator Carper. I know we were happy to welcome you and 
indulge you as much as you needed. That was great. Thanks for 
that exchange. Thank you for the enthusiasm you bring to these 
subjects too.
    The Small Business Administration does a lot to promote the 
establishment of small businesses--to grow them--and they push 
something, I think it rolls around every Saturday, maybe right 
after Thanksgiving, and they call it ``Small Business 
Saturday.'' And the idea is to try to encourage people across 
the country to patronize our small businesses. I think it is a 
good thing. I enjoy doing that. We try to help to nurture all 
those small businesses, and a lot of times they grow up to be 
really big businesses.
    I have a question that relates to small businesses, and 
some small businesses understand every word you are saying; 
others do not. And just keep that in mind as you respond to 
this question.
    But I think, Ms. Bliss, I am going to ask you; Dr. Meltzer, 
you can join us as well. But the same question, and maybe, Ms. 
Bliss, you could go first. The question is, digital 
connectivity has the power to unlock tremendous opportunities, 
not just for big businesses or middle-sized businesses, but for 
small businesses too, by connecting them with consumers across 
the globe.
    Some of the small businesses I visited with my staff just 
in the last couple of weeks--we have actually seen that with 
our own eyes and heard it with our own ears. However, small 
businesses often need additional support in order to access 
foreign markets and to reap the benefits of our digital 
economy.
    The question: what resources can help small businesses 
participate in the digital economy? And how can digital trade 
rules facilitate new export opportunities for small and middle-
sized entrepreneurs?
    Ms. Bliss, would you go first?
    Ms. Bliss. Thank you, Mr. Chairman. And you will forgive 
me, but I----
    Senator Carper. I forgive you. You do not have to ask me to 
forgive you. [Laughter.]
    Ms. Bliss. I will just divert for one moment, and then I 
will answer your question. And that is, that I think it is 
unfortunate that there is an enduring perception among some 
that the digital agenda is about big tech and driven by big 
tech. And I think my organization is an example of that.
    Yes, we do have several large tech companies, but they are 
only about 10 percent of my membership. And we have large and 
small businesses represented, and manufacturers. And as I said 
in my testimony, I think you certainly understand, and others 
do as well, that building strong digital rules is really across 
the board, not just about big tech. It is across sectors, 
across industries, and so that is what I was going to ask your 
forgiveness for, if I could divert to that for a moment.
    But back to small business. I think that it is very clear 
that I know that the Commerce Department does a good job of 
providing information to small businesses to help them export.
    I think there needs to be a lot more of that. I think small 
business needs to be provided with digital tools. I know 
certainly, among my members, there is a lot of that going on, 
where they have facilitator labs for start-ups and small 
businesses where they give them digital tools, whether it is 
AI, use of platforms, other digital technologies, cloud 
technologies. But I think there needs to be more of that from 
the government, as well as the private sector, maybe in public-
private partnerships.
    To answer your question about what specifically should be 
included in IPEF, for example, we think that it is very 
important that there be a provision where countries commit to 
the importance of providing those tools, digital tools, to 
small business, and capacity building in particular. Certainly 
the United States is very important, but also in IPEF 
countries.
    And so, I think that that alone would be maybe the most 
helpful thing that could be done for small business in terms of 
specific provisions that could be added in IPEF, and also just 
general capacity building that I know CSI member companies are 
already doing in the U.S., but also in IPEF countries.
    Senator Carper. All right. Thank you.
    The same question for Dr. Meltzer. What resources can 
better help small businesses to participate in the digital 
economy? And how can digital trade rules facilitate new export 
opportunities for both small and medium-sized enterprises?
    Dr. Meltzer. Senator, thank you for the question.
    Let me just go directly to the question of the digital 
trade rules. I think it is really worth noting that, in many 
respects, these rules are perhaps most important to small 
businesses, because the reality is that, at the end of the day, 
a lot of large businesses can manage the frictions and the 
costs, and they can locate facilities in countries where they 
may need to, but it is just not an option for small businesses.
    And so a lot of the ways that the digital trade rules 
minimize transaction costs and make e-commerce particularly 
seamless are really the key benefit for them. I think about 
these in three buckets. I mean, one I would think about is 
those that facilitate e-
commerce. And there are some that have been around for a while 
but are really quite essential, like recognizing e-signatures. 
You cannot do a contract if that is not recognized in both 
countries. Issues around digital authentication and digital ID 
are new developments that also allow one to basically have a 
more seamless kind of person-to-person interaction online.
    The de minimis outcome in USMCA which raised that in Canada 
and Mexico to facilitate e-commerce exports to these 
countries--there is a whole range of de minimis levels globally 
that we could look at trying to kind of find some agreement on, 
and just the nuts and bolts of the way Customs procedures work, 
and so forth, which is sort of the old work of trade policy, 
which is actually still relevant for e-commerce, because we are 
doing a lot of digital services online. We are also doing a lot 
of goods purchases online that still have to go through the 
typical trade channels. But making sure they fit for these kind 
of small business transactions is important.
    Another one I would mention is around interoperability. The 
U.S.-EU Privacy Shield 2.0 is one that has gotten a lot of 
attention because of its impacts on Facebook, but it would have 
had enormous impacts on a whole range of small businesses if 
small businesses that were selling in to Europe were unable to 
collect personal data once they made their transaction.
    So ensuring that, despite differences in regulations, data 
can flow freely, personal data can flow freely but remain 
protected, I think is a key thing that digital trade rules can 
continue to address, and that will have a big impact on small 
businesses.
    And finally, we have all talked about data flows, but I 
mentioned in my written testimony and my oral testimony the 
importance of sort of platform-solving for the barriers that 
allow small businesses to become exporters. The data flow piece 
is actually the key there as well.
    Senator Carper. Thanks for those responses.
    Ms. Bliss, at one point in time when he was responding, I 
was watching you, and you were vigorously nodding your head, 
and I thought, ``Maybe I should call on her again.'' So, do you 
want to jump in and add something?
    Ms. Bliss. Yes. I totally agree with what Dr. Meltzer 
described, and I am so glad that he mentioned trade 
facilitation, because that is another really important piece. 
But I also want to mention that I think a permanent moratorium 
on e-commerce duties is also critical, especially to small 
business, because that is something that can definitely hurt, 
particularly if there was retaliation, if it were to lapse and 
not exist with respect to small business, both exporting and 
importing.
    So I just wanted to add that one as well.
    Senator Carper. Good. I am glad you did.
    Mr. Feith, do you want to opine on this one?
    Mr. Feith. No, sir.
    Senator Carper. All right. Maybe I will give you another 
shot at a different question. This one deals with bolstering 
our cybersecurity and our digital infrastructure.
    Digital infrastructure, including things like broadband, 
like data centers, like physical input, like semiconductors, 
have become critical to global trade, and have been for some 
time.
    What vulnerabilities currently exist related to digital 
infrastructure? Talk about some of those, and how can we 
safeguard these resources--or maybe better safeguard these 
resources in order to protect the cybersecurity of American 
workers and our businesses?
    Mr. Feith. Well, thanks, Senator. It is a huge subject, and 
I will try to give you a limited answer. I think that we have 
seen a lot of really important action on recognizing the China-
related threat in cyber-space generally, around things like the 
theft of intellectual property, say over the last decade, the 
threat that relates to telecommunications infrastructure in the 
U.S. and around the world, especially over the last 5 years or 
so. The understanding of what Huawei and ZTE and others mean--
we have seen steady action from parts of our government that 
are responsible for those areas. We still need more of it, but 
we have seen at places like the FCC, the Federal Communications 
Commission, over the years, including just last week, a lot of 
effort to sort of gradually and increasingly restrict the 
ability of Chinese companies, subject to Chinese Communist 
Party influence and control, to be present in the hardware and 
software of the U.S. telecommunications infrastructure.
    One thing that I would note, though, that is really 
interesting and kind of emergent about what this means in our 
consumer economy--but also in our national critical 
infrastructure--is things like drones and surveillance systems 
and cameras.
    Some of these areas are, in a sense, uncovered by our 
traditional regulatory approaches. And so on drones, you have 
had this interesting and rather frustrating scene over the last 
several years where various parts of the U.S. Government--DHS, 
the Pentagon, and others--have put out statements that relate 
to the fact that these Chinese drones pose these major data-
integrity concerns because of the complete ability of the data 
to be subverted by Beijing and used for hostile purposes.
    But the statements from DHS, for example, are just 
advisory; useful and educational, but not really restrictive 
when it comes to what State governments or local law 
enforcement or power grid operators do when it comes to 
procuring drones.
    Some of those DHS advisories succeeded in getting operators 
of power grid infrastructure, for example, to get rid of their 
Chinese-procured drones. But others did not get the message, 
and the message was just advisory. It was not mandatory. That 
sort of thing is present broadly throughout. And there are 
parts of the picture, such as the autonomous transport piece 
and the digital mapping piece, that appear to have gone 
basically entirely unremarked on, even by advisory statements 
from the U.S. Government, because we are still catching up with 
this issue.
    So we have an issue where the leading autonomous transport 
companies in the country, doing really advanced things in 
California and Arizona and elsewhere, are in many cases deeply 
tied to financing and engineering and other connections to 
China--to the Chinese state, to the Chinese military--and yet 
they operate freely here. They operate without restriction when 
it comes to the sharing of U.S. road and port and other 
critical infrastructure digital mapping data, internationally 
back to engineering fleets in China. And all of that would seem 
to pose really very significant risks in the sort of 
cybersecurity and critical infrastructure areas that you have 
asked about.
    Senator Carper. Good. Thank you. One last question.
    My last question, and I will just telegraph this, but I am 
going to ask you a number of things. A number of times I will 
ask witnesses what should we do on this issue or that issue? I 
am going to ask you to give us one example of something we 
should not do as we go forward. Is there something we should 
not do? Okay, so just be thinking about that.
    Okay, my question, my next question is of Mr. Woodall. Mr. 
Woodall, where are you coming to us from today?
    Mr. Woodall. In Washington.
    Senator Carper. Oh, good. You seem close; I can feel that. 
But anyway, whether you are in Washington, DC or Washington 
State, we are delighted to have you join us. How long have you 
been involved with the AFL-CIO Technology Institute?
    Mr. Woodall. For about a year.
    Senator Carper. Okay. Did you start right out of school? 
[Laughter.]
    Mr. Woodall. Yes, but not here. I have been working on 
public trade policy for decades.
    Senator Carper. Really? Okay, well good.
    My question, serious question, is, as the use of digital 
technology grows, and as it evolves, it is critical that 
American workers feel the benefits of these innovations in a 
couple of ways. One would be through better jobs, and the other 
would be better wages, higher wages.
    My question would be, how can digital trade cooperation in 
investments and in our workforce help ensure that American 
workers develop the kinds of skills that are needed for success 
in the digital economy? I visited businesses large and small a 
lot when we were on recess for several weeks earlier this 
month, and almost every day when I visited businesses large and 
small, I would ask them, how are we doing? How are we doing, we 
in Congress, in the State of Delaware, and what can we do to 
help? Actually what I heard more than anything else was, we 
just need people to come to work, people who are trainable, 
with the requisite skills, who are trainable for additional 
skills, added additional skills. That is what they said that 
they were looking for and needed. So I am focusing right now on 
that.
    But my question, how can digital trade cooperation and 
investments help ensure that American workers develop the 
skills needed for success in the digital economy?
    Mr. Woodall. I think obviously, investment in workforce is 
critical for the next generation of technologies. This is the 
sort of discussion that is going on around the CHIPS and 
Science Act, and in other parts of the administration's agenda.
    We have been very involved to make sure that the jobs that 
are created are good union jobs with good pay, and provide 
opportunities for advancement. We are very supportive of that.
    I think what we are concerned about in the digital trade 
arena is the extent to which some of these technologies are 
really corrosive on workplace conditions and workplace fairness 
and erode workers' income. And so we have seen this with a lot 
of the algorithmic management issues, and we are very concerned 
that it will be difficult to address things like workplace 
surveillance, the unfairness behind algorithmic management that 
workers face every day in the workplace. And frankly, much of 
this surveillance is off the job as well.
    So it needs to be a situation where there is enough 
domestic governance space to protect workers from the downsides 
of the digitization, as well as provide opportunities for 
workers going forward in real workforce development that 
centers workers in that process.
    Senator Carper. All right; thanks. Do any other witnesses 
want to comment on that? Ms. Bliss?
    Ms. Bliss. Mr. Chairman, I would just add that I think that 
one of the things that we have certainly endorsed and think is 
important is that there be a provision included in the new 
digital piece of IPEF--and in other U.S. initiatives--that 
addresses AI principles, including respect for human-centered 
values, which is certainly one of the OECD AI principles that 
we think is very important and could be helpful in addressing 
concerns about things like abuse of AI.
    Senator Carper. Thanks.
    Mr. Feith, anything else you would like to add?
    Mr. Feith. No, sir.
    Senator Carper. Dr. Meltzer?
    Dr. Meltzer. Just building on Christine Bliss's point, the 
White House released a blueprint for AI--human rights and AI--
and I think this would be an excellent starting point to think 
about including in the digital trade agreement, because it 
would certainly reflect U.S. values, and I think it would get 
at a lot of the concerns that have been expressed today about 
ensuring that AI is used consistent with human rights as well 
as labor standards.
    Senator Carper. Mr. Feith, do you agree with that?
    Mr. Feith. Yes, Senator.
    Senator Carper. How about Ms. Bliss? Do you agree with 
that?
    Ms. Bliss. Yes.
    Senator Carper. All right.
    I told you I was going to ask you about any advice of what 
not to do on this front, and we would welcome that.
    Mr. Woodall, if you do not mind, I am going to ask you to 
respond to that question first. I am not asking you to advise 
us in Congress what we ought to do, but what are we not to do, 
to be careful to avoid? Please, Mr. Woodall?
    Mr. Woodall. Certainly, I think there are a lot of things 
to be careful to avoid; I have talked about some. I think one 
area to consider avoiding is sort of blanket exclusions. And I 
would recommend something that would exclude personal 
vulnerable data and critical infrastructure from the data flow 
and data localization commitments that we have seen in other 
digital areas.
    I think these are areas where there is broad consensus that 
there needs to be more protection, and so we should sort of not 
include that.
    Senator Carper. Dr. Meltzer, what should we avoid doing?
    Dr. Meltzer. One comment about maybe the politics, which is 
not for me to manage, but avoid this becoming a partisan issue. 
I think it has a huge economic value across the U.S., and we 
should be able to get behind this. But I think specifically, we 
should avoid walking away from anything that would dilute the 
commitment to data flows. I think the thoughts on the 
exceptions are really crucial here. It is really where the 
battles are being waged between maximizing the economic 
opportunities and providing the regulatory space for 
governments to keep doing what they need to be doing. And I 
think it is really important that we get that bit right.
    Senator Carper. Senator Cornyn, who is the ranking member 
on this subcommittee and was the chairman--we are glad to work 
across the aisle. And we do not see these as partisan issues. 
And Todd Young, Senator Young, who was here, feels very much 
the same way, and that is the way I like to operate.
    And I get to chair the Committee on Environment and Public 
Works, and a lot of the big pieces of the bipartisan 
infrastructure bill came through our committee, which was 
adopted unanimously in our committee, and later by overwhelming 
margins in the Senate.
    We have reported out big pieces of the Inflation Reduction 
Act, big pieces including methane reduction programs, 
unanimously, and later reported out unanimously the Water 
Resource Development Act, which will be before the Senate 
probably later next month.
    A lot of folks across the country have worked together, and 
I am just here to tell you that a lot of times we do not get on 
television much when working together, but it is the glue that 
holds our country together, I think.
    With that, my last question: is there a question that you 
maybe thought you would be asked, that should have been asked, 
that was not asked?
    Dr. Meltzer, is there a question maybe you hoped would be 
asked that was not asked?
    Dr. Meltzer. I think part of the piece here is the way the 
rest of the world is looking at what the U.S. is going to do in 
this space, and the perspective that the rest of the world has 
on the decisions that the U.S. makes. It is understandably a 
very domestically focused set of considerations at the moment, 
but the desire for, I think, U.S. reengagement on the digital 
trade piece in a lot of the Asia-Pacific could not be 
overstated.
    They are dealing with the challenges from China in a 
geographically proximate way on digital regulation broadly, 
including across a whole set of issues. And I think this is one 
piece of what is really being asked for in terms of U.S. 
leadership that would be absolutely well received and welcomed 
in that part of the world.
    Senator Carper. Thank you.
    Same question, Mr. Feith.
    Mr. Feith. Well, Mr. Chairman, I will go back to your 
previous question about what not to do, and I would offer a 
suggestion not to let these China data problems get so big they 
seem unfixable. TikTok was a lot smaller in its share of the 
U.S. social media market and in its cultural presence 2 years 
ago when the last administration attempted a ban. These things 
have grown bigger and more problematic very quickly.
    We had an interesting discussion about the biodata question 
and whether too much has been transferred already, and whether 
it is too late. It would seem that it is not too late. But it 
can become so over time, the more that these sorts of 
problematic data relationships with China give Beijing leverage 
over us and box us in and limit our decision-making--and 
ultimately limit our sovereign ability to protect ourselves in 
this space.
    Senator Carper. Thanks for responding to that question as 
well.
    Ms. Bliss and then Mr. Woodall, the same question of what 
you would like to have been asked but were not asked. Go ahead.
    Ms. Bliss. Well, I think it was asked in some respects, but 
I think more about the importance of--and it is a corollary to 
what Dr. Meltzer raised about U.S. leadership, but at the same 
time what are the challenges that we face, particularly in 
IPEF, in getting not only our like-minded countries, but other 
countries that are now agreeing to participate in the trade 
bucket to get onboard with a high set of digital principles.
    And I do think we face some real challenges there, 
particularly from countries like Indonesia and Vietnam. So that 
would be one question.
    And the second thing I will answer to your previous 
question about what not to do is, I think it is absolutely 
critical that in IPEF--or any of our other initiatives with 
respect to digital--that we not go backwards, and that we build 
on what we have done. It can be improved. It should be added 
to, but we should not go backwards.
    Senator Carper. All right; that is good advice.
    Okay, does anybody have a last thought? Mr. Woodall, 
anything else you want to add or take away?
    Mr. Woodall. No. I mean, I expected to sort of be asked 
about the ephemera of digital affecting real workers' lives, 
and I think there is a recognition that there are real 
challenges workers face because of the digitization, and we 
need to deal with that in more worker-centered digital trade 
provisions going forward.
    Senator Carper. Not everybody who answers the question 
leads with the word ``ephemera,'' so thank you for that 
addition.
    I think that is pretty much it. I just want to close with 
``thank you.'' I want to thank each of you for taking time to 
join us in person, or virtually from not too far away here in 
Washington. Thank you for what you do with your lives and for 
what you do for our country, directly or indirectly.
    I want to thank Senator Cornyn, with whom I'm proud to lead 
this subcommittee. In fact, we have worked on a lot of issues, 
including some of the issues when the gun safety legislation 
was adopted several months ago. But we look for opportunities 
to work together. I have great respect for him and his staff, 
and I also appreciate very much the efforts of Senator Todd 
Young and the opportunity to partner with him.
    And I would say to my own staff and other members of the 
staff, including the majority and minority staff of the full 
committee, how much we appreciate their working with us as we 
put together this hearing.
    I have a script here that tells me--it gives me how many 
days my colleagues have to submit their questions for the 
record, and they do not have much time. For the Senators who 
wish to submit questions for the record, those questions are 
due 7 days from today. That is a pretty quick turnaround. Our 
witnesses, however, will have 45 days to respond to any 
questions for the record.
    So that should put us through, I think through December, 
through the holidays, and maybe into the beginning of the new 
year. But if you receive those questions, just try to get them 
back to us before too long.
    And with that, I think this is a wrap. Thank you all. You 
are dismissed. Thanks so much.
    [Whereupon, at 5:05 p.m., the hearing was concluded.] 
    
    
    
    


        

                            A P P E N D I X

              Additional Material Submitted for the Record

                              ----------                              


           Prepared Statement of Christine Bliss, President, 
                 Coalition of Services Industries (CSI) 
                 
    Mr. Chairman, Ranking Member Cornyn, and members of the 
subcommittee, I appreciate the opportunity to appear before you today 
to discuss the benefits of digital services trade to businesses both 
large and small as well as workers and consumers across the economy. My 
name is Christine Bliss, and I am the president of the Coalition of 
Services Industries, a nonprofit trade association that represents U.S. 
services firms on services and digital trade issues. Our members 
include companies that provide distribution, logistics, financial 
services, professional services, and information and communication 
technology services. CSI members also include manufacturers of consumer 
technology, telecommunications equipment, and health and nutrition 
products. Our members both deliver many aspects of their services 
digitally as well as rely heavily on software and digital technologies 
in their business operations. CSI member companies operate in all 50 
States and over 200 countries and territories.

    Too often the discussion of the digital economy is narrowly and 
mistakenly viewed as an issue that only relates to and benefits large 
firms in the information and communication technology sector. In fact, 
it is essential to the health and future of companies both large and 
small in sectors throughout the economy: manufacturing, agriculture, 
health, education, environment, transportation and logistics, 
communications, finance, distribution and media and entertainment, to 
name just a few. It is a major source of existing and future U.S. jobs 
and growth fueled by U.S. global competitiveness.

    To ensure that our economic growth is robust and that its benefits 
extend to all Americans, especially small firms, women- and minority-
owned businesses, and workers and their families, it is vital that the 
U.S. not only ensure that its domestic infrastructure and industries 
are strengthened through measures such as the CHIPS Act, it must also 
address the threat to U.S. global competitiveness arising from growing 
digital protectionism and fragmentation. That is why it is more 
important than ever that the U.S. build strong binding, enforceable 
digital disciplines, remove discriminatory digital trade barriers, and 
promote greater inclusivity in the global digital economy by fully 
engaging with trade partners in the Indo-Pacific, UK and Europe, 
Taiwan, North America, Africa and Latin America, as well as the WTO and 
forums such as APEC.

    CSI believes that promoting strong digital disciplines and greater 
inclusivity are complementary goals. Working together, Congress, the 
administration, business, labor, environmental groups, and other 
stakeholders in this new piece of the economy have a unique opportunity 
to develop policies that will shape the direction and growth of digital 
trade for years to come. 

                      what is the digital economy? 
                      
    At its core the digital economy is powered by its basic 
communications network of fiber-optic cable, computer chips and other 
technology, software and services that create the Internet, and its 
ever-evolving platforms that enable data to carry information across 
the Internet and be used in myriad products and services. We carry on 
our lives via the digital economy from texting colleagues and friends 
on our mobile phones, working or shopping online on our laptops, to the 
factory floor from design, to construction and assembly of goods 
including the sensors that expand the capabilities of those goods. 
Autos, tractors, planes, and everyday consumer products are produced 
using advanced manufacturing technologies that rely on data analytics, 
artificial intelligence, and cloud services where data may be stored 
and processed. Digital technology monitors the safety and operation of 
the planes we fly and the cars we drive. Digitally enabled tractors 
allow farmers to test soil quality or the cloud technology they use to 
time when to plant crops, digital technology helps farmers take care of 
their animals from herding, to reproduction, to detecting illness. 
Cross-border exchange of research and design facilitates development of 
computer chips and sharing of the latest medical research on critical 
new vaccines--this is just a fraction of the digital economy.

    The digital economy is also playing an important role in addressing 
climate change through encouraging reduction of carbon emissions, and 
facilitating response and relief in instances of natural disaster. And 
along with greater efforts to expand broadband capacity, it is 
extending the reach of services available to underserved communities, 
particularly in areas such as health, education, financial services, 
and job opportunities in those sectors. Just think of how this 
committee was able to continue its work through the onset of the COVID-
19 pandemic by working remotely, as were businesses, and schools and 
countless other examples.

    As explained below, one of the greatest impacts of the digital 
economy is in helping small businesses establish and extend their reach 
into domestic and global markets. 

                   economic impact of digital economy 
                   
    It is important that Congress and the administration focus on the 
impacts of the digital economy on American business and workers as it 
is a burgeoning source of economic activity, growth and jobs. According 
to the Commerce Department, in 2021, the digital economy generated $3.7 
trillion in gross output, over 10 percent of total U.S. GDP.\1\ Digital 
gross output increased by 9.8 percent in 2021, compared to 5.9 percent 
for the economy overall. The digital economy is also an important 
provider of jobs in the United States. In 2021, 8 million workers owed 
their jobs to the digital economy. An increasing percentage of U.S. 
jobs generally require digital skills. These skills are not needed just 
for professional level jobs. High school educated individuals are able 
to obtain certification that allows them to acquire needed skills in 
areas such as IT network building.
---------------------------------------------------------------------------
    \1\ This and subsequent data reporting the importance of the U.S. 
digital economy are from the U.S. Department of Commerce, Bureau of 
Economic Analysis, ``New and Revised Statistics of the U.S. Digital 
Economy, 2005-2021,'' https://www.bea.gov/data/special-topics/digital-
economy.
---------------------------------------------------------------------------
                      
                      benefits of digital economy 
                      
    The digital economy has been a key source of resilience for the 
United States throughout the pandemic, getting businesses--especially 
small businesses--and households through a challenging period. 

Facilitating Social and Economic Resilience During the Pandemic
          Millions of workers had to figure out ways to work or go to 
        school from home, and the Internet and other digital services 
        made that possible.
          Digital services enabled hundreds of thousands of small 
        businesses to become digital virtually overnight, sustaining 
        their businesses through the pandemic. One-third of small 
        businesses state that they would not have survived the pandemic 
        without access to digital tools.\2\ Just one example is Freaks 
        and Geeks LLC in Denton, TX, where Alex Featherstone reported, 
        ``COVID forced us to shut down our physical store. Without any 
        foot traffic to our store, we were not making a profit large 
        enough to pay our store's rent and eventually we were forced to 
        sell. Facing the death of my business, I decided to give eBay a 
        try. eBay gave us a place to transfer all of our retail and 
        keep our business alive. Thanks to the growth we have 
        experienced on eBay, we will be able to buy another physical 
        location once the pandemic ends.''\3\
---------------------------------------------------------------------------
    \2\ Connected Commerce Council, ``Digitally Empowered,'' https://
digitallyempowered.connected
council.org/.
    \3\ eBay, ``United States Small Online Business Report,'' May 2021, 
https://www.ebaymain
street.com/sites/default/files/policy-papers/
2021%20Small%20Online%20Business%20Report.
pdf.
---------------------------------------------------------------------------
          Financial services firms made it possible for people to bank 
        from home at the same time banks developed new digital 
        technologies to assist the unbanked and facilitate government 
        subsidies and direct payments to the American people. They also 
        supported thousands of companies in getting PPP loans.
          Digitally connected supply chains eventually enabled 
        manufacturers to restock their customers. Transportation and 
        warehouse workers kept supplies moving, particularly of PPE 
        goods needed to fight the pandemic.
          Cloud services--like the open industrial IoT, advanced 
        analytics and AI provided by one U.S.-based cloud services 
        provider--were an important way in which many manufacturers 
        were able to address issues to their business end laid bare by 
        the pandemic. Currently, 96 percent of manufacturers use cloud 
        technology or plan use it in the near future.\4\ Additionally, 
        by the end of 2021, 90 percent of all manufacturing supply 
        chains will have invested in the technology and business 
        process necessary for true resiliency, resulting in 
        productivity improvements of 5 percent.\5\
---------------------------------------------------------------------------
    \4\ ``Managing Application Development: The manufacturing 
perspective,'' Economist Impact, April 16, 2019, https://
impact.economist.com/perspectives/technology-innovation/managing-
application-development-manufacturing-perspective.
    \5\ IDC Futurescape: Worldwide Manufacturing 2023 Predictions, 
https://www.market
research.com/IDC-v2477/IDC-FutureScape-Worldwide-Manufacturing-
Predictions-32554203/.
---------------------------------------------------------------------------
          Cross-border sharing of research and data supported the 
        development of vaccines. The health-care industry pivoted to 
        telemedicine. For example, companies like Now Optics (https://
        nowoptics.com/our-journey/) in Indiana, now provides virtual 
        eye exams to customers across the United States, with customers 
        more comfortable with telemedicine as a result of the 
        pandemic.\6\
---------------------------------------------------------------------------
    \6\ Bill Briggs, ``Vision quest: How Now Optics is delivering 
virtual eye care to millions of patients,'' April 14, 2021, https://
news.microsoft.com/transform/vision-quest-how-now-optics-is-delivering-
virtual-eye-care-to-millions-of-patients/.
---------------------------------------------------------------------------

Helping Small Business Start-Ups Succeed
          Olaris, a women-owned life sciences lab in Boston, MA, with 
        the help of AI technology has developed a non-invasive kidney 
        transplant test. This small group of scientists was able to 
        build an Internet platform to study the role of metabolics in 
        the early detection of cancer.
          Honest Jobs, a Denver, CO-based small business founded by a 
        former prison inmate, was able to create a platform using 
        assistance in coding and use of cloud technology providing an 
        employment network for ex-convicts trying to enter the 
        workforce.
          Marketing for Greatness, a Cedar Park, TX-based marketing 
        consultancy, was founded by Jessica Santos, a then-new mother. 
        Transferring her legal and accounting skills to the digital 
        economy, Jessica launched her own digital marketing firm and 
        led the international expansion of a Fortune 500 company while 
        working from home and raising four children.
          Fraud.net, a women-owned fraud prevention platform in New 
        York, offers an end-to-end fraud management and revenue 
        enhancement ecosystem specifically built for digital 
        enterprises and fintech globally.

    In many cases, the introduction of new digital goods and services 
into our daily work and home activities over the last 2 years has 
permanently changed the way we work and play. 

                         digital services trade 
                         
    As members of the subcommittee know so well, the U.S. economy 
depends on international markets. You know the statistic: more than 95 
percent of the world's customers live outside the United States. 
Reaching those customers by exporting American goods and services now 
almost universally entails a cross-border digital services trade 
component.

          Manufacturers communicate with international customers via 
        email and track deliveries over the Internet. U.S. 
        manufacturers rely on services like finance, marketing, 
        payments, insurance, and logistics to ship their products to 
        international markets, all of which are digitally enabled in 
        important ways.
          Small businesses use e-commerce to reach customers across 
        the globe. eBay reports that ``. . . eBay-enabled small 
        businesses in every State have been engaging in global trade at 
        a scale once reserved for the very largest corporations. The 
        numbers are striking: a massive 96 percent of eBay-enabled 
        small businesses in the United States export--a rate of 
        exporting that dwarfs that of traditional businesses. . . . The 
        ability of small, independent businesses to reach consumers 
        anywhere across the globe has helped foster enterprise growth 
        in rural and more diverse counties, places that too often 
        otherwise suffer from economic stagnation.''\7\
---------------------------------------------------------------------------
    \7\ eBay, ``United States Small Online Business Report,'' May 2021, 
https://www.ebaymain
street.com/sites/default/files/policy-papers/
2021%20Small%20Online%20Business%20Report.
pdf.
---------------------------------------------------------------------------
          Engineers, architects, and accountants all benefit from 
        being able to provide services such as design or financial 
        consultations and send drawings internationally over the 
        Internet without having to establish a foreign presence.
          Retailers process payments from customers both in the United 
        States and abroad using online payment transaction services 
        offered by American payment networks. Online access to this 
        financial service is particularly important for enabling small 
        retailers to service international customers.
          Insurance, shipping and other firms are increasingly using 
        Blockchain ledger technology to keep real time track of 
        accounts and transactions, increasing reliability and security 
        of customer accounts for information.
          Tourists and business travelers book transportation and 
        accommodation services over the Internet.
          Transportation services providers track the arrival and 
        departure of ships or airplanes containing U.S. exports or 
        imports in real time using GPS and other transportation 
        management software.
          Small computer application developers and content creators, 
        typically sole proprietors or small businesses themselves, 
        benefit by expanding the range their sales into foreign markets 
        via the Internet.

    Selling goods and services to the world using digital trade 
supports American manufacturing, farming, and services creation and the 
millions of jobs associated with that trade activity. This is not just 
about promoting the interests of high-wage workers at large U.S. 
services and digital firms and other professional workers; it is also 
about creating new opportunities for the 52 million U.S. workers in 
services occupations earning middle-class wages.\8\
---------------------------------------------------------------------------
    \8\ CSI, ``White Paper 1: Services and Digital Trade Are Critical 
to U.S. Competitiveness and Middle-Class Job Creation,'' https://
uscsi.org/wp-content/uploads/2021/10/CSI-White-Paper-1-Services-Dig-
Trade-Comp.pdf.
---------------------------------------------------------------------------
       
       importance of providing digital tools to small businesses 
       
    Digital tools--e.g., access to broadband, Internet platforms, and 
the latest digital applications in the cloud--are also vital to micro, 
small, and medium-sized businesses which increasingly depend on them to 
expand their domestic and international customer base. A study that 
surveyed U.S. small businesses found that 92 percent that export use 
digital tools such as online payment processing tools, online 
productivity tools, e-commerce websites, online marketing and other 
tools.\9\ That same study found that exporting accounts for a growing 
share of small business services firms' revenues, reaching 25 percent 
in 2018, and nearly 6 million export-related jobs nationally. 
Particularly during the pandemic, Internet platforms afforded small 
businesses new opportunities to offer their goods and services 
globally, and software and services enabled small businesses to operate 
more competitively and efficiently.
---------------------------------------------------------------------------
    \9\ United States Chamber of Commerce and Google, Growing Small 
Business Exports: How Technology Strengthens American Trade, October 
2019, https://www.uschamber.com/assets/archived/images/
ctec_googlereport_v7-digital-opt.pdf.

    Just one example is Cloud to Street, a NYC-based small women-
founded and -owned business that uses digital tools to monitor, map and 
analyze floods and flood risk in the most climate-vulnerable 
communities around the world. Cloud to Street uses global satellites 
and remote sensing AI to monitor risk and detect floods in real time. 
This unique technology requires zero ground equipment and provides 
governments and communities with accurate and trustworthy flood 
monitoring in almost 20 markets worldwide.\10\
---------------------------------------------------------------------------
    \10\ Asia-Pacific Economic Cooperation, ``From Platforms to 
Payments,'' Small and Medium Enterprises Working Group, 2022, https://
globalinnovationforum.com/events/apec-workshop-sme14-2019a/.

    Digital tools are of particular importance to women-owned small 
businesses. A Visa Economic Empowerment Institute survey found that 
newer firms are increasingly ``born digital and newly established 
women-led small businesses are particularly highly digitized: strong 
majorities use online stores and some forms of digital payments, 
including mobile payments, QR codes, established e-commerce payment 
---------------------------------------------------------------------------
providers, and new entrants in the payment space.''

    The particular importance of digital trade during the pandemic is 
clearly illustrated by U.S. export data. Nationally, services exports 
remain below their 2019 peak. As shown in the graph below, the decline 
is wholly due to a sharp decrease in services provided to foreigners 
that typically are conducted in person. For example, U.S. exports of 
personal travel services declined by $88 billion (-78 percent) from 
2019 to 2021 despite a slight rebound last year. Related export sectors 
fared similarly poorly, with large declines in U.S. exports of 
including business travel services (-64 percent), passenger fares (-68 
percent), equipment installation and repair (-55 percent), and 
education (-13 percent).

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 


    Contrast that with exports of digitally enabled services that 
have been especially strong during the pandemic years. Digitally traded 
services exports increased by $74 billion (+14 percent) from 2019 to 
2021. In fact, U.S. exports of digitally traded services have increased 
every year since 2011. Between 2019 and 2021, there was strong growth 
in U.S. exports of purely ``digital'' services such as customized 
software services (+27 percent) and cloud computing and data storage 
(+21 percent) as well as potentially digitally enabled services such as 
business management and consulting (+36 percent), financial management 
and advisory services (+29 percent), and legal services (+24 percent). 
Digitally tradable services have not grown enough to offset all of the 
COVID-19-related services export declines, but have certainly helped 
mitigate the damage.

    The national trends extend as well to every U.S. State represented 
by a member of the trade subcommittee. According to estimates from 
Trade Partnership Worldwide,\11\ every State saw increased exports of 
digitally tradable services between 2019 and 2021 but a decline in non-
digitally trade services over the same period. In Chairman Carper's 
home State of Delaware, 2021 services exports exceeded their 2019 
levels on the strength of digitally tradable exports including 
financial and insurance services. CSI prepared reports for each U.S. 
State detailing the importance of services and digital trade to each 
State; you can see the reports for each member of the trade 
subcommittee here:
---------------------------------------------------------------------------
    \11\ Trade Partnership Worldwide, LLC, CDxports database, https://
tradepartnership.com/data/cdxports-and-cdxjobs/.

_______________________________________________________________________

Colorado                             New Jersey
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Delaware                             North Carolina
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Idaho                                North Dakota
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Indiana                              Ohio
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Iowa                                 Oklahoma
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Louisiana                            Oregon
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Maryland                             Pennsylvania
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Massachusetts                        Rhode Island
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Michigan                             South Carolina
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Missouri                             South Dakota
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Montana                              Texas
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Nebraska                             Virginia
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Nevada                               Washington
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New Hampshire                        Wyoming
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    how can good digital trade policy support the american economy?
    
    A robust U.S. trade agenda for services and digital trade is 
especially important for several reasons. First, it is an important 
means to promote democracy, freedom, access to information, and other 
core American values and press back against authoritarian regimes. 
Second it is an important avenue to redress barriers to digital 
services trade by ensuring non-discriminatory treatment of U.S. firms 
abroad and promoting enforceable harmonization of standards and 
disciplines with trade partners, whether those participating in the 
Indo-Pacific Economic Framework (IPEF), with the EU, UK, Taiwan, Kenya, 
the WTO and Latin America. Working to gain support of trade partners to 
promote democratic values and to achieve harmonization of disciplines 
and standards is important to ensuring their effectiveness. Third, 
digital trade is an increasingly important source of new jobs and we 
need to ensure that American workers--both blue and white collar--are 
ready to take advantage of those jobs. We also need to ensure the 
benefits of the digital economy and digital trade flow across the 
economy, especially to small businesses, and underserved communities. 

                       promoting american values 
                       
    U.S. engagement on digital trade topics in bilateral, regional, and 
multilateral forums is a crucial opportunity for the U.S. to advance 
its vision of a free and prosperous trading regime anchored in American 
democratic market values. Other governments, including China, are 
actively working to shape the rules of the road for digital trade, 
often at odds with democratic values and the principles of openness and 
transparency. We also recognize the seriousness of national security 
concerns that China's digital policies have raised. In recent years, we 
have seen countries in political transition--like India, Brazil, 
Turkey, Vietnam, Pakistan, Indonesia, and Nigeria--rapidly adopt and 
adapt restrictive Chinese and Russian models of digital regulation, 
premised on sovereignty, censorship, surveillance, and security. The 
2022 Freedom House report \12\ notes that ``governments are breaking 
apart the global Internet to create more controllable online spaces,'' 
with a record number of national governments blocking websites--mostly 
from sources outside of the country--with nonviolent political, social, 
or religious content.
---------------------------------------------------------------------------
    \12\ Freedom House, ``Freedom on the Net 2022: Countering an 
Authoritarian Overhaul of the Internet,'' https://freedomhouse.org/
report/freedom-net/2022/countering-authoritarian-overhaul
-internet.

    U.S. engagement in negotiations to draft and implement 
international digital trade agreements is especially important to 
counteract China's protectionist and authoritarian whole-of-government 
approach to shaping the rules of the road on digital trade. In fact, 
China recently released its 5-year digital economy plan that clearly 
articulates its protectionist ambitions in this arena. China has also 
extended its influence on digital policies and standards at the World 
Trade Organization, the International Telecommunications Union (ITU), 
APEC and in the recently concluded RCEP, the world's largest trading 
bloc which accounts for 30 percent of global GDP, and does not include 
the U.S. China is also seeking accession to the CPTPP agreement--a 
high-standard trade agreement which the U.S. led and left--and the 
Digital Economy Partnership Agreement (DEPA). China's industrial 
policies and unfair subsidies benefit Chinese companies and unlevel the 
playing field for U.S. firms operating in the region, especially in the 
ICT sector. To be truly effective we need to gain the support of our 
trade partners in engaging in this effort. 

 addressing digital barriers and creating effective digital disciplines 
 
    We need to address the very real threat of increasing 
discriminatory foreign barriers to services and digital trade. As a 
primary example, data localization and data residency requirements are 
proliferating. Countries around the world--including some U.S. trading 
partners--are passing increasingly restrictive digital rules that 
disadvantage U.S. companies. For instance, the EU regulatory agenda 
includes policies such as discriminatory digital taxes and 
discriminatory cloud cybersecurity restrictions that undermine the 
ability of U.S. firms to access the EU digital market on an equal 
footing. These depart from a shared principles-based approach to 
regulation. We hope the U.S. Government will press the EU to provide 
clarification on compliance with the EU's Digital Markets Act and 
Digital Services Act. Both are sweeping pieces of legislation with 
complex requirements, and it will be important to ensure they are not 
implemented in a discriminatory or unduly burdensome manner.

    This is a time when like-minded partners with shared values should 
be standing shoulder-to-shoulder to defend basic democratic values 
through a rules-based trade system that adheres to long standing norms 
of non-discrimination and openness.\13\ Instead, such measures, 
particularly when imposed by allies, can undermine technological 
cooperation between trading partners. In the meantime, countries with 
authoritarian tendencies and with weak legal systems and rule of law 
are beginning to copy and further misuse these regulatory templates 
that undermine a transparent and non-discriminatory rules-based system 
for the global digital economy.
---------------------------------------------------------------------------
    \13\ For specific CSI digital priorities with the EU, see letter 
from CSI to U.S. Trade Representative Katherine Tai, November 21, 2022, 
https://uscsi.org/wp-content/uploads/2022/11/20221121-EU-digital-
concerns-letter.TTC_.Amb_.-T.pdf.

    These not only pose major trade barriers to U.S. exports, but they 
also enable increased authoritarian influence, censorship and 
surveillance, while leaving networks vulnerable to cybersecurity risks 
and malicious interference. The Organisation for Economic Co-operation 
and Development (OECD) found that the services regulatory environment, 
particularly for foreign investment, became more restrictive in 2020 
and the pace of tightening has accelerated.\14\ The resulting 
``regulatory divergences'' are raising cross-border costs as activities 
need to be aligned across multiple regulatory frameworks.''\15\
---------------------------------------------------------------------------
    \14\ Organisation for Economic Co-operation and Development, OECD 
Services Trade Restrictiveness Index: Policy trends up to 2021, 
February 2021, https://issuu.com/oecd.publishing/docs/oecd-stri-policy-
trends-2021.
    \15\ Organisation for Economic Co-operation and Development, op. 
cit.

    CSI has provided the administration with further detailed 
recommendations (https://uscsi.org/wp-content/uploads/2022/03/CSI-
Calls-for-an-Ambitious-Indo-Pacific-Econom.pdf) on these points, which 
we are happy to share with subcommittee members. We would however like 
to highlight a number of the areas we have included in our 
---------------------------------------------------------------------------
recommendations.

 1.  Cross-border Data Flows and Prohibitions on Data Localization: 
Cross-border data flows are the life blood of the digital economy and 
we believe that the cross-border data flow data and data localization 
provisions included in the bi-partisan USMCA agreement should be 
included in other trade agreements. As noted above, the rise of data 
localization is pernicious and can enable authoritarian influence and 
censorship.

 2.  Non-Discrimination for Digital Products: U.S. digital services and 
content providers should be granted non-discriminatory treatment in 
foreign markets and allowed to compete on a level playing field with 
their foreign competitors. We oppose the imposition of discriminatory 
regulations which tilt the playing field in favor of domestic 
champions.

 3.  Permanent Moratorium on E-commerce Duties: This element should 
also be included to cover digital services and products as it was in 
the U.S.-Japan Digital Agreement. This provision is especially 
important for SMEs, for those involved in research and development in 
medical as well as commercial sectors and app developers who are 
frequently small businesses. Should the moratorium be allowed to lapse, 
exporters could face a chaotic Customs regime with potentially non-
administrable Customs duties which would disproportionately hurt SMEs. 
Likewise, small businesses in developing companies would be similarly 
disadvantaged in terms of their access to software and app imports. 
Further, allowing the moratorium to lapse would be counterproductive to 
U.S. efforts to strengthen the domestic semiconductor industry, which 
relies on the ability to electronically transmit software and design 
information on a cross-border basis.

     For similar reasons, we believe the WTO moratorium on e-commerce 
duties should also be extended at MC 13. We note in the WTO context 
that imposing duties on digital services could raise questions of GATS 
inconsistency. Although there is widespread support for continuation of 
the e-commerce moratorium among developing countries, including 
Malaysia, Thailand, Caricom countries, Nigeria, Mauritius, and even 
LDCs such as Zambia, some developing countries continue to want 
assurances about policy space to develop their digital industries. We 
believe these issues should be fully discussed in the WTO including 
alternative but WTO-consistent options to the imposition of tariffs.

     In addition, imposing digital tariffs on e-commerce would 
essentially amount to a digital services tax and would be at odds with 
work towards implementation of an agreement at the OECD on a global 
minimum tax.

 4.  Prohibition on Mandatory Transfer of Source Code and Algorithms: 
We believe that this provision should also be included in any set of 
digital disciplines as included in USMCA and the U.S.-Japan Digital 
Agreement. This provision is an important protection against the 
unauthorized mandatory transfer of software source code and algorithms 
contained in such code. It does not however, prohibit a regulator or 
judicial authority from requiring a person to preserve and make 
available source code in instances where there is a specific 
investigation, inspection, enforcement action, or judicial proceeding.

 5.  Greater Cooperation in Cybersecurity: Provisions on cybersecurity 
cooperation that assume a ``risk-based'' approach should be included. 
Such an approach should be based on principles that are performance-
based, rather than prescriptive; proportionate, rather than one-size-
fits all; and that utilize industry standards.

 6.  Adopting Best Practices in the Use of Artificial Intelligence 
(AI): Use of AI is becoming an increasingly pervasive and powerful tool 
in expanding the digital economy. It is important that its use be 
subject to best practices, such as the OECD AI principles with the goal 
of eventually reaching agreement on harmonized AI disciplines that will 
ensure transparent, nondiscriminatory use of AI and protect against 
abuse.

 7.  Applying Good Regulatory Practices to Digitally Enabled Services 
Standards and Conformity Assessment: CSI believes that new disciplines 
applying good regulatory practices, transparency, and nondiscrimination 
to digitally enabled services standards and conformity assessment 
procedures would benefit all services exporters, but they would be of 
particular value to smaller services firms. SMEs are less equipped to 
bear the higher costs and greater trade frictions that have resulted 
from growing digital fragmentation. Indeed, OECD analysis has shown 
that in relatively more restrictive services markets, new exporters 
confront costs as much as 53 percent greater than those faced by 
incumbent exporters. Addressing barriers to services trade in the form 
of trade-restrictive standards and conformity assessments would 
especially benefit SMEs seeking to expand services exports. 
Increasingly, governments are implementing mandatory, unique national 
standards and technical regulations that are not interoperable and 
create barriers to trade and technological progress. The resulting 
fragmentation has created an urgent need to update the standards-
related rule book for trade in digitally enabled services. It is 
important to note that trade disciplines on standards for digitally 
enabled services are highly compatible with a government's right to 
regulate and would in no way undermine that right.

 8.  Provision of Greater Capacity Building and Digital Tools to SMEs: 
Parties to any new digital initiative should agree to provide more 
assistance in the form of digital tools and capacity building to SMEs.

 9.  Promotion of Worker Digital Upskilling: Yet another way in which 
policymakers can support American workers is to collaborate with 
American businesses to ensure that our educational system is ready to 
train students with the required skills to meet the requirements of 
jobs needing digital competencies. As services and other jobs 
increasingly demand digital skills obtainable by both professionals and 
the high school educated, both government and industry must do more to 
equip individual workers with the requisite training. A study by 
Brookings found that nearly two-thirds of the new jobs created between 
2010 and 2016 required at least a moderate level of digital skills.\16\ 
The same report found that nearly a quarter of workers were already 
engaged in occupations with a high level of digital content. It also 
concluded that holding education constant, workers with better digital 
skills tended to earn higher wages than those with lower skills. 
Government and companies should collaborate to improve education and 
training programs. For example--just one of many--is ``Girls4Tech,'' 
Mastercard's signature education program, which was launched in 2014 to 
drive the interest of young girls in science, technology, engineering 
and math (STEM). The curriculum is designed to teach participants 
curiosity, develop an innovative mindset and take a smart approach to 
solving everyday challenges using technology. Ultimately, the program 
aims to help bridge the skill gap in the technology industry. 
Girls4Tech is tailored for girls ages 8-16 to encourage their interest 
in cryptology, digital convergence, algorithms, biometrics, AI, and 
more. Many others engage in extensive digital skills training program, 
for example CISCO offers certificate level training programs for high 
school graduates at community colleges. A catalogue of CSI member 
programs is provided here (https://v8v669.a2cdn1.secureserver.net/wp-
content/uploads/2021/10/CSI-member-workforce-dev-programs.pdf), and we 
would welcome your engagement with us on ways to make these kinds of 
programs more broadly available to American workers.
---------------------------------------------------------------------------
    \16\ Mark Muro, Sifan Liu, Jacob Whiton, and Siddharth Kulkarni, 
Brookings, Digitalization and the American Work Force, November 15, 
2017, p. 15.

     In the IPEF context, CSI members understand that in order for the 
Indo-Pacific region to grow and thrive, workers, small businesses, 
institutions, and governments must have the knowledge and skills to 
participate in the digital world. To that end, CSI member firms have 
developed innovative programs and partnerships that promote women-owned 
small businesses, capacity building, financial inclusion and education, 
cybersecurity training, digital infrastructure development, and worker 
skilling. We would similarly welcome the opportunity to engage with 
Congress on ways to collaborate and integrate such programs in the 
---------------------------------------------------------------------------
IPEF.

10.  Trade Facilitation Measures: Agreements that promote the 
implementation of measures that facilitate trade also benefit American 
workers and their employers. Many of those measures are digital in 
nature--e.g., filing entry paperwork online, or even consistent online 
publication of current tariff schedules, regulations, and forms for 
customs clearance. The U.S. de minimis threshold must be protected 
along with other measures that reduce red tame for SME exporters and 
importers. In a similar manner, measures such as the General Product 
Safety Regulation, are of concern for small businesses selling to the 
EU. One study found that if all countries implemented the same trade 
facilitation measures currently employed in the United States, U.S. 
employment would expand by nearly 1 million jobs, of which 79 percent 
would be at small businesses.\17\
---------------------------------------------------------------------------
    \17\  Gabe Horwitz, ``Reducing the Red Tape Around Supply Chains,'' 
Third Way, July 25, 2022, https://www.thirdway.org/report/reducing-the-
red-tape-around-supply-chains.

    The IPEF discussions present an opportunity to address some of 
these problems. Deepening commercial ties with the Indo-Pacific region 
is key to U.S. services sectors, which are increasingly digitally 
delivered and a key enabler of Indo-Pacific trade in all sectors. In 
2021 alone, the value of U.S. services exports to the Asia-Pacific 
region was $180 billion, of which $124 billion were digitally enabled 
services.\18\ As more countries in the region develop regulatory 
regimes focused on the digital environment, an increasing number of 
them are using the opportunity to impose discriminatory protectionist 
measures. These policies include overly broad, arbitrary foreign 
investment restrictions, data transfer restrictions, targeted 
curtailment of U.S. market access, data localization requirements, 
cloud services barriers, nationality of ownership restrictions, quotas, 
and discriminatory standards, among others. A high-standard digital 
trade agreement in the Indo-Pacific with binding rules is needed to 
counter the promulgation of such discriminatory measures, which 
disadvantage U.S. workers and employers not just in the services 
sectors, but across the economic spectrum. We note that greater 
integration, cooperation, and high-ambition digital standards in the 
IPEF region is a key part of U.S. national security strategy as well.
---------------------------------------------------------------------------
    \18\ Trade Partnership Worldwide, LLC, CDxports database.

    Longstanding trade principles of non-discrimination, transparency, 
openness, and interoperability should take center place in the trade 
module of the IPEF. It should also include a consultation mechanism and 
other means to raise member concerns and to hold members accountable. 
It is also critically important that these disciplines be legally 
binding enforceable. We also believe that these disciplines can be 
developed consistent with the long recognized trade agreement principle 
of recognizing the importance of respecting government's right to 
---------------------------------------------------------------------------
regulate.

    We also believe that Congress has an important role to play in 
shaping these disciplines and that full and regular consultation and 
transparency must be a part of their development. In this regard 
support a bipartisan extension of Trade Promotion Authority. 

                               conclusion 
                               
    Thank you for the committee's attention to these critical issues. 
We believe that creating strong disciplines on digital trade are 
important to promote job creation and competitiveness across all 
sectors of the economy and to advance American values abroad. We look 
forward to working with committee members and the administration to 
support this effort.

                                 ______
                                 
             Prepared Statement of Hon. Thomas R. Carper, 
                      a U.S. Senator From Delaware 
                      
    Good afternoon. It's my pleasure to call this hearing before the 
Senate Finance Subcommittee on International Trade, Customs, and Global 
Competitiveness to order. Thank you to our witnesses for joining us to 
testify today. And I want to say a special ``thank you'' to our 
subcommittee's ranking member, Senator Cornyn--as well as Chairman 
Wyden and Ranking Member Crapo, and their teams--for working with both 
Senator Cornyn's and my staff to plan this hearing on digital trade.

    Today's hearing will offer an opportunity for us to answer three 
central questions. First: what is digital trade, anyway? Second: why is 
it important to Americans? And finally: how can we work with our allies 
to strengthen our ever-changing digital economy? Today's hearing will 
also be the first Senate hearing in this Congress to specifically 
explore the importance of digital trade. I'm glad we can take this 
dedicated time, in a bipartisan way, to dive into this critical issue 
with leading experts across our Nation.

    When I first started learning about digital trade, I quickly 
discovered it is necessary for us to better understand and appreciate 
how digital technologies and the Internet have transformed our economy. 
I'd like to take just a couple of moments to talk about this through an 
example that we have all come to know very well: smartphones.

    Smartphones are everywhere in our society--nearly everyone I know 
has one, and it's almost impossible to imagine our lives today without 
them. We use them for everything: from checking work emails to logging 
into a Zoom meeting to purchasing goods from halfway around the world. 
Whether you're booking a hotel in Dover, DE or Dover, England, 
smartphones have made our lives more accessible to just about 
everything.

    These are just a few examples in our daily lives that show how 
digital connectivity makes it easier, faster, and less expensive to 
trade goods and services across the globe. And this is all made 
possible because the Internet has made it easier for us to share 
information and data without geographic barriers. Without these 
tangible barriers, digital innovation has revolutionized nearly every 
industry across our economy, ranging from manufacturing to agriculture 
to financial services to e-commerce--you name it!

    As a result, trading goods and services, with a lot of help from 
the Internet, has exploded in recent years. Just look at the numbers: 
from 2005 to 2019, real value added for the U.S. digital economy grew 
at an average annual rate of over 5 percent per year, outpacing the 2-
percent growth in the overall economy each year. And the pandemic has 
spurred digital growth even more, with people staying home and turning 
to the Internet to access medical services, stream their favorite 
movie, or book that next vacation in the first State, another State, or 
around the globe.

    And this growth isn't just benefiting consumers--it's also spurring 
job creation and enabling small businesses to thrive. With the digital 
economy, a small business that sells jewelry in Delaware or Texas can 
now sell their products to anyone, anywhere in the world with ease.

    However, it's critical that as we examine the importance of digital 
trade for our economy, we must also acknowledge how digital 
technologies affect our national security. Right now, we are witnessing 
a global battle over the values that govern the digital economy. 
Foreign adversaries like China are using digital technologies to 
advance authoritarianism and crack down on freedom of speech and human 
rights. They are working overtime to shape the digital economy in a way 
that threatens our democratic values and jeopardizes our national 
security.

    Yet as Albert Einstein once said, ``In adversity lies 
opportunity.'' And that's exactly what we have before us today: a real 
opportunity to set rules of the road for digital trade that reflect our 
values. Those words were true then, and are even truer today. So far, 
the U.S. has taken a leadership role through negotiating ambitious 
digital rules in the USMCA agreement with Canada and Mexico and through 
digital trade cooperation with Japan--but that's not enough. Our work 
cannot stop there.

    That's why this past July, my staff and I worked closely with 
Senator Young and his staff and other members of this committee to 
introduce a bipartisan, bicameral resolution advocating for the United 
States to work with our allies across the globe to establish forward-
looking global digital trade policies.

    I'm also eager to work with U.S. Trade Representative Katherine Tai 
and the Biden administration to make progress on these important issues 
as they negotiate the Indo-Pacific Economic Framework and other 
economic engagements related to digital trade.

    In that spirit, today I look forward to hearing from our esteemed 
panel of witnesses as they pull back the curtain on the importance of 
digital trade and how we can work with our allies to advance thoughtful 
digital trade policies. And with that, I'd like to turn it over to 
Senator Cornyn for his opening statement.

                                 ______
                                 
                Prepared Statement of Hon. John Cornyn, 
                       a U.S. Senator From Texas 
                       
    Thank you, Mr. Chairman, for organizing this hearing. It's been a 
pleasure as always working with your staff, and thanks to all of our 
witnesses for being here and sharing their expertise and knowledge. I 
like the three questions that you plan to ask or have teed up here. 
This subcommittee has consistently focused on the threat that China 
poses to our national security through its weaponization of trade, 
contrary to the international rules-based system that we thought they 
were joining when they became part of the WTO.

    On that note, I want to express my concerns with regard to reports 
that our allies in Europe may retaliate for provisions of the recently 
passed Inflation Reduction Act. In the face of existential challenges 
posed by the Chinese Communist Party and its allies in the Russian 
Federation, a strong relationship with our partners in Europe is more 
important than ever.

    Unfortunately, legislation passed on a purely party-line vote, like 
the Inflation Reduction Act, has moved us in the wrong direction. And I 
hope the administration will work to limit the trade ramifications from 
this bill with regard to Europe and our other allies. We all know that 
the results of protectionism helped put us into the Great Depression 
nearly a century ago, and we simply cannot afford to repeat it or get 
anywhere near it.

    On this subcommittee, we've advocated for the U.S. to join the 
CPTPP, which was a mistake for us to walk away from in the first place. 
I was with Senator Hagerty, the former Ambassador to Japan, now a 
member of the U.S. Senate, and Senator Cardin, our colleague on the 
Finance Committee, in Japan recently. In every single meeting we had 
with our Japanese Government counterparts, they mentioned the TPP. And 
Senator Carper and I have written and spoken together on what a mistake 
it was for us to walk away from that. And my hope would be at some 
point we would get back in the game in Asia with the CPTPP.

    Unfortunately, so far the Biden administration has refused to 
reopen negotiations on that agreement. So we need to look to sectoral-
specific free trade agreements that focus, for example, on digital 
trade. This was also part of the conversation we had with Ambassador 
Emanuel in Japan when we were there. As each of our colleagues know, 
free trade agreements passed through Congress are insulated from 
domestic political pressure. They provide long-term certainty for our 
businesses and reinforce the key economic relationships that we have 
with our friends and allies.

    We've also focused on China's use of censorship as a barrier to 
digital trade in particular. We see today how China is weaponizing its 
digital infrastructure against its own citizens for simply protesting 
in the streets. One of the first tasks we should explore is how to 
define digital trade, which is the question Chairman Carper raised 
first--and appropriately so. For everything digital or virtual--from 
the cloud to artificial intelligence--there is obviously an underlying 
physical element. For digital trade, that medium is semiconductors, so 
maybe we should start by using that physical apparatus as a starting 
point for our discussions.

    The second area we should explore is how digital trade agreements 
help to solidify our relationship with our friends and allies against 
the threat posed by the Chinese Communist Party. So I believe any 
digital trade agreement with our allies and partners should include 
provisions that incorporate disciplines on semiconductors as part of 
it. That includes things like coordination of semiconductor incentives, 
harmonization of our export controls with regard to China, and supply 
chain resiliency.

    Finally, most importantly, we should find common areas of agreement 
amongst all stakeholders to include business, labor, and national 
security. That includes topics like preventing data localization and 
forced technology transfers. We should have free and open digital trade 
facilitation with clear rules of the road. For example, we should not 
be taxing electronic transmissions between our borders, or forcing data 
centers to be located in one nation or another. As with all issues 
pertaining to China, that will require a fair amount of discussion, 
debate, and even compromise.

    So I look forward to hearing from our witnesses today, who 
represent a facet of each of those.

    I'd like to welcome Mr. Feith for the national security 
perspective, Mr. Woodall for the labor community, Ms. Bliss from 
industry, and Mr. Meltzer from the think tank community that's 
important to give us the intellectual firepower we need to make good 
decisions here in Congress. So thank you all for being here today, and 
I look forward to hearing from you.

                                 ______
                                 
       Prepared Statement of David Feith, Adjunct Senior Fellow, 
   Indo-Pacific Security Program, Center for a New American Security 
   
    Chairman Carper, Ranking Member Cornyn, and members of the 
subcommittee, it is a privilege to appear before you today. Thank you 
for your invitation.

    This hearing addresses digital trade, and I will focus my testimony 
on the national-security problems in this area posed by China--
specifically, concerns about China's open access to American data.

    I want to stress three points.

    First: The importance of recognizing the China challenge. China is 
an outsize player in global digital trade flows. It is implementing 
aggressive strategies of data control, data exploitation, and data 
mercantilism. U.S. policy is not yet answering those strategies.

    Second: The United States not only should work overseas to expand 
our digital trade arrangements, we also have urgent work at home. Our 
domestic task is to curb the massive unregulated flows of sensitive 
data to China. Our trading partners in Europe, Asia and beyond face the 
same challenge, even if some fail to recognize it.

    Third: Immediate action can be taken in at least three areas: (a) 
to ban TikTok and the TikToks yet to come, (b) to begin controlling 
exports of Americans' biodata, and (c) to implement the so-called 
``ICTS'' process endorsed by both the previous and current 
administrations but not yet in use to limit U.S. data flows to China. 

                   the china problem in digital trade 
                   
    In our unfortunately polarized politics, it is an important sign of 
health that there is strong bipartisan support for countering China's 
national security threats. There is also bipartisan support for 
boosting U.S. digital trade links overseas.

    The digital economy accounts for some 10 percent of U.S. GDP; 
digital trade contributes more to U.S. GDP than financial or 
merchandise flows; and digital trade is growing faster than traditional 
trade in goods and services. There is particularly strong support for 
increasing such trade with the Indo-Pacific, where the United States 
has vital interests and strong allies and partners eager to work with 
us to prevent China from achieving regional hegemony.

    But to set new global rules for the data age, and to compete with 
China, it is not enough to expand digital trade with friends. We also 
need to limit our digital trade with China. And we need to take action 
not just overseas but at home. Our challenge is how to begin placing 
national-security controls on data flows to and from China. We are late 
in addressing this challenge. If we don't do so soon, the national-
security costs may be so high that they will far outweigh the benefits 
of any improvement in trade rules with our foreign friends. Our 
failures in domestic regulation may severely limit our ability to shape 
rules abroad.

    A necessary first step is understanding China's approach to digital 
trade, which has long been far more strategic, mercantilist, and non-
reciprocal than U.S. policy has recognized. It is a key element of 
China's national-security strategy.

    For nearly a decade, Chinese leader Xi Jinping has declared that 
data in the 21st century is like oil in the 20th century: the critical 
input for fueling economic strength and national power. In 2013, he 
told his state-run Chinese Academy of Sciences:

        The vast ocean of data, just like oil resources during 
        industrialization, contains immense productive power and 
        opportunities. Whoever controls big data technologies will 
        control the resources for development and have the upper hand.

    The analogy between data and oil later became something of a cliche 
in certain circles. But U.S. policy never recognized its logic. China's 
did.

    The Chinese Communist Party developed a comprehensive strategy to 
control, accumulate, and exploit data. Data such as personal health 
records, personal genetic sequences, and personal online browsing 
habits. Data such as corporate trade secrets, corporate supply chain 
records, and corporate financial accounts. Data such as the photos, 
voice recordings, and mapping imagery pulsing through phones, drones, 
and smart cars all around the world.

    Beijing recognizes that the competition for global influence in the 
21st century will require protecting and harnessing such data to 
achieve commercial, technological, military and intelligence 
advantages. And that's what it is doing.

    Beijing has built a latticework of laws and regulations to make the 
Chinese Communist Party the world's most powerful data broker. A set of 
laws implemented in 2017 gave the Communist Party unchecked access to 
private data on Chinese networks, whether those networks are in China 
or associated with Chinese firms such as Huawei overseas. Last year, 
Beijing enacted additional laws that go even further, demanding not 
just access to private data but effective control over it.

    This has a huge impact on foreign firms operating in China. Not 
only must their Chinese data stay in China and be accessible by the 
Chinese state, but Beijing now demands control over whether those firms 
can send the data to their own headquarters; or to a corporate lab in, 
say, California; or to a foreign government that has made a lawful 
regulatory or law-enforcement request. Under Beijing's new laws, it may 
be criminal to comply with foreign sanctions against China that involve 
data. So if the U.S. Government, for example, wants to shut off banking 
or cloud services to a Chinese entity linked to human rights 
atrocities, a U.S. or other company can comply with U.S. law, or it can 
comply with Chinese law, but not both.

    Boxed in by Beijing, Tesla, Apple, and others have opted to build 
dedicated Chinese data centers--sometimes in partnership with Chinese 
state entities, lest they lose access to the large Chinese consumer 
market and valuable manufacturing supply chain.

    Beijing's bullying data rules inside China complement its 
longstanding efforts to buy, steal, and otherwise acquire data from 
outside of China. Beijing hacks foreign corporate databases. It runs 
``talent recruitment'' programs at foreign universities and firms. It 
buys foreign companies. And it funds its own data-driven companies to 
conduct research, forge partnerships, win customers, and vacuum up data 
in open foreign markets like Silicon Valley, Boston, and Austin.

    Beijing's data strategies also prize global propaganda, censorship, 
and influence, all to advance Xi's stated goal of winning the digital 
``public opinion struggle.'' Xi wants the Chinese Communist Party to 
have what he calls ``discourse power,'' meaning the ability to set and 
shape global narratives. Hence his aggressive regulation of the 
algorithms and other data technologies that power Chinese apps such as 
TikTok that are increasingly dominating the U.S. social media market. 
TikTok enables Beijing not only to harvest mass American data but to 
transmit favored messages, export censorship preferences, and 
potentially manipulate and mobilize Americans on a grand scale 
completely without precedent for a foreign power.

    Beijing's approach is nakedly non-reciprocal. It relies on access 
to data from foreign countries while denying foreigners access to data 
from China. In China, Beijing controls the data of foreign companies. 
Outside of China, Chinese companies operate comfortably, creating and 
accessing valuable new data sets primed for easy transfer back to China 
in all manner of data-intensive fields--biotech, pharmaceuticals, 
medical devices, drones, autonomous cars and trucks, social media, 
digital payments, e-commerce, and more. These data flows to China 
contain massive quantities of information about American citizens, 
American companies, American government, and American critical 
infrastructure.

    This is the stuff of digital trade. Yet there are effectively no 
rules governing any of it. There is nothing effective under the World 
Trade Organization or any U.S.-China bilateral trade accord, and not 
under U.S. domestic law either. The United States has no comprehensive 
Federal approach to data governance. Because of the nature of the 
internet--namely, that it was able to expand globally in a permissive 
environment, without any of the state controls inherent with 
traditional goods transported by truck or ship--digital trade 
(including U.S.-China digital trade) has remained fundamentally 
unregulated.

    In this environment, for upwards of a generation, Beijing has been 
effective in designing a strategy of global data mercantilism: hoarding 
and controlling data for me, relinquishing and exposing data for thee. 
If the United States and our allies do not organize an effective 
response, Beijing will succeed in commanding the heights of future 
global power. Any new digital-trade arrangements we make with our 
partners would still operate in the shadow of a global digital-trade 
order that is open to fatal exploitation by Beijing. 

                   the domestic regulatory imperative 
                   
    The Biden administration has spoken about the importance of data in 
our competition with China. ``Our strategic competitors see big data as 
a strategic asset, and we have to see it the same way,'' said National 
Security Adviser Jake Sullivan in 2021. But no visible strategy has 
emerged.

    The U.S. Government has traditionally had no mechanism for limiting 
cross-border data flows, even on national-security grounds. Traditional 
national-security restrictions on commerce are designed to address 
other issues, and they have historically been narrowly scoped, 
consistent with important American traditions of limited government. 
The Committee on Foreign Investment in the United States (CFIUS) 
screens inbound investment. Export controls restrict outbound flows of 
U.S. goods and technology (and of some data, in limited cases). 
Procurement restrictions limit what Federal Government departments and 
agencies can buy.

    But vast areas of economic life are largely or completely untouched 
by those tools--including the cross-border exchange of data by private 
companies, individuals, academic institutions, and State and local 
governments. When a U.S. hospital system wants to partner with a 
Chinese pharmaceutical or genomics company, or an American teenager 
wants to download a Chinese social-media app onto her phone, or your 
State government wants to procure Chinese drones to monitor the power 
grid or assist in law enforcement, the Federal Government has 
traditionally had no way to regulate such activity to protect national 
security.

    Washington began to address this problem only recently, through the 
creation--at least on paper--of a new regulatory regime for reviewing 
cross-border data flows. Known as ``ICTS'' (for Information and 
Communications Technology and Services), this regime was established in 
the previous administration's waning days and maintained by the Biden 
team through a June 2021 executive order on ``Protecting Americans' 
Sensitive Data From Foreign Adversaries.'' Under the ICTS process, a 
Commerce-led interagency panel can investigate, modify, block, or unwind 
data-related commercial transactions believed to present ``undue or 
unacceptable risks'' to U.S. national security.

    This ICTS panel has authority across six sweeping sectors: critical 
infrastructure; network infrastructure, including satellites, wireless 
networks, and cable access points; data hosting, including services 
with the personal information of more than 1 million Americans; 
surveillance and monitoring technology, including drones; 
communications software, including mobile and gaming apps; and emerging 
technologies, including artificial intelligence and autonomous systems. 
These sectors touch nearly the entire modern economy.

    But the ICTS process has not yet been put to use--not against 
Chinese access to U.S. data centers or biotech labs, not against 
Chinese drones with eyes on U.S. critical infrastructure, and not 
against other channels through which large volumes of sensitive U.S. 
data can flow to China.

    Apart from ICTS, the Congress could of course consider legislative 
approaches. Various bills have been proposed to limit the ability of 
Chinese apps to operate and collect data in the United States, but 
without success.

    Another idea is to create a new export-control category to restrict 
the sale of bulk personal data to certain foreign countries. This is 
the essence of the ``Protecting Americans' Data from Foreign 
Surveillance Act'' introduced in June by Chairman Wyden of this 
committee, with four Republican and Democratic cosponsors. But the fate 
of that bill is uncertain, and the issue of Beijing's data mercantilism 
was largely unexamined in the congressional work that resulted this 
summer in the CHIPS and Science Act.

    Elsewhere on Congress's agenda, there is the risk that efforts 
intended to rein in domestic big tech platforms could end up imposing 
stricter standards on American firms than on Chinese ones. This would 
be perverse in terms of commercial competition and U.S. national 
security. 

        the international path to ``data free flow with trust'' 
        
    Also perverse is our longstanding failure to work with our allies 
(especially in Europe) to address China's digital-trade abuses as part 
of our international trade diplomacy.

    Across effectively the entire era of digital trade, we have been at 
cross-purposes with Europe over data-privacy rules, while far greater 
data-related harms from Beijing have mounted. Chinese companies 
processing European data are in principle subject to localization and 
privacy-protection requirements under the European Union's General Data 
Protection Regulation (GDPR). But the EU has to date shown no great 
concern with mass data collection and exploitation by Chinese companies 
functioning as extensions of the Chinese state--especially compared 
with the EU's longstanding rage against U.S. big tech.

    To be sure, there is a new test case involving TikTok. The Irish 
Government recently investigated the Chinese platform's data practices 
and sent findings to the EU Data Protection Commission. Brussels has 
yet to report back.

    In the Indo-Pacific, the dynamic is more fluid. The 11-nation 
Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) 
includes high digital standards consistent with those of the U.S.-Japan 
Digital Trade Agreement (2019) and USMCA (2020), both of which were 
crafted with Beijing's abuses in mind.

    Beijing prefers lower digital-trade standards, like those in the 
Regional Comprehensive Economic Partnership (RCEP) agreement, to 
protect its mercantilist and authoritarian interests. That is why it is 
now pushing to join both the high-standard CPTPP and the non-binding 
but potentially high-standard Digital Economic Partnership Agreement 
involving Singapore, New Zealand and Chile--to try to shape (that is, 
restrain) their standards from the inside. Beijing realizes that 
digital-trade flows are still overwhelmingly unregulated, and it wants 
to influence whatever might emerge to fill this international 
regulatory gap.

    Important as it is, keeping Beijing from entering CPTPP against the 
rules is not enough. Fashioning a high-standard Indo-Pacific digital-
trade agreement would be good. So would beginning to impose reasonable 
national-security restrictions on U.S.-China data flows, followed by 
consultations to encourage partners to do the same.

    The concept that combines these two elements--digital-trade 
expansion with friends, digital-trade limitation with rivals--is what 
late Japanese Prime Minister Shinzo Abe called ``Data Free Flow with 
Trust'' (DFFT). We should maximize data trade with those we can trust 
and limit data trade with those we cannot. In other words, more data 
flow among democratic allies and other like-minded countries, and less 
data flow with China.

    DFFT is a simple notion that will be hard to implement given 
China's size, strength, and deep integration into our digital economy 
and that of our allies. It is necessary, however. We are overdue in 
recognizing data as a strategic resource. Our responsibility now is to 
design a global digital-trade order that reflects democratic values and 
not Beijing's. 

                three immediate opportunities for action 
                
    U.S. legislators and policymakers can prioritize immediate action 
in at least three areas:

 1.  TikTok--and the TikToks to Come: As the Biden administration 
reviews TikTok via the Committee on Foreign Investment in the United 
States (CFIUS), Republicans Marco Rubio and Mike Gallagher have called 
for legislation to ban the app. Their approach could provide statutory 
authority to overcome the statutory barriers (namely the Berman 
Amendment to the International Emergency Economic Powers Act) that 
caused the previous administration's attempted TikTok ban in 2020 to 
fail in court. Democratic Senator Mark Warner (also on this committee) 
recently endorsed a TikTok ban in principle, calling the platform ``an 
enormous threat.''

       TikTok's fate is an acute test of Washington's seriousness about 
data privacy, counterintelligence, election integrity, and democratic 
sovereignty. No hostile foreign power has an entitlement to control a 
leading U.S. media platform. And keeping hostile foreign powers from 
wielding such influence is a safeguard of free speech.

       But TikTok's fate is also a test for other data threats looming 
on the horizon. TikTok parent Bytedance has a virtual-reality 
subsidiary, Pico, that wants to compete in the U.S. metaverse market 
soon against Meta and Apple. Fellow Chinese tech giant Tencent operates 
WeChat and other platforms in the United States. As long as such 
Chinese-owned and -controlled platforms enjoy unfettered access to U.S. 
consumers, Beijing will exploit that access for asymmetric strategic 
advantage.

 2.  Biodata: For all the controversy over TikTok and the obvious 
complexities in regulating a wildly popular platform, it is widely 
agreed that Americans should protect their health and genomic data, on 
grounds of personal privacy and national security. And yet U.S. law and 
policy have not yet risen to this challenge.

       The protection of biodata deserves to be at the top of 
Washington's tech-competition agenda. We have seen much commendable
action in recent years on semiconductors, including initial moves by
the previous administration, the CHIPS Act this summer, and the pending
Schumer-Cornyn proposal to extend ``section 889'' Federal Government and 
contractor procurement restrictions to Chinese-manufactured chips. 
President Biden recently announced measures to promote domestic biotech 
and biomanufacturing, but there are no corresponding protections on 
biodata flows.

       Meanwhile Chinese pharma and genomics companies such as WuXi 
Apptec and BGI are expanding operations in the United States and 
partnering with U.S. hospitals and universities. These companies answer 
to Beijing's Party-state and military, part of Xi Jinping's growing 
military-industrial complex for precision medicine. As the University 
of Virginia's Aynne Kokas has written in an invaluable new book, 
China's access to U.S. health data, especially DNA, threatens harms 
``with multigenerational consequences.''

 3.  ``ICTS'' Implementation: The new ``ICTS'' process may be the 
single best tool Washington has for addressing the multifaceted China 
data problem. It is vital, then, that ICTS get off the ground with 
appropriate staffing, funding, and authority. The administration may 
have most or all of what it needs to activate the ICTS, but some 
congressional action may be helpful, too.

       Consider the wide range of problems that ICTS could address, if 
appropriately used:

          Data centers: The June 2021 executive order clearly 
threatened Chinese firms' continued access to U.S. ``large data 
repositories,'' and Commerce reportedly subpoenaed several Chinese 
communications firms in early 2021. Yet no enforcement action has 
followed.

          Drones: U.S. officials have issued years of warnings about 
Chinese drone giant DJI, which DOD recently added to a list of firms 
tied to China's military. Yet DJI still dominates the U.S. commercial 
drone market. Another Chinese drone maker, Autel, is growing its U.S. 
sales while keeping a relatively low profile. Drones are within ICTS's 
mandate but they have not been the subject of any known enforcement 
action--or even investigation.

          Autonomous vehicles and digital mapping: Many leading U.S. 
autonomous transport companies rely on financing and engineering from 
China, while facing no restrictions on the export of sensitive data 
about U.S. roads and critical infrastructure. ICTS appears to have 
authority to stop this, but hasn't done so.

       ICTS was designed to solve all of these cases. As with TikTok 
and biodata, addressing them would demonstrate prudent data regulation 
at home that could be a model for digital-trade policy promotion 
overseas.

    China threats and digital trade are overlapping fields of 
bipartisan concern. The stakes are high. Immediate action is possible 
and would be valuable. The administration would benefit from 
congressional action, and the American people would appreciate the 
greater protection of their privacy and the strengthening of their 
national security.

    Thank you for the opportunity to testify. I look forward to your 
questions.

    * Center for a New American Security (CNAS) disclaimer: As a 
research and policy institution committed to the highest standards of 
organizational, intellectual, and personal integrity, CNAS maintains 
strict intellectual independence and sole editorial direction and 
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supporters.

                                 ______
                                 
    Prepared Statement of Joshua P. Meltzer, S.J.D., Senior Fellow, 
         Global Economy and Development, Brookings Institution 
         
    Chair Carper, Ranking Member Cornyn, and members of the 
subcommittee, thank you for the opportunity to testify today.

    I am a senior fellow at the Brookings Institution, where I work on 
digital trade issues as well as on emerging technologies such as 
artificial intelligence.

    Today I will focus my testimony on the opportunities of e-commerce 
and digital services trade for the U.S., with a focus on the 
opportunities for small and medium-sized enterprises (SMEs). I will 
also discuss evolving global AI regulation. In both these cases I will 
outline how digital trade commitments--whether in Free Trade Agreements 
(FTAs), Digital Economy Agreements (DEAs) or the Indo-Pacific Economic 
Forum (IPEF) negotiations, can support growth in e-commerce 
opportunities, in digital services trade and support AI regulation and 
R&D consistent with U.S. values and strategic objectives. 

                         what is digital trade? 
                         
    There is no globally agreed definition of digital trade; however, 
it is a term increasingly used to describe an ecosystem that is more 
expansive than ``e-commerce,'' which is focused on trade in goods and 
services purchased online.\1\ Digital trade includes the important role 
of cross-border data flows, and how data and digital technologies such 
as cloud computing and Artificial Intelligence (AI) can enable trade. 
The Organisation for Economic Co-operation and Development (OECD) 
defines digital trade as digitally enabled transactions of trade in 
goods and services that can either be digitally or physically delivered 
and involve consumers, firms, and governments.\2\ Underpinning digital 
trade is the movement of data. Data is not only a means of production, 
but also an asset that can itself be traded, and a means through which 
global value chains are organized and services delivered. Furthermore, 
it indirectly supports physical trade by enabling implementation of 
trade facilitation.
---------------------------------------------------------------------------
    \1\ WTO Work Programme on E-Commerce, 1998 definition of e-commerce 
is ``the production, distribution, marketing, sale, or delivery of 
goods and services by electronic means.''
    \2\ https://www.oecd.org/trade/topics/digital-trade/.

    The increasing scope of digital trade is reflected in various free 
trade agreements that now have digital trade chapters in place of e-
commerce chapters.\3\ These digital trade chapters include new 
commitments such as not to prohibit cross-border data flows and require 
data localization as a condition for doping business, subject to GATS 
Article XIV style exceptions.\4\ Another trade policy development is 
the shift to digital economy agreements (DEAs), such as the U.S.-Japan 
Digital Trade Agreement or the Australia-Singapore Digital Economy 
Agreement.\5\ These are digital-only agreements that often do not 
include new market access and instead focus on developing the rules and 
norms that can support digital trade. This includes regulation that 
builds trust in data flows and facilitates e-commerce.
---------------------------------------------------------------------------
    \3\ For example, the Comprehensive and Progressive Trans-Pacific 
Partnership (CPTPP) and United States-Mexico-Canada Agreement (2019) 
include digital trade chapters whereas the U.S.-Australia FTA (2005) 
and U.S.-Singapore FTA (2004) have e-commerce chapters.
    \4\ See for example USMCA Article 19.11 and Article 19.12.
    \5\ Agreement between the United States of America and Japan 
Concerning Digital Trade.
---------------------------------------------------------------------------

                    opportunities from digital trade 
                    
    Digital trade commitments, whether in FTAs or DEAs, can deliver 
potentially significant economic gains. The most recent assessment of 
the economic impacts of digital trade commitments was the U.S. ITC 
assessment of the economic impacts of USMCA that was published in April 
2019.\6\ According to the ITC assessment, a key driver of the economic 
gains for the U.S. from the USMCA come from its digital trade chapter. 
These rules were found to have a significant, positive impact on 
industries that rely on cross-border data flows, including for firms in 
the services economy, manufacturing, and agricultural industries, all 
of which rely on data and information flows in their business models, 
supply chains, and for international trade.
---------------------------------------------------------------------------
    \6\ United States International Trade Commission. ``U.S.-Mexico-
Canada Trade Agreement: Likely Impact on the U.S. Economy and on 
Specific industry Sectors,'' April 2019, https://www.usitc.gov/
publications/332/pub4889.pdf.

    The following outlines the key elements of digital trade on how 
cross-border data flows enable e-commerce, services, and manufacturing 
exports, and can strengthen global value chains. 

  e-commerce and opportunities for small and medium-sized enterprises 
  
    There has been a lot of attention on the opportunities for SMEs of 
doing their business online, and therefore reaching customers globally. 
This was an early promise of the Internet in the 1990s and early 2000s 
that was not fully realized. While a lot of companies did build 
websites, this did not necessarily translate into sales in other 
countries. There were several reasons for this outcome, including 
payment systems that were costly and often could not support some of 
the elements required for cross-border e-commerce, such as processing 
returns. There was a lack of trust among consumers purchasing goods 
from businesses in third countries with limited recourse if the goods 
failed to arrive or were defective or damaged. It was also difficult to 
deliver the product in a timely and cost-effective way due to costly 
delivery services and inefficient Customs processes.

    This has now changed. E-commerce presents a real opportunity for 
SMEs to export and reach customers globally, allowing small businesses 
to thrive and scale. A key development has been platforms such as eBay, 
Amazon, Etsy, Mercado Libre in South America, and Lazada in Asia. These 
platforms solve many of the previously mentioned problems. They provide 
integrated payment solutions, trust mechanisms, cheap and effective 
dispute settlement procedures, and links to express delivery services. 
Figure 1 compares SMEs on eBay that export compared to their offline 
peers. As can be seen, in the U.S. for example, 97 percent of small 
businesses on eBay export.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 


    The opportunities for SMEs to engage in digital trade has been 
enabled by various trade commitments. For instance, the WTO Trade 
Facilitation Agreement has helped reduce the costs of getting goods 
through Customs in many markets globally. In trade agreements such as 
the USMCA, commitments to raise the de minimus levels for Customs 
duties support the economic viability of smaller value transactions, 
often a staple of SME sales. Commitments on electronic signatures and 
electronic authentication provide important legal frameworks that allow 
for digital cross-border transactions. Commitments to not restrict data 
flows and to encourage interoperability among digital payment systems 
also enable the platforms that SMEs rely on to be global.

    Another element that supports SMEs is access to digital 
technologies such as cloud computing. In fact, the cloud is an 
important enabler of a range of key inputs for all businesses. This 
includes leading edge software and computing capacity that is secure 
and available anywhere with an Internet connection. Cloud also supports 
businesses that provide access to attorneys, marketers, design 
professionals, and financial advisors on an at-need basis, supporting 
flexible and cost-effective solutions for small businesses. 

           the u.s. leads the world in digital service trade 
           
    The discussion around digital services leads to the broader 
observation that digital trade and cross-border data flows enable 
digital services exports. Before turning to digital services, it is 
worth noting the importance of services as a component of U.S. trade.

    According to the U.S. Census Bureau, the U.S. services trade 
surplus (September 2021-September 2022) was $236.6 billion. This is a 
familiar and long-term trend--the U.S. has been exporting more services 
than it imports for over 30 years. Services now comprise around 40 
percent of total U.S. trade.

    But services are an even more significant part of overall U.S. 
trade than this share of services exports would suggest. This is 
because around 30 percent of U.S. goods exports comprise value-added 
services used in the production of goods. The net result is that over 
60 percent of total U.S. exports comprise services.

    The World Trade Organization (WTO) identifies four ways or modes 
that services can be exported:

        1.  Mode 1: In a cross-border manner--where the service 
        supplier does not leave the U.S. and provides the service 
        online. This is a key vehicle for digital or online services 
        trade.
        2.  Mode 2: When someone comes to the U.S. to consume a service 
        such as tourists or students.
        3.  Mode 3: Where a U.S. business sets up a subsidiary overseas 
        to provide a service, such as when Citibank opens a branch in 
        Germany and provides financial services through that branch. 
        Though in this example, much of this communication between the 
        U.S. and the German branch will be online data will flow to 
        enable communication, transfers for banking, and which allow 
        the company to operate, such as information for human 
        resources.
        4.  Mode 4: Services are traded internationally when people 
        work in another country, a relatively small component of how 
        services are exported.

    These examples underscore that a lot of services can be exported 
and provided online. The following graph shows digitally deliverable 
services as a share of commercial services trade. Commercial services 
are key business inputs and comprise insurance and pension services, 
financial services, charges for the use of intellectual property, 
telecommunications, computer, and information services, and audiovisual 
and related services. Many of these services would be familiar to the 
average American consumer or small business owner. For example, PayPal 
is a digital financial service that enables cross-border e-commerce 
transactions on eBay, but also supports many e-commerce sites. Charges 
to IP can range from software licensing fees paid by a business to the 
commissions paid for artworks on Etsy. Small business owners may 
subscribe to Apple's iCloud in order to streamline the storage and 
security of data, as well as facilitate collaboration across platforms, 
such as Microsoft Teams. Digital native companies such as Allbirds or 
Bombas build their businesses almost exclusively using online 
advertising and social media networks to reach potential customers 
globally.

    As can be seen in Figure 2, the U.S. is the world's largest 
exporter of digitally deliverable services, over three times larger 
than its nearest competitor Germany and 2.2 times larger than the UK. 
Moreover, 51 percent of U.S. exports of commercial services are 
digitally deliverable.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 


            digitally deliverable services are also important 
                   for manufacturing competitiveness 
                   
    As outlined, services comprise approximately 30 percent of U.S. 
manufactured exports, and many of these are digital services. The table 
below shows the percentages of domestically produced digital intensive 
services embodied in manufactured exports.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 


    As can be seen, digital services used in manufacturing comprise 
professional, scientific, administrative, financial, ICT, and wholesale 
retail trade. For example, steel production is increasingly digitally 
intensive, relying on smart plants that knit together the manufacturing 
processes digitally to increase efficiency, and use AI systems that 
monitor and make adjustments to maximize performance. These types of 
uses of data and digital services play out across manufacturing--in 
automobiles, aircraft, medical products, and so on. 

                 growing restrictions on digital trade 
                 
    The digital trade opportunities for U.S. exporters increasingly 
face a global environment with high restrictions on digital trade. The 
OECD digital trade restrictiveness index shows relatively low levels of 
restrictions in the U.S. and relatively high levels of restrictions in 
Japan, India, and Indonesia--a set of countries participating in the 
Indo-Pacific Economic Framework (IPEF) negotiations. These restrictions 
also pale in comparison to China, which has one of the world's most 
restrictive digital trade regimes. They range from various personal 
data protection, cybersecurity, and national security laws that 
prohibit or severely restrict cross-border transfers of information. 
These laws often impose local data storage and processing requirements 
on companies that collect ``important data,'' a broad and vaguely 
defined term. Many countries prevent U.S. companies from directly 
providing cloud computing services, including computer data processing 
and storage services and software application services provided over 
the Internet. Many digital trade restrictions are also hurdles to 
electronic and Internet-enabled payment services such as slow licensing 
processes and data localization requirements.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 

             digital trade and artificial intelligence 
             
    Digital trade also affects access to and the development of key 
digital technologies such as AI. Indeed, U.S. National Security Advisor 
Jake Sullivan has identified three families of technologies: (1) 
computing-related technologies that includes AI; (2) clean energy 
technologies; and (3) biotechnologies, all of which will affect U.S. 
security.\7\ While the U.S. is a world leader in AI, many countries are 
moving to regulate AI and expand AI R&D in ways important for ongoing 
U.S. leadership in AI, and to which digital trade agreements can 
respond. This includes AI regulation that can restrict AI development 
and use. For instance, the European Union's AI Act that is moving 
through the EU Parliament will regulate high risk AI. In addition, 
Canada recently tabled its Artificial Intelligence and Data Act (AIDA). 
Meanwhile, China, which holds a unique position in the international AI 
landscape as both a chief collaborator with the U.S. on AI R&D and 
competitor, has begun to roll out its own AI governance framework. This 
includes regulations on the development and deployment of AI 
algorithms, as well as increased control over Chinese technology firms 
leading in AI development. China is also exporting its model for AI 
regulation to other countries in the Indo-Pacific and globally.
---------------------------------------------------------------------------
    \7\ Remarks by National Security Advisor Jake Sullivan at the 
Special Competitive Studies Project Global Emerging Technologies 
Summit, The White House, https://www.whitehouse.gov/briefing-room/
speeches-remarks/2022/09/16/remarks-by-national-security-advisor-jake-
sullivan-at-the-special-competitive-studies-project-global-emerging-
technologies-summit/.

    Some countries are using FTAs and DEA to support AI specifically, 
but the U.S. has yet to do so. Relevant ways that digital trade 
commitments can support AI regulation and R&D include around access to 
data, agreements on using technology standards developed in 
multistakeholder standards setting bodies, agreement that AI regulation 
should be risk-based, and support for collaboration on AI R&D among 
---------------------------------------------------------------------------
like-minded countries.

    The following table was developed in the Forum on Cooperation in AI 
(FCAI), which I co-lead with Cameron Kerry and Andrea Renda. FCAI is a 
track 1.5 dialogue among seven governments, industry, and civil society 
that aims to identify areas for international collaboration in AI.\8\
---------------------------------------------------------------------------
    \8\ The Forum for Cooperation on Artificial Intelligence, https://
www.brookings.edu/project/the-forum-for-cooperation-on-artificial-
intelligence/.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 


    This table shows the ways that trade agreements can support AI. 
While the USMCA and the U.S.-Japan Digital Trade Agreement include 
relevant commitments, none of these are AI specific. In contrast, other 
countries have taken the next step and began articulating AI specific 
commitments. For example, the Australia-Singapore Digital Economy 
Agreement, the EU-UK Trade and Cooperation Agreement, and the New 
Zealand-UK Free Trade Agreement include AI-specific commitments. While 
the U.S. does continue to focus on AI in other spaces, such as the TTC 
and the Quad, digital trade commitments present an important 
opportunity to influence AI regulatory developments, ensure markets are 
open and competitive, and support AI R&D among allies and partner 
countries. 

                               conclusion 
                               
    The U.S. has been perhaps most effective at developing a world 
class digital economy that has created a range of new opportunities for 
digital trade for both small and large businesses. However, to date the 
U.S. has not sufficiently engaged nor shaped the rules and norms for 
how digital trade should assess risks that impact access to new 
markets. The U.S. should therefore work in cooperation with many 
governments that are working hard to regulate and develop their own 
digital economies and shape the terms of digital trade. And most 
importantly, U.S. leadership in developing rules that govern digital 
technologies such as AI is needed to ensure that AI is appropriately 
regulated and developed consistently with U.S. values. The forthcoming 
IPEF negotiations is the next opportunity for the U.S. to craft the 
next generation of digital trade rules that can support a range of 
economic opportunities that digital trade provides.

                                 ______
                                 
           Prepared Statement of Patrick Woodall, Policy and 
            Research Director, AFL-CIO Technology Institute 
            
    Thank you, Chairman Carper and Ranking Member Cornyn, for the 
opportunity to testify before your committee on ``Opportunities and 
Challenges for Trade Policy in the Digital Economy.'' This testimony is 
submitted on behalf of the AFL-CIO Technology Institute and the 
American Federation of Labor and Congress of Industrial Organizations 
and the 12.5 million workers represented by its 58 affiliated unions.

    The digital transformation of the economy has generated real 
societal gains--with significant scientific, communications, health-
care, commercial, and other advances--but also raised urgent challenges 
for workers and society. This rapid technological change has emerged 
largely without the knowledge, consent, or input of the people it most 
affects--the workers and consumers whose lives are increasingly 
governed, surveilled, and commodified by the digital revolution. The 
U.S. Congress and U.S. regulators as well as governments worldwide are 
only beginning to confront these challenges.

    Digital commerce and cross-border digital trade affects people at 
work and at home as technologies become built into workplaces and daily 
life. Digital commerce and digital trade covers any services or 
products that are delivered over the Internet. Much of this is 
consumer-facing content or services like e-books and movies, email 
services, smartphone apps, and software downloads. But it also concerns 
the backbone of e-commerce (everything except the delivery of goods 
purchased online), global cloud computing, and the big data services 
that undergird an increasing portion of big business operations and 
impact workers on and off the job.

    The forces of global digital commerce are dramatically affecting 
millions of workers whether they know it or not. These workers include 
back-office and call-center workers that can lose their jobs from 
digital offshoring to countries where workers are paid poverty wages 
and face severe repression for organizing trade unions. They include 
workers whose jobs are managed or controlled by automated software that 
hires, rates, fires, schedules, and prods them to work faster to hit 
ramped-up productivity targets. These technologies can shortchange 
workers' earnings, expose workers to unsafe workplace conditions, 
infringe on the right to form unions, and exacerbate employment 
discrimination. Digital trade includes low-paid workers who toil for 
platform companies that assign tasks, set pay rates, and impose 
unaccountable discipline on ``gig'' workers who endure low earnings, 
uncertain work schedules, and no benefits. And workers everywhere who 
are monitored on and off the job by their employers.

    Working families face the threats of digitization outside the 
workplace as well. The large technology companies collect, share, 
commodify, and sell tremendous amounts of personal data with little or 
no oversight. Digital apps and social media platforms have eroded 
personal privacy, undermined the mental health of adolescents, and 
provided a megaphone to anti-democratic and hateful forces that have 
corroded the social discourse.

    The digital trade rules set the parameters of how governments can 
address these global data flows and cross-border software that affects 
workers, consumers, and society. The current digital trade rules, 
included in the U.S.-Mexico-Canada Agreement and the U.S.-Japan digital 
trade agreement, grant broad powers to the companies that control these 
technologies and data and set stringent prohibitions against government 
efforts to curb the demonstrable excesses of the digital economy.

    There needs to be a new way forward for digital trade that 
prioritizes workers and people and not just the technology industry. As 
United States Trade Representative Katherine Tai stated in 2021, 
digital trade must be ``grounded in how it affects our people and our 
workers'' and provide space to ``prioritize flexible policies that can 
adapt to changing circumstances'' of rapidly evolving forms of digital 
commerce.\1\ This requires a more balanced approach that preserves the 
right of governments to fully regulate the digital economy, while also 
driving greater cooperation to address the very real threats to 
privacy, democracy, and decent work.
---------------------------------------------------------------------------
    \1\ Tai, Katherine. (Ambassador Tai). Ambassador, Office of the 
U.S. Trade Representative. ``Remarks of Ambassador Katherine Tai on 
Digital Trade at the Georgetown University Law Center Virtual 
Conference.'' November 3, 2021 (https://ustr.gov/about-us/policy-
offices/press-office/speeches-and-remarks/2021/november/remarks-
ambassador-katherine-tai-digital-trade-georgetown-university-law-
center-virtual-conference).

    A new worker-centered approach to digital trade must enshrine the 
right to regulate these new technologies to protect workers and 
consumers by enforcing current law and addressing emerging impacts on 
the workplace and society. The absence of domestic measures governing 
the digital economy heightens the importance that digital trade 
---------------------------------------------------------------------------
agreements must preserve robust public policy space.

    This testimony describes the significant problems with granting 
broad powers to cross-border digital trade while narrowly constraining 
government oversight in the context of trade approaches of other 
sectors (Section I). It discusses the issues around digital trade 
provisions on cross-border data flows and data localization (Section 
II), source codes and algorithms (Section III), and other digital trade 
issues that impact workers and society (Section III).

i. existing digital trade rigid constraints on domestic governance are 
               inappropriate because digital is different 
               
    The past 3 decades of globalization and international trade have 
cost millions of American manufacturing and service-sector jobs and 
contributed to the widening economic and racial inequality in the 
United States. Prior trade agreements focused on the shipments of 
physical goods and cross-border services but also addressed so-called 
regulatory non-tariff barriers to trade that affected goods and 
services. These trade provisions were adopted long after industrialized 
countries had established regulatory structures designed to protect 
workers, consumers, the environment, and communities from unsafe 
workplaces, dangerous products, and pollution.

    But the current provisions in digital trade are fundamentally 
different. First, they grant broader powers to the technology companies 
and employers that deploy digital technologies and ship data worldwide 
than have previously been included in trade provisions. Second, the 
digital trade language sets far narrower constraints on government 
oversight of these cross-border data and technology transactions and 
transmissions than in other sectors. The combination of these two 
elements delivers a far more unbalanced combination of unilateral 
corporate power for big tech with far more rigid constraints on 
domestic oversight of the ubiquitous technologies and data that govern 
workers' lives at home and on the job.

    Critically, existing U.S. digital trade provisions are delivering 
these broad cross-border corporate powers unfettered by government 
regulation when the United States and many trading partners have almost 
no regulatory structures to address the excesses of the technology 
industry. The United States has only a patchwork of laws and rules that 
govern big tech business models and expanding the current digital trade 
model would effectively lock in an unregulated technology sector with 
little or no meaningful oversight. The technology companies have pushed 
for tough digital provisions to ``lock in their political power in 
international rules that are difficult to change,'' according to a 2016 
London School of Economics paper.\2\ Providing meaningful public policy 
space that is not curtailed by digital trade provisions is especially 
crucial for the new and novel concerns that are rapidly impacting 
workers and society.
---------------------------------------------------------------------------
    \2\ Azmeh, Shamel and Christopher Foster. London School of 
Economics. ``The TPP and the digital trade agenda: Digital industrial 
policy and Silicon Valley's influence on new trade agreements.'' 
Working Paper No. 16-175. January 2016 at 7 (https://
www.semanticscholar.org/paper/The-TPP-and-the-digital-trade-agenda%3A-
Digital-and-Azmeh-Foster/bead20d05f43cbbd
e351a4cc42f2112773ff1039).

    Trade agreements infringe on domestic governance: Trade agreements 
were designed to reduce barriers to cross-border shipments of goods, 
largely import tariffs and quotas but increasingly domestic regulations 
that are deemed so-called non-
tariff barriers. Over the past 3 decades, tariffs were substantially 
reduced or eliminated through multilateral or bilateral trade 
agreements. In the United States, this led to a dramatic surge in 
imports that cost millions of U.S. manufacturing jobs and created far 
more vulnerable supply chains.\3\ Unlike physical goods, there has been 
a tariff moratorium on cross-border data flows, electronic 
transmissions, and e-
commerce transactions since 1998.\4\
---------------------------------------------------------------------------
    \3\ Scott, Robert E. and Zane Mokhiber. Economic Policy Institute. 
``Growing China trade deficit cost 3.7 million American jobs between 
2001 and 2018.'' January 30, 2020 (https://www.epi.org/publication/
growing-china-trade-deficits-costs-us-jobs/); Acemoglu, Daron et al. 
National Bureau of Economic Research. ``Import Competition and the 
Great U.S. Employment Sag of the 2000s.'' Working Paper No. 20395. 
August 2014 (https://www.nber.org/papers/w20395).
    \4\ Farge, Emma. ``WTO provisionally agrees to extend e-commerce 
tariff moratorium--sources.'' Reuters. June 16, 2022 (https://
www.reuters.com/markets/commodities/wto-provisionally-agrees-extend-e-
commerce-tariff-moratorium-sources-2022-06-16/).

    The trade agreements since the 1990s have also aimed to curb 
domestic regulations that purportedly act as non-tariff barriers to 
cross-border trade. The World Trade Organization and other bilateral 
agreements constrained domestic governance over workplace safety, the 
environment, food safety, regulatory standards and more. These 
agreements imposed significant limitations on governments' ability to 
implement policies that can affect trade and brought domestic 
---------------------------------------------------------------------------
governance under the disciplines of trade dispute settlement.

    Trading partners can demand that domestic policies (or measures, in 
trade language) be assessed to determine whether they pose illegitimate 
trade barriers. These evaluations are significantly biased against the 
ability of governments to establish domestic policies to protect 
workers, consumers, communities, or the environment. Policies are 
evaluated on a series of trade tests (the legitimacy and necessity of 
the measure, the trade restrictiveness or whether a less protective 
measure would facilitate more trade, and whether the measure poses 
arbitrary or unjustified non-discrimination, including whether it is a 
disguised trade restriction).

    These policy caveats have proven difficult for countries to invoke 
in practice, even for sectors with longstanding, well-established 
regulatory regimes. At the World Trade Organization (WTO), fewer than 5 
percent of domestic measures that were challenged as illegal trade 
barriers were upheld in trade disputes as trade-legal under these 
regulatory exceptions.\5\
---------------------------------------------------------------------------
    \5\ Rangel, Daniel. Public Citizen's Global Trade Watch. ``WTO 
General Exceptions: Trade Law's Faulty Ivory Tower.'' January 2022 
(https://www.citizen.org/article/wto-general-exceptions-trade-laws-
faulty-ivory-tower/).

    The prior trade agreements' approach to domestic regulations over 
goods and services were built upon an architecture of longstanding 
domestic regulatory regimes in countries like the United States. Even 
the severe bias against domestic regulations often contained language 
that affirmatively granted the right to regulate and established 
guidelines for evaluating domestic regulations to purportedly ensure 
they were consistent with the international commitments.\6\ These 
approaches at least recognized that global trade commitments interacted 
with robust domestic regulatory policies.
---------------------------------------------------------------------------
    \6\ For example, the WTO Sanitary and Phytosanitary Agreement Art. 
2.1 gave members ``the right to take sanitary and phytosanitary 
measures necessary for the protection of human, animal or plant life or 
health, provided that such measures are not inconsistent with the 
provisions of this Agreement.

    Digital trade provisions include tough proscriptions against 
domestic governance: The existing digital trade provisions grant more 
powerful constraints on domestic policymaking in an environment where 
there is little or no regulatory oversight of the technology sector. 
The technology industry generally views all efforts to regulate digital 
commerce and trade--including in areas like privacy protection and 
national security--as illegitimate trade barriers motivated more by 
parochial protectionism than by legitimate public policy concerns.\7\
---------------------------------------------------------------------------
    \7\ Horowitz, Jeff. ``U.S. International Trade Commission's Digital 
Trade Roundtable: Discussion Summary.'' Journal of International 
Commerce and Economics. October 2015 at 3 (https://www.usitc.gov/
publications/332/journals/vol_iv_article4_digital_trade_summary.pdf).

    Many USMCA and the U.S.-Japan digital provisions include 
prohibitions against domestic regulations. For example, the agreements 
dictate that ``no party shall prohibit or restrict'' cross-border data 
flows,\8\ ``no party shall require'' local data storage,\9\ ``no party 
shall require'' access to software source codes,\10\ and ``no party 
shall adopt or maintain'' policies that hold platforms accountable for 
the content posted on their networks.\11\
---------------------------------------------------------------------------
    \8\ U.S.-Mexico-Canada Agreement (USMCA) Art. 19.11.1 (https://
ustr.gov/sites/default/files/files/agreements/FTA/USMCA/Text/19-
Digital-Trade.pdf); U.S.-Japan Digital Trade Agreement (U.S.-Japan). 
Art. 14.11.1 (https://ustr.gov/sites/default/files/files/agreements/
japan/
Agreement_between_the_United_States_and_Japan_concerning_Digital_Trade.p
df).
    \9\ USMCA Art. 19.12; U.S.-Japan Art. 12.
    \10\ USMCA Art. 19.16.1; U.S.-Japan Art. 17.1.
    \11\ USMCA Art. 19.17.2; U.S.-Japan Art. 18.2.

    This digital language begins with broad prohibitions against 
domestic governance which sets a presumption that any domestic laws or 
regulations to safeguard workers or consumers from the excesses of the 
technology industry could be deemed illegal trade barriers. Some 
provisions contain the same weak trade policy caveats (legitimate, 
necessary, minimally trade restrictive, and disguised protectionism) 
that make it harder to establish domestic policies to protect workers 
and consumers from the downsides of digitization.\12\
---------------------------------------------------------------------------
    \12\ USMCA Art. 19.11.1 and U.S.-Japan Art. 11.1.

    The significant constraints on domestic governance could make it 
easier for trading partners to challenge any future regulatory efforts 
to rein in the technology industry and protect workers and consumers. 
This effectively would lock in the current absence of regulatory 
oversight of big tech in the United States.\13\
---------------------------------------------------------------------------
    \13\ Azmeh, Shamel, Christopher Foster, and Jaime Echavarri. 
(Azmeh, Foster and Echavarri). ``The International Trade Regime and the 
Quest for Free Digital Trade.'' International Studies Review. Vol. 22. 
2020 at 684 (https://academic.oup.com/isr/article/22/3/671/5564378).

    Constraint of governance over unregulated technology: The United 
States has a patchwork of largely outdated statutes and regulations 
that fail to protect people and workers from the potential abuses of 
the digital world. Federal laws protecting personal data cover some 
specific areas (like medical information, credit, or financial data), 
but do not require companies to notify or compensate people if their 
personal information is shared or sold or exposed to unauthorized 
parties through cyber-crime or data breaches.\14\ Many of the laws are 
outdated for today's digital world.\15\ For example, the rules that 
absolve platforms and social media companies from responsibility from 
users promoting hate speech and disinformation were implemented during 
the age of dial-up modems.\16\
---------------------------------------------------------------------------
    \14\ Klosowski, Thorin. ``The state of consumer data and privacy 
laws in the US (and why it matters).'' New York Times. September 6, 
2021 (https://www.nytimes.com/wirecutter/blog/state-of-privacy-laws-in-
us/).
    \15\ Kerry, Cameron F. Brookings Institute. ``Why protecting 
privacy is a losing game today--and how to change the game.'' July 12, 
2018 (https://www.brookings.edu/research/why-protecting-privacy-is-a-
losing-game-today-and-how-to-change-the-game/).
    \16\ The Digital Millennium Copyright Act of 1998. 17 U.S.C. 
Sec. 512.

    There are effectively no regulations overseeing the impact of 
algorithmic management, and workers have little protection or recourse 
from digital surveillance on or even off the job.\17\ Automated 
recruiting, hiring, and promotional decisions can have disproportionate 
or disparate impact on people of color, women, people with 
disabilities, older people, immigrants, or other protected classes, but 
the application of civil rights statutes to new and emerging digital 
technologies remains murky.\18\
---------------------------------------------------------------------------
    \17\ Bernhardt, Annette, Lisa Kresge, and Reese Suliman. (Bernhard, 
Kresge and Suliman). University of California Berkeley Labor Center. 
``Data and Algorithms at Work: The Case for Worker Technology Rights.'' 
November 2021 at 2 (https://laborcenter.berkeley.edu/data-algorithms-
at-work/); Ajunwa, Ifeoma, Kate Crawford, and Jason Schultz. (Ajunwa, 
Crawford, and Schultz). ``Limitless Worker Surveillance.'' California 
Law Review. Vol. 105. 2017 at 747 to 749 (https://
californialawreview.org/print/3-limitless-worker-surveillance/).
    \18\ Yang, Jenny R. Urban Institute. (Yang). Statement before the 
Subcommittee on Civil Rights and Human Services. Committee on Education 
and Labor. U.S. House of Representatives. ``The Future of Work: 
Protecting Workers' Civil Rights in the Digital Age.'' February 5, 2020 
at 8 to 11 (https://edworkforce.house.gov/download/jenny-r-yang/
default.aspx).

    The public and the Congress recognize that this big tech Wild West 
is not working for people or society. An increasing majority of the 
public favors more regulation of technology and technology companies, 
especially related to protecting privacy and curbing monopolistic 
market power.\19\ The House Energy and Commerce Committee passed 
digital privacy legislation nearly unanimously in July 2022 and 
released a bipartisan statement flagging the legislation's goal to 
``rein in big tech's power and establish clear, robust protections for 
people.''\20\ Bipartisan legislation to address big tech's monopolistic 
and anticompetitive power has passed the Senate and House Judiciary 
committees but has faced a withering and misleading advertising 
campaign to derail the legislation.\21\ The existing digital trade 
language would create a very high barrier to implementing and enforcing 
these laudable congressional efforts.
---------------------------------------------------------------------------
    \19\ Vogels, Emily A. Pew Research Center. ``56% of Americans 
support more regulation of major technology companies.'' July 20, 2021 
(https://www.pewresearch.org/fact-tank/2021/07/20/56-of-americans-
support-more-regulation-of-major-technology-companies/); Brenan, Megan. 
Gallup. ``Views of Big Tech Worsen; Public Wants More Regulation.'' 
February 18, 2021 (https://news.gallup.com/poll/329666/views-big-tech-
worsen-public-wants-regulation.aspx).
    \20\ U.S. House of Representatives. Energy and Commerce Committee. 
[Press release]. ``Bipartisan E&C Leaders Hail Committee Passage of the 
American Data Privacy and Protection Act.'' July 20, 2022 (https://
republicans-energycommerce.house.gov/news/press-release/bipartisan-ec-
leaders-hail-committee-passage-of-the-american-data-privacy-and-
protection-act).
    \21\ Feiner, Lauren. ``Senate committee votes to advance major tech 
antitrust bill.'' CNBC. January 20, 2022 (https://www.cnbc.com/2022/01/
20/senate-committee-votes-to-advance-major-tech-antitrust-bill.html); 
McKinnon, John D. ``Big Tech Has Spent $36 million on Ads to Torpedo 
Antitrust Bill.'' Wall Street Journal. June 9, 2022; Wheeler, Tom. 
Brookings Institute. ``History repeats itself with Big Tech's 
misleading advertising.'' June 15, 2022 (https://www.
brookings.edu/blog/techtank/2022/06/15/history-repeats-itself-with-big-
techs-misleading-advertising/).

    The existing digital trade provisions constraints on domestic 
governance harm workers, consumers, and society. The following sections 
describe how the combination of broad corporate powers for big tech 
companies and stringent regulatory restrictions could lead to increased 
offshoring of U.S. jobs, make it harder to enforce current labor, 
employment, and civil rights laws against artificial intelligence 
algorithmic management and automated decision-making, and prevent 
governments from adopting safeguards to address emerging technological 
issues, such as workplace surveillance. 

ii. workers harmed by  free flow of data and  data  localization  digital 
   trade provisions that accelerate job offshoring and prevent protecting
   critical data and sectors
                       
    The current digital trade model grants broad powers to technology 
and other companies to control, transmit, process, and store data 
worldwide, while also shielding their digital systems from regulatory 
scrutiny. These provisions prohibit any restriction on cross-border 
data flows--even for sensitive forms of personal information--as well 
as an absolute prohibition on ``data localization'' policies. Together, 
these two provisions grant companies a near unrestricted right to 
control data and ship it worldwide. The globalization of data has led 
to the outsourcing and offshoring of U.S. jobs, the increasing 
privatization of government datasets that reduces public access and 
raises costs, and the collection of vast troves of personal data 
compromises the privacy of workers on the job and people at home.

    Tech industry demands and existing digital provisions deliver 
unfettered free flow of data: The technology industry and other big 
businesses have pressed for digital trade provisions that largely 
prohibit any impediments to cross-border data flows. The U.S. 
technology industry has pressed hard for free flow of data because the 
biggest cloud computing firms are based in the United States.\22\ The 
U.S. Chamber of Commerce listed unfettered cross-border data flows as 
its top digital trade priority.\23\ The industry promotes the 
unrestricted right for companies to transfer data across borders as a 
tool to counter authoritarian Internet censorship,\24\ but that does 
not mean that all data--including personal, sensitive, or secure--
should have no restrictions or requirements when crossing borders.\25\
---------------------------------------------------------------------------
    \22\ Fefer, Rachel F., Shayerah I. Akhtar, and Michael D. 
Sutherland. (Fefer, Akhtar and Sutherland). Congressional Research 
Service. ``Digital Trade and U.S. Trade Policy.'' CRS Report R44565. 
December 9, 2021 at 17 (https://crsreports.congress.gov/product/pdf/R/
R44565/18).
    \23\ U.S. Chamber of Commerce. ``The Digital Trade Revolution: How 
U.S. Workers and Companies Can Benefit from a Digital Trade 
Agreement.'' February 2022 at 18 (https://www.
uschamber.com/assets/documents/Final-The-Digital-Trade-Revolution-
February-2022.pdf).
    \24\ Cory, Nigel, Robert D. Atkinson, and Daniel Castro. 
Information Technology and Innovation Foundation. ``Principles and 
Policies for `Data Free Flow with Trust.' '' May 27, 2019 (https://
itif.org/publications/2019/05/27/principles-and-policies-data-free-
flow-trust/).
    \25\ McCann, Duncan. (McCann). New Economics Foundation. For the 
International Trade Union Confederation. ``Free Trade Agreements, 
Digital Chapters and the impact on Labor.'' 2019 at 16 (https://
www.ituc-csi.org/IMG/pdf/
digital_chapters_and_the_impact_on_labour_en.pdf).

    These industry demands are enshrined in existing digital trade 
language that provide a nearly unrestricted, unconditional right for 
cross-border data collection, transmission, and use. The USMCA and U.S. 
Japan digital agreement both contain nearly absolutist language on data 
flows: ``No Party shall prohibit or restrict the cross-border transfer 
of information'' and it specifically includes ``personal information'' 
in this protected right to ship data worldwide.\26\ This prioritizes 
corporate data ownership and control over the privacy rights of workers 
and consumers.
---------------------------------------------------------------------------
    \26\ USMCA Art. 19.11.1 and U.S.-Japan Art. 11.1.

    The USMCA and the U.S.-Japan cross-border data flow provisions 
contain only narrow caveats for permissible government measures that 
must be necessary, legitimate, not disguised restriction to trade, or 
more trade restrictive than necessary.\27\ These policy exceptions are 
borrowed from the WTO, where dispute panels have narrowly interpreted 
these caveats and constrained governments' right to regulate. The 
current digital provisions would make it very difficult for governments 
to maintain or adopt rigorous measures to address the negative impacts 
of unrestricted data flows on workers or consumers.
---------------------------------------------------------------------------
    \27\ USMCA Art. 19.11.2 and U.S.-Japan Art. 11.2.

    Prohibitions on data localization can harm workers, consumers, and 
the economy: The USMCA and U.S.-Japan digital provisions also contain 
an absolute prohibition on ``data localization'' policies. Data 
localization measures require that data generated within a country must 
meet certain requirements including domestic data storage.\28\ An 
increasing number of governments are requiring that some kinds of data 
be stored on domestically to protect digital privacy or secure critical 
infrastructure.
---------------------------------------------------------------------------
    \28\ Azmeh, Foster and Echavarri. 2020 at 677 (https://
academic.oup.com/isr/article/22/3/671/5564378).

    The USMCA and U.S.-Japan data localization provisions broadly 
prohibit countries from requiring companies ``to use or locate 
computing facilities in that party's territory as a condition for 
conducting business.''\29\ Unlike the prohibition on restrictions to 
cross-border data flows, neither digital agreement contains a 
``legitimate public policy'' exception, although both agreements 
exclude financial services from the data localization provisions.\30\
---------------------------------------------------------------------------
    \29\ USMCA Art. 19.12; U.S.-Japan Art. 12.1.
    \30\ USMCA Art. 19.1; U.S.-Japan Art. 12.2.

    While some data localization policies have been established to 
foster domestic capacity or protect domestic industries, many 
``localization policies may be used to achieve legitimate public policy 
objective, including national security and personal data protection,'' 
according to the Congressional Research Service.\31\ Localization 
requirements can also prevent companies from moving data to countries 
with the weakest privacy or financial protections in a digital race to 
the bottom that could shield information from regulatory oversight.\32\
---------------------------------------------------------------------------
    \31\ Fefer, Akhtar and Sutherland. 2021 at 16 (https://
crsreports.congress.gov/product/pdf/R/R44565/18).
    \32\ Kelsey, Jane. Public Services International. ``Digital trade 
rules and Big Tech: Surrendering the public good to private power.'' 
February 2020 at 14 to 15 (https://publicservices.
international/resources/publications/digital-trade-rules-and-big-tech-
surrendering-public-good-to-private-power?id=10825⟨=en).

    The combination of the unfettered right to ship data across borders 
and prohibitions against maintaining domestic data storage to secure 
some categories of sensitive data or some critical economic sectors can 
---------------------------------------------------------------------------
harm consumers, workers, and the economy. For example:

          Digital trade provisions compromise personal privacy: In our 
        hyper-connected online world, consumers and workers' personal 
        data is increasingly monitored, collected, shared, analyzed and 
        sold by companies without their knowledge, consent, or 
        oversight. Privacy issues are inherently tangled with digital 
        trade issues by companies that collect and ship personal data 
        across borders.\33\ Tech companies view privacy measures that 
        keep critical data either within national borders or subject to 
        stronger oversight requirements as ``impediments to the 
        presence and productivity of their companies in these countries 
        and to international trade,'' according to companies at a U.S. 
        International Trade Commission forum.\34\ The Office of the 
        U.S. Trade Representative (USTR) has identified consumer 
        privacy measures as potential or likely trade barriers and 
        unreasonable impediments to the cross-border flow of data, 
        including laws in Canada, EU, India, Israel, Korea, and 
        Switzerland.\35\
---------------------------------------------------------------------------
    \33\ Azmeh, Foster and Echavarri. 2020 at 682 (https://
academic.oup.com/isr/article/22/3/671/5564378).
    \34\ Horowitz, Jeff. ``U.S. International Trade Commission's 
Digital Trade Roundtable: Discussion Summary.'' Journal of 
International Commerce and Economics. October, 2015 at 4 (https://
www.usitc.gov/publications/332/journals/
vol_iv_article4_digital_trade_summary.pdf).
    \35\ Office of the U.S. Trade Representative (USTR). ``2021 
National Trade Estimate Report on Foreign Trade Barriers.'' March 2021 
at 89, 209, 266, 289, 332 (https://ustr.gov/sites/default/files/files/
reports/2021/2021NTE.pdf).

         The USMCA and U.S.-Japan digital provisions explicitly state 
that even the cross-border transmission of ``personal information'' 
cannot be prohibited or restricted.\36\ The agreements purportedly 
permit policies to safeguard personal information but effectively 
encourage voluntary, corporate self-
regulation as a substitute for government privacy regulations.\37\ But 
voluntary, self-regulation is what consumers face today and it is not 
working. The big tech companies that own the personal data already have 
``privacy'' policies but have nonetheless exposed users to cyber-risks 
while monetizing the data they collect.\38\ The digital trade personal 
information provisions also require regulatory approaches be 
``necessary and proportionate to the risks,''\39\ but do not recognize 
that consumers, not the companies, bear all the digital privacy risks. 
This prevents the enactment of any meaningful privacy protection, 
because it can be difficult to put a financial value on privacy and 
security from cyber-breaches.\40\
---------------------------------------------------------------------------
    \36\ USMCA Art. 19.11.1; U.S.-Japan Art. 11.2.
    \37\ USMCA Art. 19.8.2 footnote 4; U.S.-Japan Art. 15.1 footnote 
12.
    \38\ Warzel, Charlie and Stuart A. Thompson. ``Tech Companies Say 
They Care.'' New York Times. April 10, 2019 (https://www.nytimes.com/
interactive/2019/04/10/opinion/tech-companies-privacy.html).
    \39\ USMCA Art. 19.8.3; U.S.-Japan Art. 15.4.
    \40\ Estevadeordal, Anton, Marisol Rodriguez Chatruc, and Christian 
Volpe Martincus. Inter-American Development Bank. ``New Technologies 
and Trade: New Determinants, Modalities, and Varieties.'' Discussion 
Paper No. IDB-DP-00746. February 2020 at 25 (https://
publications.iadb.org/publications/english/document/
New_Technologies_and_Trade_New_Determi
nants_Modalities_and_Varieties_en.pdf).

          Current digital provisions contain no exceptions for 
        critical infrastructure: The USMCA and U.S.-Japan data 
        provisions do not exclude critical infrastructure.\41\ Failing 
        to exempt critical infrastructure from the cross-border data 
        and data localization provisions could make it harder to 
        protect essential economic sectors from cyberattacks. In 2021, 
        a cyberattack against one of the biggest pipeline systems on 
        the east coast led to gas lines and threatened to idle 
        downstream industry like chemical companies and refineries.\42\ 
        Another 2021 hack of a Florida water system remotely elevated 
        the levels of a dangerous chemical in the water; the operator 
        fortunately noticed the change and quickly prevented the hack 
        from tainting the water supply.\43\ The Government 
        Accountability Office has highlighted the environmental and 
        economic risks of the cyber vulnerability of 1,600 U.S. 
        offshore oil and gas rigs.\44\ Some companies and countries are 
        moving towards domestic data hosting for critical 
        infrastructure to increase security and accountability for 
        systems like electricity and water delivery.\45\
---------------------------------------------------------------------------
    \41\ The Comprehensive and Progressive Agreement for Trans-Pacific 
Partnership, to which the United States is not a party, did exempt 
critical infrastructure from the agreement's software secrecy 
provisions. CPTTP Art. 14.17.2 (https://www.dfat.gov.au/sites/default/
files/14-electronic-commerce.pdf).
    \42\ Sanger, David E. and Nicole Perlroth. ``Pipeline Attack Yields 
Urgent Lessons About U.S. Cybersecurity.'' New York Times. June 8, 2021 
(https://www.nytimes.com/2021/05/14/us/politics/pipeline-hack.html).
    \43\ Margolin, Josh and Ivan Pereira. ``Outdated computer system 
exploited in Florida water treatment hack.'' ABC News. February 11, 
2021 (https://abcnews.go.com/US/outdated-computer-system-exploited-
florida-water-treatment-plant/story?id=75805550).
    \44\ Government Accountability Office. ``Offshore Oil and Gas: 
Strategy Urgently Needed to Address Cybersecurity Risks to 
Infrastructure.'' GAO-23-105789. October 26, 2022 (https://www.gao.gov/
products/gao-23-105789).
    \45\ ``Mitigating risks through sovereign data services.'' CRN 
News. November 21, 2022 (https://www.crn.com.au/feature/mitigating-
risks-through-sovereign-data-services-588052).

          Digital trade data provisions encourage low-road digital 
        offshoring: Big tech companies and other employers have 
        demanded unfettered cross-border data flows, in part, to 
        facilitate the offshoring of digitally enabled back-office, 
        call-center, data processing, telemedicine, and other jobs. 
        According to a 2021 report commissioned by Facebook, ``If 
        transferring personal data were not permitted, offshoring 
        business services to popular outsourcing destinations would no 
        longer be possible.''\46\ This kind of digital outsourcing has 
        eliminated U.S. jobs and cost workers their benefits.\47\ One 
        call center outsourcing company promotes a list of nearly 30 
        major corporations--including financial and telecommunications 
        firms--that outsource their call centers.\48\ AT&T shuttered 44 
        call centers costing 16,000 unionized Communications Workers of 
        America (CWA) jobs from 2011 to 2018, despite record 
        profits.\49\ A 2018 Labor Department investigation found that 
        Wells Fargo slashed thousands of U.S. customer service and 
        technology jobs while hiring overseas workers to replace the 
        exact same functions.\50\
---------------------------------------------------------------------------
    \46\ Kepes, Roze, Josh White, and Aaron Yeater. Analysis Group for 
Facebook. ``The importance of cross-border data flows.'' June 2021 at 4 
(https://about.fb.com/wp-content/uploads/2021/06/The-Importance-of-
Cross-Border-Data-Flows.pdf).
    \47\ Chakraborty, Kalyan and William Remington. ``Impact of 
Offshore Outsourcing of IT Services on the U.S. Economy.'' Southwestern 
Economic Review. 2004 (https://swer.wtamu.edu/sites/default/files/Data/
73-94-69-258-1-PB.pdf).
    \48\ Magellan Solutions. ``List of Companies That Outsource Call 
Centers.'' Accessed March 2022 (https://www.magellan-solutions.com/
blog/list-of-companies-that-outsource-call-centers/).
    \49\ Sainato, Michael. `` `They're liquidating us': AT&T continues 
layoffs and outsourcing despite profits.'' The Guardian. August 18, 
2018 (https://www.theguardian.com/us-news/2018/aug/28/att-earns-record-
profits-layoffs-outsourcing-continue); Communication Workers of America 
(CWA). ``AT&T 2018 Jobs Report.'' April 25, 2018 (https://www.cwa-
union.org/sites/default/files/att-jobs-report-2018.pdf).
    \50\ Moise, Imani. ``Wells Fargo moves jobs abroad after U.S. 
layoffs, government says.'' Reuters. December 20, 2018 (https://
www.reuters.com/article/us-wells-fargo-outsourcing/wells-fargo-moves-
jobs-abroad-after-u-s-layoffs-government-says-idUSKCN1OJ2V5).

    Many of these jobs are going to countries where workers and union 
activists face severe repression and toil for low wages with few labor 
protections. For example, many of the CWA call center jobs have been 
digitally offshored to countries like Mexico and the Philippines.\51\
---------------------------------------------------------------------------
    \51\ CWA. ``Offshoring Security.'' October 2013 (https://
www.scribd.com/document/183863856/OFFSHORING-SECURITY-How-Overseas-
Call-Centers-Threaten-U-S-Jobs-Consumer-Privacy-and-Data-
Security#fullscreen=1); CWA. [Press release]. ``CWA Uncovers Massive 
Verizon Offshoring Operation in Philippines.'' May 13, 2016 (https://
cwa-union.org/news/releases/cwa-uncovers-massive-verizon-offshoring-
operation-in-philippines).

    The digital trade data provisions also help maintain a global 
underclass of low-paid gig workers who transcribe, enter data, label 
images, and manually tag information that powers the artificial 
intelligence systems of the biggest tech companies.\52\ Many of these 
millions of ghost workers are in Indo-Pacific Economic Framework 
countries India and the Philippines where they receive low pay and 
precarious labor conditions.\53\ Companies in the United States are the 
biggest employers of digital gig workers in the developing world 
according to data compiled by the University of Oxford.\54\
---------------------------------------------------------------------------
    \52\ Friedland, Julian, David Balkin, and Ramiro Montealegre. ``A 
Ghost Workers' Bill of Rights: How to Establish a Fair and Safe Gig 
Work Platform.'' California Management Review. January 7, 2020 (https:/
/cmr.berkeley.edu/2020/01/ghost-workers/).
    \53\ Royer, Alexandrine. Brookings Institute. ``The urgent need for 
regulating global ghost work.'' February 9, 2021 (https://
www.brookings.edu/techstream/the-urgent-need-for-regulating-global-
ghost-work/).
    \54\ Kassi, Otto and Vili Lehdonvirta. Oxford Internet Institute. 
University of Oxford. ``Online Labour Index 2020 by Country.'' 2020 
(http://onlinelabourobservatory.org/oli-demand/).

    A worker-centered digital trade agenda would establish critical 
safeguards for workers, consumers, and the economy: Future digital 
trade agreements must provide robust public policy space to protect 
workers, consumers, and the economy. The current digital provisions 
excessively constrain domestic policy and do not provide necessary 
flexibility to address emerging and novel technological issues. At a 
minimum, the cross-border data and data localization provisions of 
---------------------------------------------------------------------------
future digital trade agreements or compacts should:

          Authorize and encourage governments to enact policies to 
        safeguard individuals' personal data: Governments should be 
        able to adopt restrictions on cross-border data flows to 
        protect the privacy and security of their citizens' personal 
        data. Digital trade policy should encourage rather than deter 
        government efforts to safeguard individuals' personal data 
        inside and outside the workplace.

          Authorize governments to enact data localization policies 
        with regard to certain categories of sensitive data: While open 
        data flows are essential to the modern global economy, not all 
        data is the same. Governments should have the ability to 
        establish stronger requirements for data related to certain 
        sensitive sectors or personal information, including critical 
        infrastructure (energy, water systems, transportation), 
        national security, law enforcement, health care, finance, and 
        other areas where a data breach or disruption risks undermining 
        economic or national security. Safeguarding critical, 
        vulnerable, and personal data not only protects the security of 
        people and the economy, but it also helps keep good jobs here 
        in the United States.
    
iii. workers harmed by source code and algorithm digital trade provisions 
     that set high barriers to address corrosive impacts of boss-ware 

    Current U.S. digital trade agreements include broad prohibitions on 
government access to and oversight of the source codes and algorithms 
behind the automated decision-making and artificial intelligence 
systems that are increasingly impacting the workplace and society. The 
provisions purport to be focused on preventing the forced transfer of 
software secrets as a condition for market access, but the strong, 
binding source code and algorithm protections pose significant 
challenges for effective government oversight.\55\
---------------------------------------------------------------------------
    \55\ Slok-Wodkowska, Magdalena and Joanna Mazur. (Slok-Wodkowska 
and Mazur). ``Secrecy by Default: How Regional Trade Agreements Reshape 
Protection of Source Code.'' Journal of International Economic Law. 
Vol. 25. 2022 at 107 (https://academic.oup.com/jiel/article/25/1/91/
6534278).

    Source code is the description of the steps or actions a computer 
program takes to perform its functions. Software source code is often 
``black box'' technology that is not transparent to software consumers, 
meaning even the companies that buy and deploy these programs do not 
know how they work. These source codes and algorithms are also the 
recipe for how companies extract and commodify personal data and 
---------------------------------------------------------------------------
increasingly govern the workplace and oversee workers.

    There are many legitimate policy reasons for government authorities 
to examine source codes and algorithms. For example, financial 
regulators might want to access source codes and trading algorithms to 
prevent high-frequency securities trading from engaging in market 
manipulation.\56\ Environmental regulators should be able to determine 
if pollution-evasion software facilitates increased emissions, as was 
the case with the Volkswagen diesel emissions fraud.\57\
---------------------------------------------------------------------------
    \56\ Busch, Danny. ``MiFID II: Regulating high frequency trading, 
other forms of algorithmic trading and direct market access.'' Law and 
Financial Markets Review. Vol. 10, Iss. 2. 2016 (https://
www.tandfonline.com/doi/full/10.1080/17521440.2016.1200333).
    \57\ Dwyer, Jim. ``Volkswagen's Diesel Fraud Makes Critic of Secret 
Code a Prophet.'' New York Times. September 22, 2015 (https://
www.nytimes.com/2015/09/23/nyregion/volkswagens-diesel-fraud-makes-
critic-of-secret-code-a-prophet.html).

    Ambassador Katherine Tai stated that digital trade provisions need 
to provide policy space to address ``artificial intelligence in a way 
that safeguards economic security for workers.''\58\ But the current 
digital trade provisions create substantial barriers to governments 
accessing source code and algorithms to protect workers and enforce 
labor laws, protect privacy, enforce civil rights laws and prohibit 
discrimination, safeguard consumers, police anticompetitive conduct, 
and to pursue other legitimate public policy goals.
---------------------------------------------------------------------------
    \58\ Ambassador Tai. 2021 (https://ustr.gov/about-us/policy-
offices/press-office/speeches-and-remarks/2021/november/remarks-
ambassador-katherine-tai-digital-trade-georgetown-university-law-
center-virtual-conference).

    Digital trade source code and algorithm secrecy provisions 
constrain legitimate government oversight: The USMCA and U.S.-Japan 
source code provisions impose broad prohibitions on necessary 
government oversight and lock in the current weak regulatory oversight 
of algorithmic management in the workplace leaving workers and people 
unprotected from the excesses of digitization. These agreements 
prohibit countries from requiring ``the transfer of, or access to, a 
source code of software [. . .] or an algorithm expressed in that 
source code'' as a condition of distributing or selling that 
product.\59\ The USMCA definition of algorithm (a ``defined sequence of 
steps taken to solve a problem or obtain a result''\60\) might preclude 
governments from accessing even a description of what data the source 
code uses, how the data is evaluated, and how the source code 
operates.\61\ The source code provisions shield technology companies 
and employers from government efforts to monitor and access source 
codes and algorithms even to achieve needed policy goals to protect the 
public.
---------------------------------------------------------------------------
    \59\ USMCA Art. 19.16.1; U.S.-Japan Art. 17.
    \60\ USMCA Art. 19.1; U.S.-Japan Art. 1.
    \61\ Slok-Wodkowska and Mazur. 2022 at 98 (https://
academic.oup.com/jiel/article/25/1/91/6534278).

    The existing digital agreements provide a narrow exception that 
allows government oversight ``for a specific investigation, inspection, 
examination, enforcement action, or judicial proceeding.''\62\ The 
case-by-case exemption for specific enforcement actions precludes 
broader, industry-wide evaluations of big tech to curb the harmful 
impact of algorithms, artificial intelligence, and machine learning on 
workers and people.
---------------------------------------------------------------------------
    \62\ USMCA Art. 19.16.2; U.S.-Japan Art. 17.

    The specific investigation clause also leaves it unclear how 
governments could initiate an investigation into, for example, 
employment discrimination and artificial 
intelligence-driven management software, without first having the broad 
authority to conduct an initial review of source codes to understand 
how they function and what their impacts are in the workplace.\63\
---------------------------------------------------------------------------
    \63\ McCann. 2019 at 15 (https://www.ituc-csi.org/IMG/pdf/
digital_chapters_and_the_impact_
on_labour_en.pdf).

    Digital source code and algorithm provisions could prevent the 
protection of workers from the excesses of algorithmic management: 
Employers are increasingly using artificial intelligence and other 
software automation applications to screen potential workers, assign 
tasks, press workers to be more productive, set shift schedules and pay 
rates, and discipline and terminate workers.\64\ Women, people of 
color, and immigrants are more likely to be employed in lower-wage 
workplaces where they can bear the brunt of algorithmic management and 
its potentially embedded racial and social biases.\65\ These trends 
increased during the pandemic shift to remote and hybrid work.\66\
---------------------------------------------------------------------------
    \64\ AI NOW Institute. ``2019 Report.'' December 2019 at 10 
(https://ainowinstitute.org/AI_Now_2019_Report.pdf).
    \65\ Bernhardt, Kresge and Suliman. 2021 at 2 (https://
laborcenter.berkeley.edu/data-algorithms-at-work/).
    \66\ Mearian, Lucas. ``The rise of digital bosses: They can hire 
you--and fire you.'' Computerworld. January 6, 2022 (https://
www.computerworld.com/article/3646234/the-rise-of-ai-based-managers-
they-now-play-a-big-role-in-hiring-training-and-firing.html); Finnegan, 
Matthew. ``EU `gig worker' rules look to rein in algorithmic 
management.'' Computerworld. December 15, 2021 (https://
www.computerworld.com/article/3644462/eu-gig-worker-rules-look-to-rein-
in-algorithmic-management.html).

    These automated workplace systems harm workers. A 2021 review of 45 
studies on algorithmic management found that more than 90 percent of 
them highlighted the negative impacts on workers, from de-skilling and 
task variety, lower worker autonomy and increased workplace control, 
and increased work intensity and job insecurity.\67\ Algorithmic 
management software are ``black box'' unaccountable systems that hide 
what data is relied upon and how the data is used to make decisions. 
The lack of transparency can obscure the harms which are likely to 
proliferate as these technologies become more widely implemented.
---------------------------------------------------------------------------
    \67\ Parent-Rocheleau, Xavier and Sharon K. Parker. ``Algorithms as 
work designers: How algorithmic management influences the design of 
jobs.'' Human Resource Management Review. May 2021 (https://
www.sciencedirect.com/science/article/abs/pii/S1053482221000176?via%3Di
hub).

    The digital trade source code and algorithm provisions could make 
it harder for governments to protect workers from unfair and illegal 
labor practices, to enforce current law, or to address emerging worker 
---------------------------------------------------------------------------
protection issues, including:

          Enforcing workplace safety laws against productivity-
        prodding algorithmic management that can increase injury rates: 
        Workplace surveillance and algorithmic management can impose 
        productivity targets that can lead to workplace injuries. 
        Amazon warehouse workers are monitored by artificial 
        intelligence-enhanced security cameras and handheld package 
        scanners that track worker movements and evaluate work speed 
        and can even terminate workers based on data collected on 
        workplace productivity metrics.\68\ Workers believe that 
        maintaining a high package pick rate is essential to getting 
        permanent or better positions, creating strong incentives to 
        increase work intensity.\69\ Workers have been disciplined and 
        even fired for failing to hit pick-rate productivity 
        targets.\70\ Amazon's warehouse worker productivity programs 
        have ratcheted up workloads and work speed and are associated 
        with the company's injury rate that is three times the national 
        average, with serious injury rates five times the national 
        average.\71\ The Occupational Safety and Health Administration 
        should be able to assess the extent that algorithmic 
        productivity software is increasing workplace injuries.
---------------------------------------------------------------------------
    \68\ Constantz, Jo. (Constanz). `` `They Were Spying on Us': 
Amazon, Walmart, Use Surveillance Technology to Bust Unions.'' 
Newsweek. December 13, 2021 (https://www.newsweek.com/they-were-spying-
us-amazon-walmart-use-surveillance-technology-bust-unions-1658603); 
Wood, Alex J. (Wood). European Commission. Joint Research Center. 
``Algorithmic Management: Consequences for Work Organisation and 
Working Conditions.'' JCR Working Paper No. 124874. 2021 at 8 to 9 
(https://joint-research-centre.ec.europa.eu/system/files/2021-05/
jrc124874.pdf).
    \69\ Wood. 2021 at 7 (https://joint-research-centre.ec.europa.eu/
system/files/2021-05/jrc1248
74.pdf).
    \70\ Dastin, Jeffrey. ``Amazon issued 13,000 disciplinary notices 
at a single U.S. warehouse.'' Reuters. July 12, 2022 (https://
www.reuters.com/technology/amazon-issued-13000-disciplinary-notices-
single-us-warehouse-2022-07-12/).
    \71\ Athena Coalition. ``Packaging Pain: Workplace Injuries in 
Amazon's Empire.'' January 10, 2020 (https://www.nelp.org/publication/
packaging-pain-workplace-injuries-amazons-empire/).

          Algorithmic surveillance of workers personal social media 
        presence stifles right to form unions: Some employers are 
        snooping on workers' social media accounts to find unfavorable 
        opinions of the company as well as determine worker discontent 
        and union sympathies. About half of large employers use 
        software to analyze the text of employee social media posts, 
        according to a 2018 survey.\72\ A 2022 memo from the National 
        Labor Relations Board general counsel stated that ``omnipresent 
        surveillance and other algorithmic-management tools'' can 
        ``significantly impair'' the right to form or join unions.\73\ 
        There are many examples of anti-union worker surveillance. 
        Amazon's Whole Foods has used heat maps and predictive 
        algorithms to track locations that were estimated to be high-
        risk for union activity.\74\ McDonalds has operated an 
        intelligence team that monitored the Fight for $15 organizers, 
        which McDonalds employees were active in the campaign, and 
        which workers and locations were interested in forming 
        unions.\75\ The meal kit company HelloFresh used software to 
        mine social media posts on Twitter and Instagram looking for 
        content about unionization efforts and identify whether the 
        posts belonged to an employee.\76\ The Labor Department should 
        be able to determine whether this kind of algorithmic 
        surveillance violates the right to form or join unions.
---------------------------------------------------------------------------
    \72\ Gartner. ``The Future of Employee Monitoring.'' May 3, 2019 
(https://www.gartner.com/smarterwithgartner/the-future-of-employee-
monitoring).
    \73\ Abruzzo, Jennifer A. General Counsel. National Labor Relations 
Board. Office of the General Counsel. ``Electronic Monitoring and 
Algorithmic Management of Employees Interfering with the Exercise of 
Section 7 Rights.'' Memorandum No. GC-23-02. October 31, 2022 at 1 
(https://apps.nlrb.gov/link/document.aspx/09031d45838de7e0).
    \74\ Constantz. December 13, 2021 (https://www.newsweek.com/they-
were-spying-us-amazon-walmart-use-surveillance-technology-bust-unions-
1658603).
    \75\ Franceshi-Bicchierai, Lorenzo and Lauren Kaori Gurley. 
``McDonald's Secretive Intel Team Spies on `Fight for $15' Workers, 
Internal Documents Show.'' Vice. February 24, 2021 (https://
www.vice.com/en/article/pkdkz9/mcdonalds-secretive-intel-team-spies-on-
fight-for-15-workers).
    \76\ Kaori Gurley, Lauren. ``Internal Slacks Show HelloFresh Is 
Controlling Talk of Unionization.'' Vice. November 19, 2021 (https://
www.vice.com/en/article/n7nb9w/internal-slacks-show-hellofresh-is-
controlling-talk-of-unionization).

          Automated scheduling software can violate labor law and 
        shortchange workers: Retail companies use algorithms to 
        automate just-in-time shift schedules to minimize costs that 
        often leave workers without stable work schedules that reduce 
        economic stability and disrupt family life.\77\ Half of retail 
        workers face uncertain scheduling that compounds the economic 
        precarity from low wages.\78\ Retail workers under algorithmic 
        scheduling can receive shorter hours, on-call shifts that never 
        materialize, or shift assignments without prior notice.\79\ The 
        adoption of one algorithmic scheduling software can convert 
        full-time workers into part-time workers, ending their health-
        care coverage.\80\ Algorithmic scheduling software can also 
        encourage managers attempting to meet productivity targets to 
        press workers to work off the clock, skip breaks, or 
        misattribute paid sick leave that can amount to wage theft.\81\ 
        Government authorities need to be able to access source code to 
        assess how algorithmic scheduling can negatively affect workers 
        and potentially violate wage and hour law.
---------------------------------------------------------------------------
    \77\ Finnegan, Matthew. ``EU `gig worker' rules look to rein in 
algorithmic management.'' Computerworld. December 15, 2021 (https://
www.computerworld.com/article/3644462/eu-gig-worker-rules-look-to-rein-
in-algorithmic-management.html); Wykstra, Stephani. ``The movement to 
make workers' schedules more humane.'' Vox. November 5, 2019 (https://
www.vox.com/future-perfect/2019/10/15/20910297/fair-workweek-laws-
unpredictable-scheduling-retail-restaurants).
    \78\ Schneider, Daniel and Kristen Harknett. University of 
California Berkeley and Aspen Institute. ``Income Volatility in the 
Service Sector: Contours, Causes, and Consequences.'' July 2017 at 2 
(http://www.aspenepic.org/wp-content/uploads/2017/07/
ASPEN_RESEARCH_INCOME_
VOLATILITY_PRINT.pdf).
    \79\ Kaplap, Esther. (Kaplap). ``The Spy Who Fired Me.'' Harper's 
Magazine. March 2015 (https://harpers.org/archive/2015/03/the-spy-who-
fired-me/).
    \80\ Wood. 2021 at 4 (https://joint-research-centre.ec.europa.eu/
system/files/2021-05/jrc124874.
pdf).
    \81\ Kaplap. March 2015 (https://harpers.org/archive/2015/03/the-
spy-who-fired-me/).

          Artificial intelligence recruiting and hiring tools run 
        afoul of civil rights and employment law: Employers are 
        increasingly using artificial intelligence-
        driven tools to recruit, screen, rank, and assess candidates' 
        interview performances which in turn is affecting prospective 
        workers' chances of getting hired.\82\ More than two-thirds of 
        human resources leaders and recruiters were using artificial 
        intelligence tools to automate recruiting and hiring.\83\ These 
        systems can entrench the existing subjective preferences that 
        perpetuate racial and social biases that contribute to 
        occupational segregation and racial, gender, and economic 
        inequality.\84\ The data-driven systems purport to be objective 
        and logical but often have built in biases and rely on faulty 
        data inputs that amplify the detrimental impacts on 
        workers.\85\ Some automated applicant screening processes have 
        made it harder for people with non-white sounding or foreign 
        sounding names, women, older people, or people with 
        disabilities to be interviewed and get a chance at a job.\86\ 
        As evidence mounts, the discriminatory impact of these 
        artificial intelligence screening and hiring processes are 
        being challenged as potential violations of civil rights and 
        antidiscrimination laws.\87\
---------------------------------------------------------------------------
    \82\ Yang. 2020 at 3 and 4 (https://edworkforce.house.gov/download/
jenny-r-yang/default.aspx).
    \83\ Ajunwa, Ifeoma. (Ajunwa). Cornell University Industrial and 
Labor Relations School. Statement before the Subcommittee on Civil 
Rights and Human Services. Committee on Education and Labor. U.S. House 
of Representatives. ``The Future of Work: Protecting Workers' Civil 
Rights in the Digital Age.'' February 5, 2020 at 3 (https://
edworkforce.house.gov/download/ifeoma-anunwa/default.aspx).
    \84\ Yang. 2020 at 4 to 5 (https://edworkforce.house.gov/download/
jenny-r-yang/default.aspx).
    \85\ Ibid. at 1.
    \86\ Ajunwa. 2020 at 5 to 6 (https://edworkforce.house.gov/
download/ifeoma-anunwa/default.aspx); Yang. 2020 at 4 (https://
edworkforce.house.gov/download/jenny-r-yang/default.aspx).
    \87\ Opfer, Chris. ``AI Hiring Could Mean Robot Discrimination Will 
Head to Courts.'' Bloomberg Law. November 12, 2019 (https://
news.bloomberglaw.com/daily-labor-report/ai-hiring-could-mean-robot-
discrimination-will-head-to-courts).

          Algorithmic management of gig workers suppresses earnings: 
        Algorithmic management of gig workers erodes workers' economic 
        security by assigning tasks or suppressing earnings through 
        pricing algorithms that can overwork and underpay gig workers. 
        Gig drivers are often paid under algorithmic rates that use 
        secret calculations to set fares and charges that have tended 
        to suppress earnings.\88\ The Washington Post reported that 
        changes to pay rate algorithms pushed earnings down by as much 
        as 50 percent for the same number of hours and trips.\89\ 
        Platform companies also use algorithms to discipline or block 
        gig workers from jobs. Algorithms can wrongly downgrade workers 
        or suspend their accounts without disclosing the alleged 
        misdeeds or providing a remedy.\90\ These platform 
        ``deactivations'' amount to short-term termination by algorithm 
        that reduces earnings.\91\ The combination of platform 
        algorithmic evaluation and discipline pushes workers to work 
        intensively for long hours without a break.\92\
---------------------------------------------------------------------------
    \88\ Feliz Leon, Luis. ``How Gig Workers in Canada Are Fighting for 
Employee Rights.'' The Real News. March 8, 2022 (https://
therealnews.com/how-gig-workers-in-canada-are-fighting-for-employee-
rights).
    \89\ Bhattarai, Abha. `` `Don't game my paycheck': Delivery workers 
say they're being squeezed by ever-changing algorithms.'' Washington 
Post. November 7, 2019 (https://www.
washingtonpost.com/business/2019/11/07/dont-game-my-paycheck-delivery-
workers-say-theyre-being-squeezed-by-ever-changing-algorithms/).
    \90\ Murgia, Madhumita. ``Workers demand gig economy companies 
explain their algorithms.'' Financial Times. December 13, 2021 (https:/
/www.ft.com/content/95e7f150-b0f9-4602-8e5d-76a138b59851).
    \91\ Kaori Gurley, Lauren. ``Workers Need to Unionize to Protect 
Themselves From Algorithmic Bosses.'' Vice. December 19, 2019 (https://
www.vice.com/en/article/epg4b4/workers-need-to-unionize-to-protect-
themselves-from-algorithmic-bosses).
    \92\ Wood. 2021 at 10 (https://joint-research-centre.ec.europa.eu/
system/files/2021-05/jrc124874.pdf).

          Automated surveillance of workers undermines privacy and 
        workers' rights: Employers are increasingly deploying advanced 
        surveillance to monitor workers on the job and even outside the 
        workplace.\93\ The declining cost of worker surveillance has 
        been supercharged by artificial intelligence systems that have 
        made surveillance more prevalent and includes digital cameras, 
        productivity monitoring applications, key card and RFID 
        tracking, wearable electronic monitors, geolocating and heat 
        sensory tracking, keystroke logging, WIFI network logs, 
        wellness programs, biometrics, and monitoring workers' Internet 
        search and social media activity.\94\ This surveillance is 
        often unknown to workers and companies need not receive 
        workers' consent; the surveillance data is owned by the 
        employer which can share or sell this data without workers' 
        approval.\95\
---------------------------------------------------------------------------
    \93\ Ajunwa, Crawford, and Schultz. 2017 at 738 to 739 (https://
californialawreview.org/print/3-limitless-worker-surveillance/).
    \94\ Ibid.; Abril, Danielle. ``Your boss can monitor your 
activities without special software.'' Washington Post. October 7, 2022 
(https://www.washingtonpost.com/technology/2022/10/07/work-app-
surveillance/).
    \95\ Bernhardt, Kresge and Suliman. 2021 at 18 (https://
laborcenter.berkeley.edu/data-algorithms-at-work/).

    A worker-centered digital trade agenda must provide meaningful 
public policy space to address the impacts of automated decision-making 
and algorithmic management on workers and society: The rise of 
automated decision-making and artificial intelligence-driven algorithms 
poses new challenges to enforce current laws and to address emerging 
and novel issues that affect workers and society. The digital trade 
source code and algorithm provisions could make it harder for 
government to take decisive steps to address existing and new problems 
driven by these technologies. A worker-centered trade agenda would 
provide sufficient policy space to address these technological 
challenges. This should include addressing the corrosive effect that 
social media algorithms are having on democracy, civil discourse, and 
the mental health of young people as well as the monopolistic power 
exerted by platform and e-commerce behemoths. The public policy space 
---------------------------------------------------------------------------
to protect workers should include, at a minimum:

          Meaningful oversight of source codes and algorithms to 
        ensure compliance with labor and employment laws: Governments 
        must be able to examine corporate source codes, algorithms, and 
        other tools of ``AI management'' to fully understand their 
        impacts and ensure they are compliant with existing labor and 
        employment laws. In addition, it should facilitate 
        intergovernmental cooperation to address the risk that AI 
        management software is undermining worker safety, wage and hour 
        laws, and anti-discrimination laws.

          Policy space to address emerging threats to workers' 
        privacy, including employer use of workplace surveillance 
        software: The digital trade data provisions only protect the 
        personal data of the ``users of digital trade,''\96\ which in 
        the context of worker privacy is likely the employer that 
        collects and owns the data and information collected by work-
        site surveillance. Governments must have the policy space to 
        take measures to address digital workplace surveillance and 
        other emerging threats to workers' privacy.
---------------------------------------------------------------------------
    \96\ USMCA Art. 19.8.2; U.S.-Japan Art. 15.1.

          Addressing abusive employment practices in the technology 
        sector: Large technology and platform companies have promoted 
        an exploitative employment model based on rampant employment 
        misclassification and the outsourcing of core job functions. 
        Platform gig workers are employed as precarious contractors 
        without benefits, sick leave, guaranteed minimum wages, or the 
        ability to form unions and bargain collectively. A worker-
        centered digital trade approach would require big technology 
        companies to clean up the labor abuses in their own operations 
        and their digital supply chains, including the ghost workers in 
        the developing world. 
        
 iv. other digital provisions present challenges to workers and society 
 
    The existing digital trade provisions grant broad rights to 
technology firms with limited protections for people and workers. 
Beyond the cross-border data and source code provisions, workers can be 
negatively impacted by the failure to protect copyrighted material and 
the weak protections against cyberattacks.

    Digital trade provisions fail to protect and promote the economic 
security of creative professionals in the U.S. motion picture, 
television, and music industries: The digital trade provisions shield 
platform companies from responsibility for the third-party content 
posted on their networks that leaves workers in the creative industries 
vulnerable to copyright infringement that undermines their economic 
security. The USMCA and U.S.-Japan agreements both absolve suppliers of 
interactive computer services from ``liability for harms related to 
information stored, processed, transmitted, distributed, or made 
available by the service.''\97\ This language mirrors the Digital 
Millennium Copyright Act language that excludes Internet service 
providers from being held responsible as a publisher of content on 
their networks.\98\ This absolves platforms and social media companies 
from responsibility from users promoting hate speech,\99\ political 
disinformation,\100\ or other content that has increasingly been 
associated with negative mental health impacts.\101\
---------------------------------------------------------------------------
    \97\ USMCA Art. 19.17.2; U.S.-Japan Art. 18.2.
    \98\ The Digital Millennium Copyright Act of 1998. 17 U.S.C. 
Sec. 512.
    \99\ Castano-Pulgarin, Sergio Andres et al. ``Internet, social 
media and online hate speech. Systemic review.'' Aggression and Violent 
Behavior. Vol 58. 2021 (https://prohic.nl/wp-content/uploads/2021/05/
213-17mei2021-InternetOnlineHateSpeechtSystematicReview.pdf). 
    \100\ Hiaeshutter-Rice, Dan, Sedona Chinn, and Kaiping Chen. 
``Platform Effects on Alternative Influencer Content: Understanding How 
Audiences and Channels Shape Misinformation Online.'' Frontiers in 
Political Science. May 31, 2021 (https://www.frontiersin.org/articles/
10.3389/fpos.2021.642394/full).
    \101\ Twenge, Jean M. et al. ``Increases in Depressive Symptoms, 
Suicide-Related Outcomes, and Suicide Rates Among U.S. Adolescents 
After 2010 and Links to Increased New Media Screen Time.'' Clinical 
Psychological Science. Vol. 6, Iss. 1. November 14, 2017 (https://
journals.sagepub.com/doi/10.1177/2167702617723376).

    These provisions also harm the more than 4 million people who work 
in the motion picture, television, and music industries. Many of these 
workers collectively bargain for payments and contributions to their 
health insurance and pension plans that are directly tied to the sales 
and licensing of the copyrighted works that they help create.\102\ This 
content contributes more than $500 billion to the U.S. economy annually 
and generates a trade surplus.\103\ Stolen or unlicensed use of 
copyrighted content on digital platforms directly harms these workers, 
severely diminishing the payment and benefit contributions they have 
bargained for and the ability of their employers to finance future 
content creation. Digital trade policy must aggressively address the 
stolen or unlicensed use of copyrighted content on digital platforms 
that directly harms these workers.
---------------------------------------------------------------------------
    \102\ AFL-CIO. Department for Professional Employees. [Fact sheet]. 
``Creative Professionals Depend on Strong Copyright Protection.'' 
October 4, 2021 (https://static1.squarespace.com/static/
5d10ef48024ce300010f0f0c/t/615b42671fca1314b3ae3048/1633370727780/
Copyright+one+
pager.pdf).
    \103\ AFL-CIO. Department for Professional Employees. [Fact sheet]. 
``Intellectual Property Theft: A Threat to Working People and the 
Economy.'' October 25, 2021 (https://static1.
squarespace.com/static/5d10ef48024ce300010f0f0c/t/
6177099c283f42475e62bc77/16351911
96820/2021+IP+theft+fact+sheet.pdf).

    Protect workers and unions from cyber-crime by both state and 
private actors: The USMCA and U.S.-Japan digital agreements recognize 
the importance of protecting networks and users from cyber-crimes to 
prevent the erosion of confidence in digital trade.\104\ Neither 
provision acknowledges the impact on workers, people, unions, or other 
organizations that may be harmed by cyber-breaches, malware, 
ransomware, or other cyber-crimes. The digital trade provisions 
discourage regulatory approaches to bolster cybersecurity and 
explicitly promote voluntary ``risk-based approaches that rely on 
consensus-based standard and risk management best practices'' to 
protect against cyber-crimes and respond to cybersecurity events.\105\
---------------------------------------------------------------------------
    \104\ USMCA Art. 19.15.1; U.S.-Japan Art. 15.1.
    \105\ USMCA Art. 19.15.2; U.S.-Japan Art. 1.2.

    Workers and unions can be significantly impacted by cyber-breaches 
and ransomware attacks that harm unions, expose workers' personal data, 
and affect their earnings if employers are temporarily shut down. In 
2014, the United States charged members of the Chinese military with 
hacking U.S.-based companies and the United Steelworkers.\106\ In 2019, 
the International Brotherhood of Teamsters was subject to a ransomware 
attack demanding $2.9 million that forced the union to rebuild its 
computer servers.\107\ Cyberattacks against employers can leave workers 
vulnerable to unexpected shutdowns and shift cancellations, as happened 
to unionized meatpacking workers in 2021.\108\ The United Food and 
Commercial Workers International Union was able to secure pay for 
workers that lost shifts to the cyber-attack, but these types of 
attacks could cost workers' shifts and income if employers are forced 
to idle facilities or business locations. A cyber-breach against an 
entertainment payroll company potentially exposed the personal 
information and bank accounts of Screen Actors Guild-American 
Federation of Television and Radio Artists members in 2014.\109\ 
Digital trade policy must strive to improve cybersecurity and create a 
common enforcement agenda to hold the criminals and companies that 
facilitate these crimes accountable.
---------------------------------------------------------------------------
    \106\ Miller, John. W. ``Pittsburgh-Area Firms Allegedly Targeted 
by Hackers.'' Wall Street Journal. May 19, 2014 (https://www.wsj.com/
articles/SB10001424052702304422704579572273980
220140); U.S. Department of Justice. [Press release]. ``U.S. Charges 
Five Chinese Military Hackers for Cyber Espionage Against U.S. 
Corporations and a Labor Organization for Commercial Advantage.'' May 
19, 2014 (https://www.justice.gov/usao-wdpa/pr/us-charges-five-chinese-
military-hackers-cyber-espionage-against-us-corporations-and).
    \107\ Allen, Jonathan and Kevin Collier. ``Ransomware attack hits 
Teamsters in 2019--but they refused to pay.'' NBC News. June 11, 2021 
(https://www.nbcnews.com/tech/security/ransom
ware-attack-hit-teamsters-2019-they-refused-pay-n1270461).
    \108\ ``Fallout and Blame: Ransomware Attack Against World's 
Largest Meat Producer.'' SecureWorld News. June 1, 2021 (https://
www.secureworld.io/industry-news/cyberattack-global-meat-producer).
    \109\ Raman, Jeffrey. ``Entertainment Payroll Firm Breached.'' 
BankINfo Security. December 4, 2014 (https://www.bankinfosecurity.com/
entertainment-payroll-firm-breached-a-7639); SAG-AFTRA. [Press 
release]. ``An Important Announcement About ART Payroll.'' December 2, 
2014 (https://www.sagaftra.org/important-announcement-about-art-
payroll).
---------------------------------------------------------------------------

                             v. conclusion 
                             
    As the Biden administration continues to remake U.S. trade policy, 
its ``worker-centered'' approach must extend to digital trade and the 
digital economy by placing the needs of workers, consumers, and society 
ahead of the interests of big technology companies.

    Too often, the debate over digital trade is framed as a binary 
choice between authoritarian digital censorship or the unregulated 
status quo that leaves big tech free to collect, control, and commodify 
workers and consumers' private data as they see fit. The labor movement 
rejects this false choice. Digital trade rules cannot grant broad 
powers to big tech and prevent governments from protecting workers from 
the downsides of the digital transformation of the economy.

    It is time for a strategic re-set on digital trade policy. The 
public, including workers and labor unions, must decide the rules of 
the road for technology in the workplace and society. There must be a 
new democratic, stakeholder-driven approach to data governance that 
confronts the negative impacts of digitization on workers, consumers, 
and society.

    The Biden administration's call for a worker-centered trade policy 
is a major opportunity to correct for this narrow, corporate approach 
to allow for broader policy space to protect personal data, strengthen 
economic security, protect domestic jobs, and tackle the downsides of 
the digital transition on workers, consumers, and society. As 
democracies seek to create a digital economy that is fair and 
inclusive, digital trade policy must also evolve to facilitate new 
forms of domestic and international regulation and oversight of the 
digital economy.

                                 ______
                                 

                             Communications

                               ----------                              


                        Center for Fiscal Equity
                      14448 Parkvale Road, Suite 6
                          Rockville, MD 20853
                      [email protected]

                    Statement of Michael G. Bindner

Chairman Carper and the Ranking Member Cornyn, thank you for the 
opportunity to submit these comments for the record to the Subcommittee 
on International Trade, Customs, and Global Competitiveness. These 
comments are in reaction to the submitted testimony, and would have 
dealt with the same issues, regardless, as evidenced by the amount of 
material reused from previous comments to both revenue committees and 
trade subcommittees.

That the Global South was ignored by the subcommittee and the witnesses 
is troubling. For these nations, the digital economy will include 
distance learning modalities. While the SpaceX Starlink constellation 
has been criticized as not being affordable for most people, a village 
or neighborhood could be given a shared link and server.

Distance learning could include STEM, more advanced language 
proficiency and a more realistic look at American civic culture in all 
of its gore. The way Black and Brown people are really treated may stem 
the drive to leave home for a life of low wage labor in America.

In June of this year, we highlighted the fact that the next labor 
market to be tapped is Africa. As Asian labor markets mature, 
capitalists will seek cheaper workers. American trade policy should 
step in to train workers before WalMart's supply chain arrives. From 
June, historically . . .

        . . . capitalist firms would set up factories in developing 
        nations with excess labor forces (usually due to modernization 
        of agriculture or rent seeking by landed elites) and pay the 
        workers as cheaply as possible. It is the messy way to 
        industrialize. It seems to work, but it carries human costs 
        while workers gather the leverage to organize and the power to 
        increase domestic demand by consumption. Both of these factors 
        increase wages.

        We need not be messy about assisting the Motherland on its road 
        to industrialization. As capitalism moves toward establishing a 
        foothold in Africa, our trade policy must be ready to insist on 
        the right of African workers to organize, partnered with the 
        American labor movement in helping them to do so. We can 
        partner with American colleges to establish campuses in sub-
        Saharan Africa so that their best and brightest need not come 
        to us. We can come to them.

        Technical assistance on employee ownership (which is still 
        emergent in the United States), as well as in the creation of 
        property rights for farmers, is essential. Finally, we can 
        assist Africa in creating commodity futures markets of their 
        own so that farmers can obtain working capital by selling 
        futures and decide whether it is in their interest to sell food 
        abroad. The natural progress toward industrialization is not 
        inevitable. It can move past exploitation without stopping 
        there.

The Ranking Member's opening statement is correct, the Administration 
should begin working on restarting a Trans-Pacific Partnership. It was 
ill-advised for Secretary Clinton to take it off the table in response 
to its rejection by the Stable Genius who pressed the issue, just to 
refresh all of our memories of why TPP was dropped.

Much of our supply chain difficulties come from the trade war started 
by the prior Administration, although the current administration does 
own its continued existence by not acting to reverse Trump's petulance. 
In June 2019, we characterized

        trade negotiations with China, Japan, the EU, and the UK 
        threatening tariffs have taken on the character of economic 
        gunboat diplomacy, but without the Navy. These occur because 
        the President is ill equipped by his background as a 
        businessman to work cooperatively, which is the essence of 
        governance in a free society. He has a freer hand in trade 
        negotiations. Sadly, his experience as a CEO has not served the 
        nation well. The modus operandi of most executives is to break 
        things in order to be seen fixing them. This must stop. The 
        public is not amused, including the Chamber of Commerce, 
        farmers and the stock and commodity markets.

In March of 2020, we stated that ``recent developments indicate that 
Amateur Hour at the White House over trade policy has ended. Our naked 
emperor has moved on to self-defense, allowing the adults to put things 
back together again.''

On the security front, the ``digital mercantilism'' of China is 
troubling, however, it will not last. The Party has backed down on its 
Zero COVID policy, but victory in the streets traditionally means that 
taking it to the streets has begun to work. It is a heady thing. There 
is no putting the genie back in the bottle. Not in China, not in Iran, 
not in post George Floyd America.

In each case, today's protesters and revolutionaries will become the 
backbone of the next revolution. For example, when the Civil Rights 
revolution made its way to the District of Columbia in 1968, it stayed 
to both end discrimination and move toward home rule. While most of 
that generation has retired or passed on, the District's delegate is 
still going strong.

Again, to repeat prior comments, ``China is still firmly under the 
control of their Communist Party and membership still has its 
privileges, but the entrepreneurial spirit unleashed there has morphed 
into revolution. Their AI industry is often with the support of 
American expatriates. It is now surpassing what we can do. Research has 
or will soon surpass American progress. China may soon begin talking 
about our problems in protecting intellectual property, which are 
numerous.''

Let us hope that our Expats also teach Democracy as well as they teach 
business.

Economic progress in China is not terribly different from the progress 
of economic and political freedom in the Global North of the Western 
World. While a Marxist revolution has never occurred in a Marxist 
state, a Marxian analysis (not the elevator speech that Stalin and Mao 
implemented), society moves forward in largely predictable ways.

Aristocracy (or Party) brings about industrialization under a 
capitalistic despotism, which includes militarism and imperialism. As 
the peasantry is forced into slave like conditions in urban factories, 
they soon acquire skills and savings. Eventually, they demand civil and 
union rights, which their capitalist masters resist until a consumer 
surplus is required to match the labor surplus, usually because 
production exceeds worker income.

Until the revolution occurs, and even after it does, current history 
has proven our digital vulnerability. It is simply unwise to keep the 
public Internet and the Internet of Technology on the same system.

When I was a cost analyst with the United States Air Force, we had a 
dedicated line from the Air Force Finance and Accounting System in 
Colorado Springs. This was before the world wide web, but was likely 
part of the single system. More recently, as a contract administrator 
at the Department of Energy, we worked out a deal with our providers to 
allow Verizon to keep control of connections within buildings, while 
competing what is called ``pipe'' from buildings to data centers.

To create a TechNet, it is better to keep physical connections separate 
rather than trying to program fire walls. In other places, we have 
proposed creating a network of overhead power and digital connectivity 
for electric vehicles, ending the need to further develop lithium ion 
batteries or self-driving cars. Such a system must separate system 
communication with Internet communication so that the system cannot be 
hacked, all the while letting passengers watch CNN, Fox News or Netflix 
on the way to their destinations. This infrastructure would also 
provide power to homes, factories and offices.

The next issue is the international use of Big Data, including the one-
sided treatment in China where they see ours, but do not show theirs. I 
will further discuss issues of data privacy below, when discussing 
employee ownership as an alternative to international labor agreements. 
For now, it is important to make a distinction.

Some data is intellectual property to be used in creating a product or 
service. Other digital technology is the product, for example, the 
reading of an X-Ray by a South Asian doctor working from home. This 
work is for pay, so the question is the taxation of internationally 
provided services generally, as well as physical products. Readers 
familiar with the Center's previous comments know where I am taking 
this from here on out.

The United States, in refusing to adopt consumption taxes, has cut off 
its nose to spite its face. Under the credit invoice VAT regime, 
imported goods and services would lose their VAT burden for what they 
export, with the importing nation adding their own VAT at import. Doing 
so ends the permanent disadvantage faced by American workers and small 
businesses and eliminates the ability of our new Billionaire Class to 
borrow against their fortunes to avoid taxation while consuming high-
end goods and creating new ventures.

This should become an electoral issue, or rather, a campaign finance 
issue. It would evaporate with public campaign finance. Current 
fundraising is the biggest obstacle to real tax reform. Until a 
candidate focuses on tax reform the way that Governor Huckabee senior 
focused on the Fair Tax, bipartisan corruption will continue and the 
working class will continue to lose ground.

As usual, we have included an attachment on how trade would occur in a 
VAT-based system. Goods and services taxes would fund general 
government and what was the employer contribution to Social Security 
(which would from then on be credited on an equal dollar basis rather 
than a dollar-for-dollar match). A subtraction VAT on employer labor 
and profit will fund services to employees and their families (health 
care and the child tax credit federally, education and social welfare 
at the state level).

As part of American entry into modern taxation as practiced by the rest 
of the Organization for Economic Cooperation and Development, we can 
negotiate which taxes are used to fund which activities on a global 
basis. No member state should try to push all of its social costs onto 
importers because some of these costs benefit worker families--which is 
part of doing business in a just economy. The importer benefits from 
such systems and should pay for them. Discretionary spending and 
retirement taxation, however, can be shed at the border.

To make sure that taxes are collected in the digital economy when due, 
especially regarding the use of Big Data in marketing and 
manufacturing, those who purchase or use it must be required to buy a 
license to do so. This will allow for investigation of how such data is 
used or misused and whether it is taxed correctly. In a VAT based 
system, imported data that arrives as a product rather than a component 
would be taxed on entry, but not as enterprise data.

Corporate income taxes would be abolished in this system. This will end 
all of the concerns about taxing intellectual property within an 
enterprise. As long as goods and services are taxed appropriately when 
consumed (both by invoice and subtraction VAT), the United States can 
be agnostic on where patents are held. The recently enacted corporate 
minimum tax would thus be repealed. Sadly, the current opposition was 
party politics and ignored the fact that this tax was enacted as part 
of a larger agreement by the OECD. We signed it, we ratified it and 
repealing it must be international.

Please see the second attachment regarding our Asset Value Added Tax 
proposal, which comes from our usual tax reform attachment and comments 
provided to the revenue committees in their consideration of the 
Treasury Department Budget earlier this year. Note that there have been 
updates to proposed rates based on recent analyses and the need for 
compromise due to the recent election.

Instead of negotiated minimum tax agreements in the OECD, agreements 
would be negotiated on Asset VAT rates. These should be uniform to 
prevent market shopping and revenues could be dedicated to such items 
as common defense (including the United States Navy, etc.) and 
international debt forgiveness (to square the circle drawn in the first 
section on Africa).

The AFL-CIO's comments are not to be taken lightly, although playing 
catch up does not seem to be working well. It is time to shift from 
adversarial bargaining to the kind of representation that would take 
place where unions and professional organizations in a company hold the 
voting proxies of their members at shareholder meetings of employee-
owned companies. Such meetings will replace unitary boards of 
directors.

Our second and third attachments from June 2022 and July 2019 provide 
detail on the advantages of employee ownership, both here and abroad. 
In brief, employee-owned firms would expand their ownership structures 
to overseas subsidiaries and to its current supply chain. Transfer 
pricing would be based on a common market basket of employee-purchased 
goods rather than currency arbitrage.

This would likely require some modification to laws on both trade and 
fiduciary rules. Taft-Hartley limitations on how much of an employing 
firm a union pension fund can own must also be revised. Zero rating 
asset VAT sales to broad based ESOP and cooperative enterprises is also 
necessary to end cross-border worker exploitation.

Aside from retention of capitalistic management structures, rather than 
cooperative ones, a big reason that ESOPs have not been more widely 
sought is the lack of additional cash and prizes. In the United States, 
such firms rarely challenge the implicit assumption that household 
consumption and finance is left to the household rather than provided 
cooperatively. (This is not the case with some overseas trade unions or 
cooperatives such as Mondragon).

Not asking the question of whether common consumption, housing and 
finance systems should be considered is its own answer. If the question 
were actually asked, after informing employee owners of what is 
possible, the free market will have workers flock to these firms--
especially in our post-COVID, broken supply chain world. If your 
company sells you housing where you can grow your own vegetables and 
lab-grown protein, prices never go up.

One advantage of employee and cooperative ownership would deal with the 
problem of ``Big Data.'' Employee-controlled financial and consumption 
systems will not sell their data or let their suppliers do so. Solving 
these issues will also defuse our constant arguments on economics and 
on which party is ``winning.'' We can begin to live together again as 
neighbors and friends, rather than being manipulated by an increasing 
hostile social media space.

Thank you for this opportunity to share these ideas with the committee. 
As always, we are available to meet with members and staff or to 
provide direct testimony on any topic you wish.

Attachment--Trade Policy and Value-Added Taxes

Consumption taxes could have a big impact on workers, industry and 
consumers. Enacting an I-VAT is far superior to a tariff. The more 
government costs are loaded onto an I-VAT the better. If the employer 
portion of Old-Age and Survivors Insurance, as well as all of 
disability and hospital insurance are decoupled from income and 
credited equally and personal retirement accounts are not used, there 
is no reason not to load them onto an I-VAT. This tax is zero rated at 
export and fully burdens imports.

Seen another way, to not put as much taxation into VAT as possible is 
to enact an unconstitutional export tax. Adopting an I-VAT is superior 
to its weak sister, the Destination Based Cash Flow Tax that was 
contemplated for inclusion in the TCJA. It would have run afoul of WTO 
rules on taxing corporate income. I-VAT, which taxes both labor and 
profit, does not.

The second tax applicable to trade is a Subtraction VAT or S-VAT. This 
tax is designed to benefit the families of workers through direct 
subsidies, such as an enlarged child tax credit, or indirect subsidies 
used by employers to provide health insurance or tuition reimbursement, 
even including direct medical care and elementary school tuition. As 
such, S-VAT cannot be border adjustable. Doing so would take away 
needed family benefits. As such, it is really part of compensation. 
While we could run all compensation through the public sector.

The S-VAT could have a huge impact on long term trade policy, probably 
much more than trade treaties, if one of the deductions from the tax is 
purchase of employer voting stock (in equal dollar amounts for each 
worker). Over a fairly short period of time, much of American industry, 
if not employee-owned outright (and there are other policies to 
accelerate this, like ESOP conversion) will give workers enough of a 
share to greatly impact wages, management hiring and compensation and 
dealing with overseas subsidiaries and the supply chain--as well as 
impacting certain legal provisions that limit the fiduciary impact of 
management decision to improving short-term profitability (at least 
that is the excuse managers give for not privileging job retention).

Employee owners will find it in their own interest to give their 
overseas subsidiaries and their supply chain's employees the same deal 
that they get as far as employee ownership plus an equivalent standard 
of living. The same pay is not necessary, currency markets will adjust 
once worker standards of living rise.

Over time, ownership will change the economies of the nations we trade 
with, as working in employee-owned companies will become the market 
preference and force other firms to adopt similar policies (in much the 
same way that, even without a tax benefit for purchasing stock, 
employee-owned companies that become more democratic or even more 
socialistic, will force all other employers to adopt similar measures 
to compete for the best workers and professionals).

In the long run, trade will no longer be an issue. Internal company 
dynamics will replace the need for trade agreements as capitalists lose 
the ability to pit the interest of one nation's workers against the 
others. This approach is also the most effective way to deal with the 
advance of robotics. If the workers own the robots, wages are swapped 
for profits with the profits going where they will enhance consumption 
without such devices as a guaranteed income.

Asset VAT--The President's Fiscal Year 2023 Budget, June 7, 2022

There are two debates in tax policy: how we tax salaries and how we tax 
assets (returns, gains and inheritances). Shoving too much into the 
Personal Income Tax mainly benefits the wealthy because it subsidizes 
losses by allowing investors to not pay tax on higher salaries with 
malice aforethought.

Asset Value-Added Tax (A-VAT) is a replacement for capital gains taxes 
and the estate tax. It will apply to asset sales, exercised options, 
inherited and gifted assets and the profits from short sales. Tax 
payments for option exercises, IPOs, inherited, gifted and donated 
assets will be marked to market, with prior tax payments for that asset 
eliminated so that the seller gets no benefit from them. In this 
perspective, it is the owner's increase in value that is taxed.

As with any sale of liquid or real assets, sales to a qualified broad-
based Employee Stock Ownership Plan will be tax free. This change would 
be counted as a tax cut, giving investors in public stock who make such 
sales the same tax benefit as those who sell private stock.

This tax will end Tax Gap issues owed by high income individuals. The 
base 20% capital gains tax has been in place for decades. The current 
23.8% rate includes the ACA-SM surtax), while the Biden proposal 
accepted by Senator Sinema is 28.8%. Our proposed Subtraction VAT would 
eliminate the 3.8% surtax. This would leave a 25% rate in place.

Settling on a bipartisan 22.5% rate (give or take 0.5%) should be 
bipartisan and carried over from the capital gains tax to the asset 
VAT. A single rate also stops gaming forms of ownership. Lower rates 
are not as regressive as they seem. Only the wealthy have capital gains 
in any significant amount. The de facto rate for everyone else is zero.

With tax subsidies for families shifted to an employer-based 
subtraction VAT, and creation of an asset VAT, taxes on salaries could 
be filed by employers without most employees having to file an 
individual return. It is time to tax transactions, not people!

The tax rate on capital gains is seen as unfair because it is lower 
than the rate for labor. This is technically true, however it is only 
the richest taxpayers who face a marginal rate problem. For most 
households, the marginal rate for wages is less than that for capital 
gains. Higher income workers are, as the saying goes, crying all the 
way to the bank.

In late 2017, tax rates for corporations and pass-through income were 
reduced, generally, to capital gains and capital income levels. This is 
only fair and may or may not be just. The field of battle has narrowed 
between the parties. The current marginal and capital rates are seeking 
a center point. It is almost as if the recent tax law was based on 
negotiations, even as arguments flared publicly. Of course, that would 
never happen in Washington. Never, ever.

Compromise on rates makes compromise on form possible. If the 
Affordable Care Act non-wage tax provisions are repealed, a rate of 26% 
is a good stopping point for pass-through, corporate, capital gains and 
capital income.

A single rate also makes conversion from self-reporting to automatic 
collection through an asset value-added tax levied at point of sale or 
distribution possible. This would be both just and fair, although 
absolute fairness is absolute unfairness to tax lawyers because there 
would be little room to argue about what is due and when.

Ending the machinery of self-reporting also puts an end to the Quixotic 
campaign to enact a wealth tax. To replace revenue loss due to the 
ending of the personal income tax (for all but the wealthiest workers 
and celebrities), enact a Goods and Services Tax. A GST is inescapable. 
Those escapees who are of most concern are not waiters or those who 
receive refundable tax subsidies. It is those who use tax loopholes and 
borrowing against their paper wealth to avoid paying taxes.

For example, if an unnamed billionaire or billionaires borrow against 
their wealth to go into space, creating such assets would be taxable 
under a GST or an asset VAT. When the Masters of the Universe on Wall 
Street borrow against their assets to avoid taxation, having to pay a 
consumption tax on their spending ends the tax advantage of gaming the 
system.

This also applies to inheritors. No ``Death Tax'' is necessary beyond 
marking the sale of inherited assets to market value (with sales to 
qualified ESOPs tax free). Those who inherit large cash fortunes will 
pay the GST when they spend the money or Asset VAT when they invest it. 
No special estate tax is required and no life insurance policy or 
retirement account inheritance rules will be of any use in tax 
avoidance.

Tax avoidance is a myth sold by insurance and investment brokers. In 
reality, explicit and implicit value-added taxes are already in force. 
Individuals and firms that collect retail sales taxes receive a rebate 
for taxes paid in their federal income taxes. This is an 
intergovernmental VAT. Tax withheld by employers for the income and 
payroll taxes of their labor force is an implicit VAT. A goods and 
services tax simply makes these taxes visible.

Should the tax reform proposed here pass, there is no need for an IRS 
to exist, save to do data matching integrity. States and the Customs 
Service would collect credit invoice taxes, states would collect 
subtraction VAT, the SEC would collect the asset VAT and the Bureau of 
the Public Debt would collect income taxes or sell tax prepayment 
bonds. See the last attachment for details on this.

Attachment--A. Employee Ownership, March 7, 2019

Employee ownership is the ultimate protection for worker wages. Our 
proposal for expanding it involves diverting an every-increasing 
portion of the employer contribution to the Old-Age and Survivors fund 
to a combination of employer voting stock and an insurance fund holding 
the stock of all similar companies. At some point, these companies will 
be run democratically, including CEO pay, and workers will be safe from 
predatory management practices. Increasing the number of employee-
owned firms also decreases the incentive to lower tax rates and bid up 
asset markets with the proceeds.

Establishing personal retirement accounts holding index funds for Wall 
Street to play with will not help. Accounts holding voting and 
preferred stock in the employer and an insurance fund holding the 
stocks of all such firms will, in time, reduce inequality and provide 
local constituencies for infrastructure improvements and the funds to 
carry them out.

ESOP loans and distribution of a portion of the Social Security Trust 
Fund could also speed the adoption of such accounts. Our Income and 
Inheritance Surtax (where cash from estates and the sale of estate 
assets are normal income) would fund reimbursements to the Fund.

At some point, these companies will be run democratically, including 
CEO pay, and workers will be safe from predatory management practices. 
This is only possible if the Majority quits using fighting it as a 
partisan cudgel and embraces it to empower the professional and working 
classes.

The dignity of ownership is much more than the dignity of work as a cog 
in a machine.

B. From Hearing on the 2016 Social Security Trustees Report

In the January 2003 issue of Labor and Corporate Governance, we 
proposed that Congress should equalize the employer contribution based 
on average income rather than personal income. It should also increase 
or eliminate the cap on contributions. The higher the income cap is 
raised, the more likely it is that personal retirement accounts are 
necessary. A major strength of Social Security is its income 
redistribution function. We suspect that much of the support for 
personal accounts is to subvert that function--so any proposal for such 
accounts must move redistribution to account accumulation by equalizing 
the employer contribution.

We propose directing personal account investments to employer voting 
stock, rather than an index funds or any fund managed by outside 
brokers. There are no Index Fund billionaires (except those who operate 
them). People become rich by owning and controlling their own 
companies. Additionally, keeping funds in-house is the cheapest option 
administratively. I suspect it is even cheaper than the Social Security 
system--which operates at a much lower administrative cost than any 
defined contribution plan in existence.

If employer voting stock is used, the Net Business Receipts Tax/
Subtraction VAT would fund it. If there are no personal accounts, then 
the employer contribution would be VAT funded.

Safety is, of course, a concern with personal accounts. Rather than 
diversifying through investment, however, We propose diversifying 
through insurance. A portion of the employer stock purchased would be 
traded to an insurance fund holding shares from all such employers. 
Additionally, any personal retirement accounts shifted from employee 
payroll taxes or from payroll taxes from non-corporate employers would 
go to this fund.

The insurance fund will save as a safeguard against bad management. If 
a third of shares were held by the insurance fund than dissident 
employees holding 25.1% of the employee-held shares (16.7% of the 
total) could combine with the insurance fund held shares to fire 
management if the insurance fund agreed there was cause to do so. Such 
a fund would make sure no one loses money should their employer fail 
and would serve as a sword of Damocles to keep management in line. This 
is in contrast to the Cato/PCSSS approach, which would continue the 
trend of management accountable to no one. The other part of my 
proposal that does so is representative voting by occupation on 
corporate boards, with either professional or union personnel providing 
such representation.

The suggestions made here are much less complicated than the current 
mix of proposals to change bend points and make OASI more of a needs 
based program. If the personal account provisions are adopted, there is 
no need to address the question of the retirement age. Workers will 
retire when their dividend income is adequate to meet their retirement 
income needs, with or even without a separate Social Security program.

No other proposal for personal retirement accounts is appropriate. 
Personal accounts should not be used to develop a new income stream for 
investment advisors and stock traders. It should certainly not result 
in more ``trust fund socialism'' with management that is accountable to 
no cause but short term gain. Such management often ignores the long-
term interests of American workers and leaves CEOs both over-paid and 
unaccountable to anyone but themselves.

If funding comes through a Subtraction VAT, there need not be any 
income cap on employer contributions, which can be set high enough to 
fund current retirees and the establishing of personal accounts. Again, 
these contributions should be credited to employees regardless of their 
salary level.

Conceivably a firm could reduce their S-VAT liability if they made all 
former workers and retirees whole with the equity they would have 
otherwise received if they had started their careers under a reformed 
system. Using Employee Stock Ownership Programs can further accelerate 
that transition. This would be welcome if ESOPs became more democratic 
than they are currently, with open auction for management and executive 
positions and an expansion of cooperative consumption arrangements to 
meet the needs of the new owners.

                                 ______
                                 
            Computer and Communications Industry Association
                25 Massachusetts Avenue, NW, Suite 300C
                          Washington, DC 20001
                         Ph: +1 (202) 783-0070 
                          https://ccianet.org/

The Computer and Communications Industry Association (CCIA) submits the 
following Statement for the Record following the November 30, 2022 
Senate Finance Subcommittee on International Trade, Customs, and Global 
Competitiveness Hearing. CCIA is an international, not-for-profit trade 
association representing a broad cross section of communications and 
technology firms. For 50 years, CCIA has promoted open markets, open 
systems, and open networks. CCIA members employ more than 1.6 million 
workers, invest more than $100 billion in research and development, and 
contribute trillions of dollars in productivity to the global economy.

CCIA welcomes this opportunity to provide the following recommendations 
on the U.S. Trade Policy Agenda relating to the digital economy.

The U.S. should continue to negotiate binding commitments in free trade 
agreements that pertain to digital trade and cross-border delivery of 
Internet-enabled services. The Digital Trade chapters of the U.S.-
Mexico-Canada Agreement (USMCA) and the U.S.-Japan Digital Trade 
Agreement represent the gold standard of digital trade provisions, and 
any agreement pursued by the United States that includes digital trade 
priorities should reflect those provisions. The United States could 
also consider new digital trade disciplines and other high-quality 
digital agreements around the world, such as provisions related to 
artificial intelligence cooperation found in the Singapore-Australia 
Digital Economy Agreement. It is clear that our trading partners around 
the world recognize the importance of getting trade rules for the 21st 
century right, and it would be a missed opportunity for the United 
States to delay its engagement on the global stage in forging 
frameworks that enhance U.S. competitiveness and reflect our values.

At the same time, the United States should not fundamentally overhaul 
trade policy to undermine the benefits robust trade engagement confers 
to U.S. industry and consumers. While policymakers are encouraged to 
reassess approaches to international trade in light of new challenges 
and the changing global economy, it would be a step backwards to revise 
these commitments in future agreements that expand exceptions and/or 
overall weaken the effectiveness of such rules. The United States 
should continue to pursue high standard agreements that facilitate 
global commerce, rather than adopting the approach of China in crafting 
multilateral agreements that have broad exceptions that render 
commitments meaningless like it is in the case of the Regional 
Comprehensive Economic Partnership (RCEP). It is important to note that 
any obligations undertaken are only with respect to partners the United 
States has chosen, and thus fears that strong rules incentivize trade 
with or investment in nations whose interests are inimical to ours are 
misplaced.

Finally, it is also worth noting that IPEF members with whom we already 
have FTAs--Singapore, Korea, Australia--already benefit, by virtue of 
MFN status, from some of the key enhancements negotiated in USMCA, that 
are absent in our existing bilateral FTAs. Thus, for example, these FTA 
partners currently enjoy the benefits of strong data flow and data 
localization rules (including for financial services) that the United 
States does not enjoy in their markets.\1\
---------------------------------------------------------------------------
    \1\ If these countries were to take on similar binding commitments 
in an FTA with another country, we would equally enjoy rights in their 
market under MFN, but no country has replicated USMCA standards in 
full.
---------------------------------------------------------------------------

DIGITAL TRADE RECOMMENDATIONS \2\
---------------------------------------------------------------------------

    \2\ These Recommendations reflect more extensive recommendations 
CCIA has filed with the Office of the U.S. Trade Representative and 
Department of Commerce in ongoing trade discussions such as IPEF, 
available at https://www.ccianet.org/2022/04/ccia-offers-
recommendations-for-u-s-policymakers-on-indo-pacific-economic-
framework/.
---------------------------------------------------------------------------
      Enable cross-border data flows in digital services.

U.S. trade policy should further enable digital trade and the U.S. 
should be ambitious in its negotiations with respect to data flows and 
localization barriers. Cross-border data flows are critical to digital 
trade, and forced localization mandates make it difficult for U.S. 
exporters to expand into new markets. Analysis from the OECD has 
revealed an increasing level of restrictiveness for digitally-enabled 
services in part due to restrictions on cross-border movement of 
data.\3\ Cross-border data flows are the lifeblood of global digital 
trade and by extension the array of industries that increasingly rely 
on the Internet to compete in the global marketplace. In the U.S., the 
productivity gains and efficiencies enabled by data flows have boosted 
the economy by hundreds of billions of dollars.
---------------------------------------------------------------------------
    \3\ OECD Services Trade Restrictiveness Index: Policy Trends up to 
2020, available at https://issuu.com/oecd.publishing/docs/oecd-stri-
policy-trends-up-to-2020?fr=sNmVlNzYxOTI3Mw.

With an uptick in data-related barriers in recent years, trade 
discussions and clear rules are critical to ensure that any 
restrictions on the transfer, storage, and processing of data are 
targeted in a manner that does not unreasonably limit legitimate cross-
border trade. Policies that restrict data flows, either directly 
through explicit data and infrastructure localization requirements, or 
indirectly for national security or other purposes, negate the 
productivity gains and efficiencies enabled by Internet platforms and 
cloud computing while often simultaneously undermining digital security 
---------------------------------------------------------------------------
globally.

The U.S. should continue to pursue rules that prohibit governments from 
interfering with data flows or the exchange of information online, and 
prohibit regulations or standards that condition market access, 
procurement, or qualification for widely-used certifications based on 
nationality of ownership, location of corporate headquarters, or size 
of company.

Specifically, rules should prohibit governments from imposing data 
localization or local presence requirements on data controllers or 
processors, as well as linking market access and/or commercial benefits 
to investment in or use of local infrastructure. Often, such policies 
not only restrict foreign market access and investment, they become 
counter-productive as they hinder services providers' ability to 
diversify and backup data, instead centralizing it all in one or a 
handful of local data centers. These rules should also extend to 
financial services. To the extent possible, these prohibitions should 
apply to both explicit and indirect measures such as ill-fitting 
privacy and cybersecurity measures, industrial policy, and censorship 
disguised as national security protections to keep data in a particular 
country.

CCIA cautions strongly against introducing new exceptions to trade 
rules applicable to localization and cross-border data flows as a 
response to claims that trade rules constraint domestic regulatory from 
activating in the public interest. While requirements over how data is 
stored, processed, and transmitted may well evolve over time, the 
existing rules do not constrain such evolution. In the rare cases where 
localization can be justified, existing exceptions provide broad scope 
for addressing legitimate policy concerns.

      Foster trust in digital services and growth of new technologies.

Trust is fundamental to the growth and cross-border delivery of these 
services. Without adequate privacy protections and security in digital 
communications, governments may continue to enact restrictions on 
cross-border services citing perceived risks. Privacy and consumer 
protections and trade rules should work in tandem to further the goals 
of initiatives promoting trustworthy data flows. To that end, trade 
agreements should encourage the development of national privacy 
legislation that sets clear rules on the use of personal data 
domestically, promote the adoption of bilateral and multilateral 
agreements on government access to data such as those being pursued by 
the OECD,\4\ and commit to codify protections for valid basis for 
transfer of personal data such as the APEC Cross-Border Privacy Rules 
into domestic law.
---------------------------------------------------------------------------
    \4\ See https://www.oecd.org/digital/trusted-government-access-
personal-data-private-sector.
htm; https://www.oecd.org/newsroom/landmark-agreement-adopted-on-
safeguarding-privacy-in-law-enforcement-and-national-security-data-
access.htm.

With respect to artificial intelligence (AI), trade agreements should 
encourage the adoption and deployment of trustworthy AI technologies by 
referencing principles and agreements that reflect multi-stakeholder 
input such the OECD Council Recommendations on Principles for 
responsible stewardship of trustworthy AI or the goals referenced in 
---------------------------------------------------------------------------
the White House's AI Bill of Rights.

      Prohibit customs duties for electronic commerce.

Imposing customs requirements on purely digital transactions creates 
significant and unnecessary compliance burdens on nearly all 
enterprises, including small and medium-sized enterprises (SMEs). The 
moratorium on imposing customs duties for electronic transmissions has 
been key to the development of global digital trade and shows the 
international consensus with respect to the digital economy. The 
moratorium was most recently renewed at the 12th WTO Ministerial 
Conference in June 2022, and the commitment not to impose duties on 
electronic transmissions is reflected in the number of commitments made 
in free trade agreements among multiple leading digital economies. 
Permanent bans on the imposition of customs duties on electronic 
transmissions are a frequent item in trade agreements around the world 
and have been part of all U.S. FTAs for the past two decades.

The United States should continue to embed in trade agreements 
commitments resulting in a permanent ban on the imposition of customs 
duties on electronic transmissions. Enshrining the moratorium in 
agreements would enhance bilateral trade while also continuing to 
discourage other countries from including electronic transmission in 
their domestic tariff codes, as one IPEC member, Indonesia, has already 
sought to do.

      Prohibit unilateral and discriminatory taxes.

International trade requires a consistent and predictable international 
tax system, and tax measures play a significant role in the global 
competitiveness of U.S. companies. Any country that the United States 
seeks a trade agreement with should not impose digital taxation 
measures that are discriminatory in nature and contravene long-standing 
principles of international taxation, and the U.S. should seek to 
include commitments not to pursue unilateral and discriminatory digital 
taxation measures in forthcoming trade and economic pacts.

      Address state-censorship practices and combat rising digital 
authoritarianism.

Censorship and denial of market access for foreign Internet services 
has long been the case in restrictive markets like China, but it is 
becoming increasingly common in emerging digital markets, including 
those of major trading partners, and even in some larger developed 
markets and is accomplished through different tools and methods.\5\
---------------------------------------------------------------------------
    \5\ The U.S. International Trade Commission released its report on 
foreign censorship policies in January 2022 and detailed how extensive 
these practices have become. U.S. International Trade Commission, 
Foreign Censorship, Part 1: Policies and Practices Affecting U.S. 
Businesses (February 2022), available at https://www.usitc.gov/
publications/332/pub5244.pdf at 21.

Allied governments have a critical role to play in partnering with 
technology companies and leading in the defense of Internet freedom and 
open digital trade principles. Government-imposed restrictions of 
digital services and online content can take multiple forms, and the 
risks associated with each method or regulatory framework providing for 
---------------------------------------------------------------------------
censorship methods can vary greatly.

The U.S. should work with trading partners to address rising digital 
authoritarianism and state-censorship practices that pose threats to 
the open Internet and freedom of expression around the world. Countries 
should affirm commitments under Article 19 of the International 
Covenant on Civil and Political Rights as they apply to defending free 
expression online. Making Article 19 binding and enforceable under a 
trade agreement would significantly enhance the value of this 
commitment. Parties should pursue commitments to refrain from blocking 
or restricting access to lawful online content, digital services, and 
infrastructure underlying Internet delivery. This is consistent with 
the goals of the U.S.-led Declaration for the Future of the Internet 
that encourages like-minded countries to promote fundamental freedoms 
online and combat actions by authoritarian governments. The United 
States should look to embed similar commitments to ensure an open 
Internet in trade disciplines as well.

      Secure digital communications and devices and prevent bans on 
encryption.

Providers of digital devices and services continue to improve the 
security of their platforms through the deployment of technologies that 
safeguard the communications and commercial transactions that they 
enable. Strong encryption has been increasingly enabled on now-
ubiquitous smartphones and deployed end-to-end on 
consumer-grade communications services and browsers. Encrypted devices 
and connections protect users' sensitive personal and financial 
information from bad actors who might attempt to exploit that 
information.

Many countries, at the behest of their respective national security and 
law enforcement authorities, have passed laws that mandate access to 
encrypted communications. Often the relevant provisions are not 
explicit, but mandate facilitated access, technical assistance, or 
compliance with otherwise infeasible judicial orders. Other versions 
require access to or transfer of source code related to encryption as a 
condition of allowing technology imports. Such exceptional access 
regimes run contrary to the consensus assessments of security 
technologists because these rules are technically and economically 
infeasible to develop and implement. Companies already operating in 
countries that have or are considering anti-encryption or source code 
access laws will be required to alter global platforms or design 
region-specific devices, or face fines and shutdowns for noncompliance. 
Companies that might have otherwise expanded to these markets will 
likely find the anti-encryption or facilitated access requirements to 
be barriers to entry.

The United States should continue efforts to promote regulatory 
cooperation and international standards and best practices for securing 
products and services. Trade agreements should contain commitments to 
promote encrypted devices and connections, and adherence to frameworks 
such as the NIST-developed Cybersecurity Framework. Specifically, the 
agreement should prevent countries from compelling manufacturers or 
suppliers to use a particular cryptographic algorithm or to provide 
access to a technology, private key, algorithm specification, or other 
cryptographic design details. Similarly, the agreement should prohibit 
governments from conditioning market access, with appropriate 
exceptions, on their ability to demand access to cryptographic keys or 
source code.

Additionally, the agreement should include commitments for partners to 
pursue risk-based cybersecurity measures, and utilization of open, 
consensus-based international standards as they are the more effective 
approach in comparison to prescriptive regulation. Trading partners 
should pursue cooperative approaches to cybersecurity and incident 
responses, including sharing of information and best practices with 
respect to vulnerability disclosure.

      Foster innovation in artificial intelligence.

Emerging technologies such as artificial intelligence (AI) and machine 
learning, as well as quantum computing, increasingly impact cross-
border trade, and trade rules increasingly govern the development and 
growth of these technologies. The United States should ensure 
regulatory practices and technical standards are in alignment to foster 
open lines of cooperation. To continue to use and export AI and other 
emerging technologies, businesses and users need a trade framework that 
allows them to move data and infrastructure safely across borders while 
ensuring that other countries will not misuse legal systems to impede 
the growth of new technologies. This will enable use of emerging 
technologies in addressing global challenges such as public health, 
humanitarian assistance, and disaster response. Work on promoting AI 
alignment and export competitiveness should not clash or otherwise 
undermine existing efforts such as the ongoing National Institute of 
Standards and Technology AI Risk Management Framework process aimed at 
implementing a risk-based and flexible AI regulatory landscape.

Trade rules that can facilitate the responsible cross-border growth of 
AI technologies include those that enable cross-border data flows and 
remove localization requirements; encourage governmental investment in 
and release of open data; identify and share best practices for the 
responsible use of AI; engage in cooperation and public-private 
collaboration on AI; and adopt innovation-oriented copyright rules that 
enable machine analysis of data. In addition, to ensure substantive 
convergence and avoid the potential for discriminatory outcomes, the 
U.S. and its trading partners should agree to avoid adopting any 
measures that discriminate against U.S. suppliers who excel in this 
area by providing less favorable treatment to AI products or 
applications than they give to like products or applications without an 
AI component.

As a matter of good regulatory practice, the development and 
implementation of AI regulations should include: adopting a risk-based 
approach, including transparent processes for assessing, managing, and 
mitigating risks associated with specific AI applications; assessing 
whether potential risks can be mitigated or addressed using existing 
instruments and regulatory frameworks; considering whether any new or 
proposed regulation is proportionate in balancing potential harms with 
economic and social benefits; employing risk management best practices, 
including considering the risk-substitution impact of a specific AI 
application against a scenario where that application has not been 
deployed but baseline risks remain in place; and promoting the 
development of voluntary consensus standards to manage risks associated 
with AI applications in a manner that is adaptable to the demands of 
dynamic and evolving technologies.

In addition to trade rules, countries should work together to 
facilitate research and development of new applications of AI to 
address shared challenges; facilitate dialogues among all stakeholders 
including governments, civil society, academia, and the private sector 
on best regulatory practices; and pursue joint discussions on the 
responsible and ethical use of AI.

      Promote global practices on Internet access and interconnection 
policies.

The United States should work to protect the interoperable and 
interconnected nature of the global Internet architecture that enables 
cross-border data flows, support principles of non-discrimination and 
market access to telecommunications networks, and enable stakeholders 
to negotiate the nature of services to be delivered across the network 
on a voluntary market-driven basis, based on reasonable business 
practices agreed upon by both sides.

Globally, the business practice on Internet interconnection is for 
content and application providers and ISPs to enter into agreements 
through autonomous negotiations. To protect the Internet ecosystem, the 
growth of the tech industry globally, and ensure these investments can 
continue to flourish and support digital trade, the United States 
should seek to include assurances that Internet-based 
telecommunications service providers seeking the exchange of traffic 
with content and application providers, and vice versa, are able to 
negotiate with the other party on a voluntary, market-driven basis in 
this agreement. Trade rules should prevent new mandates to negotiate 
with ISPs, and the unilateral imposition of fees, as a condition for 
reaching end-user customers. This builds on existing trade rules that 
ensure that access to domestic telecommunications networks is 
facilitated on reasonable and non-discriminatory terms.

      Commit to following good regulatory practices.

The global Internet economy is at a pivotal moment in its development. 
Countries are moving quickly to introduce new, at times experimental, 
regulatory frameworks for digital services, and seek to craft rules on 
the development of emerging technologies with the aim to ensure that 
the digital economy remains a tool for openness and free exchange that 
has led to unprecedented growth and opportunity.

As new proposals are introduced around the world, countries should 
commit to following good regulatory practice and work together to 
ensure that regulations do not have unintended impacts. International 
regulatory cooperation is an important tool for improving regulatory 
quality, reducing the likelihood of creating trade barriers or 
unnecessary regulatory differences, aligning regulation with shared 
principles and values, avoiding unintended consequences or conflicts 
with broader foreign policy objectives, building trust and expertise 
among regulators, and deepening understanding of trends in regulatory 
governance to inform current and future approaches to policymaking. As 
new regulations take effect in foreign markets, it will be essential 
that the U.S. work with trading partners to ensure that implementing 
regulations are fair, implemented in a non-discriminatory manner 
against foreign firms, and are subject to adequate oversight and due 
process.

The United States should pursue governing principles of the digital 
economy that ensure that regulations should be non-discriminatory and 
principles-based, made pursuant to a transparent regulatory process, 
ensure due process to those affected, and include adequate safeguards 
to reduce the impact of any unintended consequences.

      Address technical barriers to trade.

U.S. technology exporters face a growing number of non-tariff measures 
such as technical regulations, conformity assessment practices, and 
standards-based measures. Adoption of global standards is critical to 
ensuring regulatory coherence and avoiding country-specific standards 
that deter market entry. Some U.S. cloud service providers (CSPs) have 
been unable to serve the public sector due to onerous security 
certification requirements that deviate from internationally accepted 
standards and make it impossible for CSPs to comply without creating a 
market-unique product, including physically segregating facilities for 
exclusive use for government-owned customers and onshoring of data. The 
adoption of country-specific standards creates de facto trade barriers 
for U.S. companies and raises the costs of cutting-edge technologies 
for consumers and enterprises.

The United States should (1) pursue commitments like those outlined in 
USMCA Chapter 11 on addressing technical barriers to trade; and (2) 
pursue commitments to follow good regulatory practices of these 
commitments in the development of standards, regulations, and 
conformity assessment procedures for services.

      Enable trade in electronic payment services.

Electronic payment (e-payment) systems which are interoperable across 
borders are critical in enabling the growth of cross-border digital 
trade. Trade policy can help drive the development of cross-border e-
payment systems through commitments on the free flow of data including 
financial services data, promoting interoperability through 
international standards, and encouraging open innovation and 
competition through the adoption of open e-payment models such as real-
time payments (RTP) systems and encouraging open application 
programming interfaces (APIs) to allow all e-payment service providers 
to compete. Additionally, the United States should pursue provisions on 
electronic signature, electronic authentication, paperless trading, and 
other best practices often included in trade agreements.

      Promote copyright frameworks that enable emerging technologies 
and digital services.

As part of U.S. trade policy, the U.S. should promote intellectual 
property frameworks that reflect U.S. law and secure commitments that 
will foster innovation in emerging technologies. This is reflected in a 
few areas of copyright traditionally included in trade agreements.

First, a flexible copyright regime is necessary for the continued 
growth of the digital economy. Principles such as fair use are a 
cornerstone of U.S. copyright law and industries that rely on this 
right are a significant contributor to the U.S. economy and exports. 
Fair use is also critical to activities central to new areas of 
innovation and cutting-edge technology such as artificial intelligence 
and text and data mining. Additionally, mandated technological 
protection measures (TPMs) are a frequent inclusion in U.S. trade 
agreements. Corresponding statutory exceptions to these 
anticircumvention measures are a critical component of these 
provisions. Consistent with USMCA, any TPM provision should include 
exceptions to anti-circumvention that are consistent with 17 U.S.C. 
Sec. 1201, including Sec. 1201(f) on reverse engineering and 
interoperability, in providing limitations and exceptions to TPMs.

Intermediary liability protections for Internet service providers, such 
as the framework in Section 512 of the Digital Millennium Copyright Act 
in the United States, have been critical to growing the U.S. digital 
economy by providing business certainty to U.S. investors and 
innovators. U.S. trade policy has long reflected domestic copyright 
principles by including necessary intermediary protections for online 
services in trade agreements dating back to 2003. USMCA continues this 
tradition, drawing directly upon Title 17 of the U.S. Code.

                                 ______
                                 
                    E-Merchants Trade Council, Inc.
                 1655 North Fort Myer Drive, Suite 700
                          Arlington, VA 22209
                             (703) 574-0000
                         https://www.emtc.org/

On behalf of the E-Merchants Trade Council, Inc. (EMTC), I am Marianne 
Rowden, CEO of EMTC and respectfully submit this statement for the 
record. EMTC appreciates the opportunity to comment concerning the 
topics covered in the hearing on ``Opportunities and Challenges for 
Trade Policy in the Digital Economy'' held on November 30, 2022.

EMTC was formed in July 2021 to represent the interests of the e-
commerce industry by creating a global community of micro, small and 
medium size enterprise (MSMEs) e-sellers, marketplace platforms, and 
service providers to resolve trade, tax and transportation challenges. 
EMTC's advocacy mission is to support national and international 
policies that simplify cross-border transactions of physical and 
digital goods. EMTC facilitates dialogue among the E-Merchant worldwide 
community and global regulators.

EMTC applauds the Subcommittee for holding this hearing on 
``Opportunities and Challenges for Trade Policy in the Digital 
Economy.'' We recommend that the Subcommittee hold more hearings, 
roundtable discussions, and town hall meetings throughout the United 
States to receive testimony, comments and input from as many 
stakeholders as possible since the United States' trade policy on 
digital trade affects every segment of American society. EMTC's 
comments address the three (3) issues posed to the witnesses during the 
hearing.

1. What is Digital Trade?

As noted in the introductory paragraph describing EMTC, we use the 
nomenclature of ``digital trade'' to describe ``digital goods'' or 
electronic articles such as software, images, music, games etc. that 
are non-physical and transmitted via the Internet by e-mail, the cloud, 
etc.\1\ EMTC makes this distinction for cross-border transactions due 
to the long-standing general rule under Treasury Decision 85-124 that 
software is classified under heading 8523 of the Harmonized Tariff 
Schedule of the United States (HTSUS) but the duty is based on the 
declared value of the carrier medium (e.g., CD-ROM, USB drive, floppy 
disk, magnetic tape). EMTC also views ``digital trade'' to encompass 
all the rules governing data (e.g., privacy, localization, etc.).
---------------------------------------------------------------------------
    \1\ We note that the World Trade Organization (WTO) has defined 
``electronic commerce'' as ``the production, distribution, marketing, 
sale or delivery of goods and services by electronic means.'' See Work 
Programme on Electronic Commerce (Adopted by the General Council on 
September 25, 1998) at: https://docs.wto.org/dol2fe/Pages/SS/
directdoc.aspx?filename=q:/WT/L/274.pdf
&Open=True. The World Customs Organization (WCO) defines ``cross-border 
e-commerce'' as ``all transactions which are effected digitally through 
a computer network (e.g., the Internet) and result in physical goods 
flow subject to Customs formalities.'' See WCO Framework of Standards 
on Cross-Border E-Commerce Definitions at: https://www.wcoomd.org/-/
media/wco/public/global/pdf/topics/facilitation/activities-and-
programmes/ecommerce/2_definitions_en.pdf?db=
web.

Traditionally, customs regimes regulated physical goods for assessing 
customs duties. Since adopting the Declaration on Global Electronic 
Commerce in 1998, the WTO members agreed to a moratorium on customs 
duties on electronic transmissions, which has been revisited and 
extended by the WTO every two years at its ministerial conference.\2\ 
In 2021, India and South Africa put forward a communication on The 
Moratorium on Customs Duties on Electronic Transmissions: Need for 
Clarity on its Scope and Impact.\3\ We note that the moratorium applies 
to the ``transmission'' and not the assessing of customs duties on the 
content of the transmission (e.g., the value of the software, music, 
image, etc.).
---------------------------------------------------------------------------
    \2\ See, Declaration on Global Electronic Commerce (Adopted May 20, 
1998) at https://docs.wto.
org/dol2fe/Pages/SS/
directdoc.aspx?filename=q%3A%2FWT%2FMIN98%2FDEC2.pdf&Open=
True.
    \3\ See, The Moratorium on Customs Duties on Electronic 
Transmissions: Need for Clarity on its Scope and Impact (Adopted 
November 8, 2021) at: https://docs.wto.org/dol2fe/Pages/SS/
directdoc.aspx?filename=q%3A%2FWT%2FGC%2FW833.pdf&Open=True.

We echo the hearing witnesses' concern that the Moratorium is set to 
expire by the next WTO Ministerial Conference (scheduled for December 
2023) or March 31, 2024, if the ministerial is delayed.\4\ EMTC's 
policy preference is for the United States to lead the effort to make 
the moratorium permanent. However, EMTC is alarmed that there are no 
discussions in any country about how customs administrations will 
implement the mechanisms to assess and collect customs duties on 
digital transmissions and to subject digital goods to the same 
regulatory requirements as physical goods.
---------------------------------------------------------------------------
    \4\ See, Work Programme on Electronic Commerce Draft Ministerial 
Decision of June 16, 2022 at: https://docs.wto.org/dol2fe/Pages/SS/
directdoc.aspx?filename=q%3A%2FWT%2FMIN22%2
FW23.pdf&Open=True.
---------------------------------------------------------------------------

2. Why is Digital Trade Important?

EMTC believes it is critical for Congress to set United States digital 
trade policy because of the convergence between digital and physical 
goods as a result of the state of flux in the WTO e-commerce 
negotiations. Moreover, digital trade comprises an increasing 
percentage of global trade, particularly for the United States as a 
leader in digital goods and services.

We recommend that the Subcommittee create a framework that acknowledges 
the new entities engaged in cross-border trade for both e-commerce of 
physical goods (e.g., foreign sellers, e-commerce marketplace 
platforms, fulfillment houses, logistics companies) and trade in 
digital goods. It is critical that the Subcommittee properly allocate 
regulatory responsibilities appropriate to the role of the entity in 
the transaction as there may be more or different intermediaries and 
agents involved in cross-border shipments rather than a single 
manufacturer/shippers, carrier, customs broker, and importer of record.

Moreover, it is important that any policy (and proposed statute) is 
neutral so that it does not disadvantage any company's business model, 
such as imposing the same regulatory requirements on marketplaces 
regardless of whether they provide logistics services handling the 
goods versus offering a means of a sales transaction. Likewise, EMTC 
urges the Subcommittee to be sensitive to the impact of regulatory 
requirements on small-medium size e-sellers as they are only able to 
engage in global trade through e-commerce and work on low profit 
margins due to competition and the numerous fees that marketplaces 
charge.

EMTC believes that future trade agreements, such as the Indo-Pacific 
Economic Framework (IPEF), should include specific chapters on Customs 
and Trade Facilitation similar to Chapter 7 of the United States Canada 
Mexico Agreement (USMCA) which emphasizes trade facilitation:

        Article 7.1: Trade Facilitation

        1. The Parties affirm their rights and obligations under the 
        Agreement on Trade Facilitation, set out in Annex 1A to the WTO 
        Agreement.

        2. With a view to minimizing the costs incurred by traders 
        through the importation, exportation, or transit of a good, 
        each Party shall administer its customs procedures in a manner 
        that facilitates the importation, exportation, or transit of a 
        good, and supports compliance with its law.

        3. The Parties shall discuss within the Trade Facilitation 
        Committee established under Article 7.24 (Committee on Trade 
        Facilitation) additional measures to facilitate trade. The 
        Parties are encouraged to adopt additional measures that build 
        on the obligations in this Chapter with a view to further 
        facilitating trade.

See, USMCA Ch. 7 on Customs Administration and Trade Facilitation at 
https://ustr.gov/sites/default/files/files/agreements/FTA/USMCA/Text/
07_Customs_Ad
ministration_and_Trade_Facilitation.pdf. Often importers and exporters 
find themselves in the difficult situation of regulatory agencies 
interpretation of a free trade agreement which eviscerates the spirit 
of free trade in order to meet regulatory compliance requirements. 
Therefore, negotiators should prioritize ``minimizing the costs 
incurred by traders'' and facilitate trade.
            a. Increase De Minimis
As a preliminary point, we note that e-commerce is not the same as de 
minimis and vice versa--that is, not all e-commerce shipments are 
entered as low-value shipments under 19 U.S.C. Sec. 1321 and not all de 
minimis shipments were ordered online. For EMTC's members who are 
service providers (e.g., customs brokers, logistics companies, etc.), 
whether an article is ordered online makes no difference to its 
handling in a cross-border transaction.

EMTC strongly believes that the United States should prioritize getting 
other countries to increase their de minimis threshold for low-value 
shipments. This will go a long way to increase MSME participation in 
global trade, especially for U.S. e-seller exporters. Most other 
countries have a de minimis level between $0 and $200 whereas the 
United States de minimis threshold is $800. The United States was 
successful in getting Canada and Mexico to increase those countries' de 
minimis in the USMCA.

Title 19 U.S.C. Sec. 1321 on Administrative Exemptions has been part of 
the customs statute since the Tariff Act of 1930. Specifically, the de 
minimis threshold under 19 U.S.C. Sec. 1321(a)(2)(C) for articles free 
of duty ``in any other case'' was initially set at $1 and periodically 
raised by Congress--first, to $5 in 1978, and $200 in 1993 as part of 
the Customs Modernization Act, Title IV of NAFTA.\5\ Congress increased 
the de minimis to $800 recently in the Trade Facilitation and Trade 
Enforcement Act of 2015, Pub. L. 114-125, 130 Stat. 223. As these 
amendments demonstrate, Congress has raised the de minimis every few 
decades taking into account the erosion of purchasing power as a result 
of inflation. EMTC believes this level for de minimis is appropriate 
given reports of inflation at over 6% for 2021 and in excess of 7.5% 
year-to-date. Congress should commit support for the current U.S. de 
minimis level and stress for near reciprocity in treatment of low-value 
shipments in the Indo-Pacific countries within a limited phased 
implementation period.
---------------------------------------------------------------------------
    \5\ See, list of legislative amendments for 19 U.S.C. Sec. 1321 at 
https://uscode.house.gov/view.xhtml?path=/prelim@title19/
chapter4&edition=prelim.

EMTC is aware of the possibility of Congress revisiting de minimis and 
lowering the threshold under 19 U.S.C. Sec. 1321(a)(2)(C) in the 
America COMPETES Act (Import Security and Fairness Act),\6\ but we 
believe that such policy instability makes it very difficult for 
companies to plan when they have organized their business operations 
based on the $800 threshold level. It is precisely because Congress has 
only increased the de minimis threshold infrequently every few decades 
that makes the possibility of a change after only six (6) years from 
passage of TFTEA in 2016 greatly concerning to the trade community, 
particularly e-commerce marketplace platforms, e-sellers and companies 
that provide trade and transportation services to e-commerce companies.
---------------------------------------------------------------------------
    \6\ See, Import Security and Fairness Act, H.R. 6412, 117th 
Congress (2022).

Since the passage of TFTEA in 2016, the trade community faced the 
prospect of lowering the de minimis threshold under 19 U.S.C. 
Sec. 1321(a)(2)(C) twice. First, during the negotiation of the USMCA in 
2019, the Administration negotiated to raise the de minimis threshold 
for imports to Mexico (to $117) and Canada (to $150), but included a 
---------------------------------------------------------------------------
footnote:

        Notwithstanding the amounts set out under this subparagraph, a 
        Party may impose a reciprocal amount that is lower for 
        shipments from another Party if the amount provided for under 
        that other Party's law is lower than that of the Party.

USMCA Ch. 7 Customs Administration and Trade Facilitation, Article 
7.8.1(f) Express Shipments, footnote 3 at 7-7.\7\ As a result of the 
trade community's advocacy efforts, Congress wrote a letter to the U.S. 
Trade Representative (USTR) stating:
---------------------------------------------------------------------------
    \7\ See, https://ustr.gov/sites/default/files/files/agreements/FTA/
USMCA/Text/07_Customs_
Administration_and_Trade_Facilitation.pdf.

        We strongly oppose any effort by the Executive Branch to lower 
        the current $800 de minimis threshold through USMCA 
        implementing bill, including any amendment to 19 U.S.C. 1321 
        that would grant the Executive Branch additional authority to 
---------------------------------------------------------------------------
        decrease or eliminate the threshold.

        The U.S. de minimis threshold is a policy recently set by 
        Congress, which raised the threshold from $200 in 2016. The 
        current de minimis threshold still enjoys wide bipartisan 
        support in Congress and throughout the manufacturing, retail, 
        logistics, and e-commerce landscapes. In our view, it is 
        neither necessary, appropriate, nor desirable to change this 
        policy in U.S. law as part of the implementation of USMCA's 
        requirements. In fact, we consider that such an effort would 
        amount to an override of Congressional authority by the 
        Executive Branch, and thus would be entirely inappropriate.

Letter from the Congress of the United States to Ambassador Robert E. 
Lighthizer, U.S. Trade Representative dated October 18, 2019.\8\ EMTC 
believes that the better policy from a U.S. leadership position is to 
get other countries to raise their de minimis threshold, as the U.S. 
accomplished in the USMCA, rather than to lower the U.S. de minimis.
---------------------------------------------------------------------------
    \8\ See letter at: https://schweikert.house.gov/2019/01/10/
congressman-david-schweikert-leads-letter-representative-lighthizer/.
---------------------------------------------------------------------------

3. How Can the U.S. Work with its Allies?

EMTC is concerned that there are numerous allies, particularly its 
largest trading partners (e.g., the European Union) where trade policy 
is diverging, including:

    a.  Small-medium e-sellers' compliance with the U.S. 1099K income 
reporting at $600 requirement;
    b.  Updating import and export data for low-value shipments;
    c.  Algorithmic decision-making for compliance and risk 
management;\9\
---------------------------------------------------------------------------
    \9\ The European Parliamentary Research Service has produced a 
study in March 2019 on ``Understanding Algorithmic Decision Making: 
Opportunities and Challenges'' and a number of factors mentioned come 
from this report (applied in a customs context), which can be found at: 
https://www.europarl.europa.eu/RegData/etudes/STUD/2019/624261/
EPRS_STU(2019)62426
1_EN.pdf. The United States' National Institute of Standards and 
Technology has released its ``AI Risk Management Framework: Second 
Draft'' at: https://www.nist.gov/system/files/documents/2022/08/18/
AI_RMF_2nd_draft.pdf.
---------------------------------------------------------------------------
    d.  U.S. implementation of the OECD tax treaty (Pillar II) and the 
UN vote on global tax standards;
    e.  The EU's Carbon Border Adjustment Mechanism;
    f.  Changes to de minimis and Value Added Tax rates for low-value 
shipments; and
    g.  The different approaches of the EU and the U.S. on regulating 
the digital economy (e.g., the EU's Digital Markets Act and Digital 
Services Act).

    Our observation is that the European Union has chosen to create a 
new body of law to regulate the digital economy whereas the United 
States seems to be integrating digital provisions into existing titles 
of federal statute. As a result, the process of aligning policies with 
our trading partners may be a challenge.

4. Conclusion

In summary, EMTC believes that the Subcommittee should carefully 
consider creating a trade policy which creates a framework to integrate 
equal treatment of physical and digital goods, accommodate new entities 
in the global trade ecosystem, and does not create regulatory burdens 
on MSME e-sellers, such as lowering the de minimis under 19 U.S.C. 
Sec. 1321(a)(2)(C).

EMTC appreciates the opportunity to comment on the testimony presented 
at the hearing on Opportunities and Challenges for Trade Policy in the 
Digital Economy, and we are happy to discuss the ideas expressed above 
in more detail.

                                 ______
                                 
                            Engine Advocacy
                        700 Pennsylvania Ave, SE
                          Washington, DC 20003

December 7, 2022

U.S. Senate
Committee on Finance
Subcommittee on International Trade, Customs, and Global 
Competitiveness
Dirksen Senate Office Bldg., Rm. SD-219
Washington, DC 20510-6200

Dear Chairman Carper, Ranking Member Cornyn, and honorable members of 
the subcommittee on International Trade, Customs, and Global 
Competitiveness:

Engine is a non-profit technology policy, research, and advocacy 
organization that bridges the gap between policymakers and startups. 
Engine works with government and a community of thousands of high-
technology, growth-oriented startups across the nation to support the 
development of technology entrepreneurship. Lowering barriers to trade 
unlocks markets for U.S. startups to expand, compete, and find success 
and is a vital part of promoting domestic technology entrepreneurship. 
Accordingly, we appreciate the committee holding a hearing on the 
Opportunities and Challenges for Trade Policy in the Digital Economy.

The Internet and digitization of world economies has enabled startups 
to reach markets beyond their borders. Through digital trade, startups 
are able to further the outsized contributions they make to domestic 
economic growth and job creation. And startups help others reach 
markets abroad too, whether they be artists, farmers, manufacturers, or 
others. As digital trade has grown,\1\ barriers to digital trade have 
grown along with it. Startups encounter these barriers as they grow and 
scale beyond U.S. borders to serve users and clients abroad, and such 
barriers dictate where startups can feasibly reach users.\2\
---------------------------------------------------------------------------
    \1\ See e.g., Table 3.1. U.S. Trade in ICT and Potentially ICT-
Enabled Services, by Type of Service, Bureau of Economic Analysis (July 
7, 2022), https://apps.bea.gov/iTable/iTable.cfm
?reqid=62&step=9&isuri=1&6210=4#reqid=62&step=9&isuri=1&6210=4.
    \2\ See e.g., Comments of Engine Advocacy Regarding Foreign Trade 
Barriers to U.S. Exports for 2023 Reporting, Engine (October 28, 2022), 
https://engine.is/s/2022-Transatlantic-Business-Statement-on-EU-US-
Data-Privacy-Framework.pdf.

Digital trade policies that lower trade barriers for U.S. businesses 
face criticism from policymakers \3\ and others \4\ that claim that 
forward-thinking digital trade policies only serve large incumbent 
companies. Reducing barriers to digital trade helps all U.S. 
businesses, including ``big tech,'' but it arguably stands to help 
startups the most. Take, for instance, the invalidation of Privacy 
Shield in 2020 created barriers to cross-border data transfers between 
the U.S. and Europe. This impacted all transatlantic businesses, but 
large companies were able to turn to other methods for transferring 
data, like Standard Contractual Clauses, while startups faced more 
existential business disruptions, increased costs, and lost clients.\5\ 
Indeed, small businesses and startups comprised the overwhelming 
majority of companies that relied on free flows of data through Privacy 
Shield.\6\ Similarly, the EU's Digital Services Act will impact all 
content-hosting companies operating or looking to operate in Europe. 
Large U.S. technology companies will face significant new obligations 
under the law, but none of them are likely to exit the EU market or 
significantly revise plans to operate there. U.S. startups on the other 
hand will encounter elevated barriers to entering the EU market, 
significant new obligations, and compliance costs.\7\ U.S. policymakers 
have intervened in both of these cases to try to reach solutions with 
their EU counterparts.\8\ This work advances the interests of U.S. 
startups, and should not be foregone merely because it also helps or is 
supported by ``big tech.''
---------------------------------------------------------------------------
    \3\ See e.g., Hearing on Opportunities and Challenges for Trade 
Policy in the Digital Economy: Hearing Before the Subcommittee on 
International Trade, Customs, and Global Competitiveness, 117th 
Congress (2022) (remarks of Senator Warren).
    \4\ E.g., ``Digital Trade'' Doublespeak: Big Tech's Hijack of Trade 
Lingo to Attack Anti-Monopoly and Competition Policies, Rethink Trade 
(November 2, 2022), https://rethinktrade.org/reports/digital-trade-
doublespeak-big-techs-hijack-of-trade-lingo-to-attack-anti-monopoly-
and-competition-policies/.
    \5\ See e.g., Sean Davis, New Transatlantic Data Deal Can Reopen EU 
Opportunities for Startups, Engine (April 20, 2022), https://
engineadvocacyfoundation.medium.com/new-transatlantic-data-deal-can-
reopen-eu-opportunities-for-startups-4a25e454572f; #StartupsEverywhere 
profile: Mikel Carmenes Cavia, Co-Founder and VP of Engineering, 
Onfleet, Engine (May 7, 2021), https://www.engine.is/news/
startupseverywhere-sanfrancisco-ca-onfleet.
    \6\ See generally, Privacy Shield Participants, https://
www.privacyshield.gov/list.
    \7\ Lauren Koop, The EU's Digital Services Act is one step closer 
to becoming law. How will it impact U.S. startups?, Engine (July 28, 
2022), https://engineadvocacyfoundation.medium.
com/the-eus-digital-services-act-is-one-step-closer-to-becoming-law-
how-will-it-impact-u-s-startups
-7be702180582; Daphne Keller, The EU's new Digital Services Act and the 
Rest of the World, Verfassungsblog (November 7, 2022), https://
verfassungsblog.de/dsa-rest-of-world/ (Explaining the comparative 
impacts of the DSA on small entities: ``The other predictable global 
harm will be to competition. The DSA burdens even very small platforms 
with obligations that today's incumbents never shouldered, or else took 
on only much later in their development. Facebook, for example, first 
released a transparency report in 2013, when it was worth $139 billion. 
It first allowed users to appeal removals of photos, videos, and posts 
(but not comments) in 2018, when the company was worth $374 billion and 
had some 35,000 employees. Newer market entrants will take on similar 
obligations at a much earlier stage: once they reach just =10 million 
and 50 employees.'').
    \8\ See, e.g., FACT SHEET: President Biden Signs Executive Order to 
Implement the European Union-U.S. Data Privacy Framework, White House 
(October 7, 2022), https://www.whitehouse.
gov/briefing-room/statements-releases/2022/10/07/fact-sheet-president-
biden-signs-executive-order-to-implement-the-european-union-u-s-data-
privacy-framework/ (on resolving transatlantic data transfer issues); 
Chamber of Progress (@ProgressChamber), Twitter (December 8, 2021), 
(Remarks of Sec. Raimondo on the DSA: ``We have serious concerns that 
these proposals will disproportionately impact U.S.-based tech firms 
and their ability to adequately serve EU customers and uphold security 
and privacy standards.'').

Smart digital trade policy that promotes a free, open, and global 
Internet is needed to lower and keep low barriers to trade for 
startups. The recent U.S.-Mexico-Canada and U.S.-Japan Agreements 
enshrined commonsense digital frameworks and can provide a template for 
smart digital trade policy and future trade agreements. Inspired by 
these agreements, digital trade policy should embrace the following 
principles, which can support the success of U.S. startups looking to 
---------------------------------------------------------------------------
expand into foreign markets and engage customers abroad:

    Provide proportionate, tailored, and certain intermediary liability 
frameworks.
        Balanced intermediary liability frameworks, like those found in 
        the U.S., provide the legal certainty needed for startups with 
        business models that rely on user content--whether it's 
        comments, photos, reviews, etc.--to grow and thrive. Around the 
        world, however, common methods for governing intermediaries are 
        taking root that undermine a startup-friendly environment and 
        create new uncertainties and costs for U.S. companies. Laws 
        that require the appointment of local representatives, impose 
        tight content takedown timelines, require automated filtering, 
        require the removal of content that is not otherwise illegal, 
        and threaten heavy fines create barriers to entry for startups 
        and reduce the number of foreign markets available to them.

    Facilitate cross-border data flows.
        The Internet allows startups to access foreign markets with 
        little additional investment. Conversely, policies that 
        restrict how and when data can be transferred across borders 
        erect barriers to trade and increase costs that startups with 
        limited resources have difficulty overcoming compared to their 
        larger rivals.

    Foster innovation and market access.
        Extraterritorial regulations adopted in other jurisdictions, 
        including around data privacy and emerging technologies, can 
        limit innovation opportunities and market access for American 
        startups. Because they often apply any time a business 
        encounters a user in or from that jurisdiction, startups with 
        relatively few users there are likely to forgo serving that 
        jurisdiction because of the regulatory structure. U.S. 
        policymakers should work through the appropriate fora to ensure 
        American startups encounter a consistent and level playing 
        field.

    Avoid technology sector-specific levies.
        While startups are rarely subject to digital services taxes 
        (DSTs) themselves, they rely on the services of larger 
        companies who are, to build their products and reach customers. 
        DSTs increase the price of these services, putting startups at 
        a disadvantage in jurisdictions with them. Working through 
        multinational fora to reach a global solution promises the best 
        step toward a uniform tax environment.

    Prohibit duties on digital transactions.
        The WTO moratorium on e-commerce is critical to fostering 
        digital trade, and it is especially important for startups. 
        Since 1998, member countries have agreed to not impose customs 
        duties on electronic transmissions, but some countries have 
        recently expressed interest in limiting or ending the 
        moratorium.

In addition to these principles, there are other affirmative steps that 
U.S. policymakers can and should take to support startups and small 
businesses as they look to trade internationally. Witnesses highlighted 
several examples in response to questioning from Chairman Carper 
regarding such positive steps available.\9\ Improved commercial guides 
and other trade resources from the Commerce Department would be helpful 
for startups. Startups turn to these and other government trading 
resources, but often find them insufficient.\10\ Helping to increase 
the adoption of digital tools for small businesses could also help 
startups while expanding trade. Technology startups often already make 
use of digital tools to run their businesses and facilitate 
international trade, but since many startups offer digital services 
themselves, incenting increased adoption of such tools will help expand 
markets for startups. Finally, most government trade resources 
available for small businesses are focused toward exporters of physical 
goods. Many technology startups export software or services digitally, 
and would benefit from these government resources, like commercial 
guides, consulting services, and grant assistance,\11\ being expanded 
to more directly support them.
---------------------------------------------------------------------------
    \9\ E.g., Hearing on Opportunities and Challenges for Trade Policy 
in the Digital Economy: Hearing Before the Subcommittee on 
International Trade, Customs, and Global Competitiveness, 117th 
Congress (2022) (remarks of Christine Bliss).
    \10\ See e.g., #StartupsEverywhere Profile: Jeff Wigh, Founder and 
CEO, Bryght Labs, Engine (February 4, 2022), https://www.engine.is/
news/startupseverywhere-overlandpark-ks-bryghtlabs (remarking about 
some resources available via Trade.gov, how they apply to startups like 
his, and how they might be improved).
    \11\ E.g., the State Trade Expansion Program (STEP), https://
www.sba.gov/funding-programs/grants/state-trade-expansion-program-step 
(STEP needs to be reauthorized for FY 2023-26).

Engine appreciates the opportunity to submit this statement for the 
hearing record and the Committee's attention to digital trade issues 
important to startups. We look forward to being a resource for the 
---------------------------------------------------------------------------
committee on these and other issues in the future.

Sincerely,

Engine Advocacy

                                 ______
                                 
                              PEN America
                    1100 13th Street, NW, Suite 800
                          Washington, DC 20005

PEN America stands at the intersection of literature and human rights 
to protect free expression in the United States and around the globe. 
Our PEN Charter calls us to uphold ``the principle of unhampered 
transmission of thought within each nation and between all nations.'' 
We champion the freedom to write and work to unite writers and their 
allies to celebrate creative expression and defend the liberties that 
make it possible. It is under these principles that we see coerced 
censorship as a key barrier to trade in the digital economy.

PEN America defines ``coerced censorship'' as the direct or indirect 
governmental suppression of digital content, in whole or in part, due 
to its perceived political or societal offense, consistent with 
international law, with special attention to Article 19 of the 
International Covenant on Civil and Political Rights. The term shall 
not be construed to include government actions related to data privacy, 
antitrust enforcement, or anti-harassment orders. This definition seeks 
to precisely target efforts against extraterritorial censorship, while 
allowing for commonsense regulation of technology companies by our 
democratic allies.

As the long arm of authoritarianism grows, freedom of expression is 
stifled in every part of the world. Beijing's efforts are especially 
worrying due to its economic reach and marked intolerance of dissent. 
Censorship can be both overt and behind-the-scenes, with Chinese 
government influence creeping into LinkedIn profiles,\1\ Zoom 
meetings,\2\ streaming services,\3\ institutions of higher 
education,\4\ and publishing houses.\5\
---------------------------------------------------------------------------
    \1\ https://pen.org/press-release/pen-america-decries-linkedins-
apparent-state-influenced-censorship/.
    \2\ https://pen.org/press-release/pen-america-condemns-shuttering-
of-chinese-activists-zoom-account/.
    \3\ https://pen.org/press-release/pen-america-denounces-disneys-
removal-of-simpsons-episode/.
    \4\ https://pen.org/censorship-free-speech-issues-china/.
    \5\ https://foreignpolicy.com/2021/10/26/chinese-censorship-enes-
kanter-celtics-browder-is-going-global/.

As PEN America documented in its landmark report Made in Hollywood, 
Censored by Beijing,\6\ even one of our country's most iconic cultural 
industries increasingly self-censors in response to pressure, either 
direct or indirect, from the Chinese Communist Party. Increasingly, 
Beijing's economic clout has allowed it to insist that others comply 
with its censorship restrictions as a prerequisite to doing business 
with or in the country. These attempts to silence critical voices and 
stories must not go unanswered and we urge the inclusion of coerced 
censorship, and its definition, when discussing and legislating trade.
---------------------------------------------------------------------------
    \6\ https://pen.org/report/made-in-hollywood-censored-by-beijing/.

If you have any questions please reach out to our Managing Director in 
Washington, Nadine Farid Johnson ([email protected]) and our Senior 
---------------------------------------------------------------------------
Manager for Legislative Affairs, Laura Schroeder ([email protected]).

                                 ______
                                 
                               PILOT Inc.
                             C/O NeueHouse
                          110 East 25th Street
                        New York, New York 10010

December 14, 2022

U.S. Senate
Committee on Finance
Subcommittee on International Trade, Customs, and Global 
Competitiveness
Dirksen Senate Office Bldg., Rm. SD-219
Washington, DC 20510-6200

Dear Chairman Carper, Ranking Member Cornyn, and honorable members of 
the subcommittee on International Trade, Customs, and Global 
Competitiveness:

PILOT is a New York City-based, Delaware-registered startup that 
provides tech-driven virtual group coaching programs to companies that 
are easy to implement, affordable, and get good results. We employ over 
50 individuals throughout the U.S. that are passionate about helping to 
empower each employee to truly own their career and actively shape 
their experience at work and our product has won many awards including 
Top HR Product of the Year. We are proud to be one of a small handful 
of certified LGBTQ-owned businesses providing enterprise Software as a 
Service (SaaS). Our customers include some of the largest companies in 
the world and we serve their employees--our end users--on five 
continents. From day one, PILOT was built to be a global company with 
global aspirations. That is why we appreciate the committee's attention 
to issues of digital trade and global competitiveness that are 
important to startups like PILOT.

To help startups like PILOT be competitive abroad, policymakers must 
pursue digital trade policies that lower barriers to entry, facilitate 
cross-border transfers of data, and promote uniform regulatory 
environments across jurisdictions. Data localization policies and 
regulatory regimes--especially around data protection and privacy--that 
vary from jurisdiction to jurisdiction increase the costs of serving 
customers and their employees in locations with these policies.

Compliance costs are not insignificant, especially for startups. I 
founded PILOT using my life's savings and we have bootstrapped since 
then, growing the business through the revenue we generate--we have not 
taken outside investment.

PILOT cares deeply about our users and keeping their data protected, 
and we have made significant investments to that end. Even with this 
focus, we must devote our limited resources to understanding our 
obligations and responding appropriately, especially when we serve 
customers abroad. High compliance costs amount to a transaction cost--a 
tax on doing business--that elevates barriers to operating in certain 
markets, without, in our view, any real tangible benefit to end users 
or our customers. Confusing and complex regulatory structures benefit 
large businesses who have the expertise and resources to comply and can 
amortize those costs across a huge base of business, while penalizing 
small innovative firms like PILOT, depressing economic growth. These 
costs can amount to 10 percent or more of the value of a contract.

The opportunity costs of compliance are not one to one. The resources 
devoted toward compliance that does little productive for our business 
could instead go toward additional innovation and job creation if those 
costs were reduced through smart digital trade policy. Savings from 
rationalized compliance policies free up dollars I can invest back into 
the business that helps us grow, in areas like marketing, sales, and 
R&D. That means we create more high-quality jobs for Americans in 
communities across the country, and generate more tax revenue for 
governments--all while adhering to our thoughtful and industry best-
practices around data privacy and IT security, protecting our 
customer's data and our reputation.

The regulatory environment and resulting compliance costs impact our 
competitiveness as a startup in multiple ways. Larger competitors are 
better positioned to absorb these compliance costs. Cumbersome 
regulatory environments also impact our prospective customers, who 
respond by reducing the amount of vendors they have. That means they 
often consolidate their supplier base to work with a few large 
companies and startups like us lose out on critical business 
opportunities. And finally as a result of regulations abroad, 
prospective customers in other countries may instead turn to a domestic 
competitor who can offer a lower price or appear to reduce regulatory 
risk.

Smart digital trade policy informed by the real-world experiences of 
startups like PILOT is critical to bolster the global competitiveness 
of U.S. startups. We appreciate the committee's attention to these 
issues and hope that our perspective will prove helpful as you work 
with your colleagues across government in forming U.S. trade policy for 
the digital economy. Rationalizing these policies is critical to 
``unlock'' America's renowned startup ecosystem, further facilitating 
the deployment of software and services around the world.

Sincerely,

Ben Brooks
Founder and CEO

                                 ______
                                 
                  Public Citizen's Global Trade Watch
                       215 Pennsylvania Ave., SE
                          Washington, DC 20003
                        https://www.citizen.org/
                             (202) 454-5107

                Statement of Melinda St. Louis, Director

Introduction

Public Citizen welcomes the opportunity to provide a written statement 
for the record for the Subcommittee Hearing: Opportunities and 
Challenges for Trade Policy in the Digital Economy. Public Citizen is a 
nonprofit consumer advocacy organization with more than 500,000 members 
and supporters. A mission of our Global Trade Watch division is to 
ensure that in this era of globalization, a majority can enjoy economic 
security; a clean environment; safe food, medicines and products; 
access to quality affordable services; and the exercise of democratic 
decision-making about the matters that affect their lives. We have 
conducted extensive analysis of U.S. trade and investment agreements 
and their outcomes, starting in 1991 during the initial North American 
Free Trade Agreement (NAFTA) negotiations. More recently, Public 
Citizen has been a leader in working to hold Big Tech accountable in 
the United States as well as identifying the dangers of so-called 
``digital trade'' rules with respect to efforts to regulate the tech 
industry around the globe.

Over the past 3 decades, the Internet has grown to encompass, or at 
least touch on, nearly all aspects of economic and social life around 
the world. During this time, a small number of companies (Big Tech) 
have emerged as the dominant architects of the global digital system, 
shaping how content is circulated, services are performed, and 
infrastructures are designed.

Lax domestic and global regulation has allowed Big Tech to enjoy broad 
and unfettered freedom to design, implement, and exploit e-commerce and 
digital systems and technologies. While new digital technologies, 
products, and systems have brought important benefits to people across 
the planet, the lack of oversight and regulation has enabled Big Tech 
to invade people's privacy, design and deploy a system of mass 
corporate surveillance, leverage its economic might to diminish 
competitors, discriminate (typically unintentionally) against 
vulnerable populations, and concentrate enormous political and economic 
power. The rise of Big Tech has inarguably contributed to a surge in 
wealth and income inequality within and between countries.

The Biden administration and Congress are grappling with how best to 
regulate Big Tech to protect consumer privacy, to ensure adequate 
competition, and hold companies accountable for discriminatory 
practices. Yet, behind closed doors in international trade 
negotiations, such as the U.S.-Mexico-Canada Agreement (USMCA) and the 
Japan-U.S. digital agreement, Big Tech has pushed digital trade terms 
that limit governments' ability to regulate their business practices. 
Big Tech continues to insert its deregulatory agenda \1\ in a patchwork 
of new Biden administration trade initiatives, including the Indo-
Pacific Economic Framework (IPEF), U.S.-EU Trade and Technology Council 
(TTC), and the U.S.-Kenya Strategic Trade and Investment Partnership 
(STIP), as well as ongoing discussions in the World Trade 
Organization's (WTO) E-commerce ``Joint Statement Initiative.'' They 
seek binding rules to:
---------------------------------------------------------------------------
    \1\ See Sarah Grace Spurgin, ``Public Submissions to U.S. 
Government Reveal Corporate Wishlist for IPEF: More Power at Our 
Expense,'' Public Citizen, published May 20, 2022, accessed December 
13, 2022.

      Limit the ability of governments to regulate where Big Tech 
firms send and store our data;
      Undermine investigation of discriminatory source code and 
algorithms, intrusive surveillance practices, and violent incitement 
online via prohibitions on technology transfer requirements and ``trade 
secrets'' protections;
      Shield online platforms from corporate accountability via overly 
broad liability waivers similar to the controversial Section 230 of the 
1996 Communications Decency Act;\2\
---------------------------------------------------------------------------
    \2\ Anna Edgerton, ``Tech Liability Shield Has No Place in Trade 
Deals, Groups Say,'' Bloomberg Law, published May 27, 2021, accessed 
December 13, 2022.
---------------------------------------------------------------------------
      Manipulate ``trade'' tools of ``market access,'' ``trade 
discrimination'' and ``conditions for business'' to exploit workers in 
the gig economy; and
      Protect monopolies and promote further consolidation by banning 
certain pro-competition policies.

These ``digital trade'' terms are not focused on remedying actual 
problems related to the online sale of imported goods, such as tariff 
evasion and product safety, but instead seek to undermine the stronger 
Big Tech accountability rules of many of our trading partners and tie 
U.S. policymakers' hands for future regulatory efforts. More than 50 
national organizations representing labor, civil rights, consumer, and 
other constituencies oppose these harmful ``digital trade'' 
provisions.\3\
---------------------------------------------------------------------------
    \3\ Trade Justice Education Fund, ``53 Organizations Warn About 
Harmful Provisions in `Digital Trade' Pacts,'' Press release, November 
2, 2021.

---------------------------------------------------------------------------
USTR Katherine Tai has articulated a more forward-thinking vision:

        Our approach to digital trade policy must be grounded in how it 
        affects our people and our workers. We must remember that 
        people and workers are wage earners, as well as consumers. They 
        are more than page views, clicks, and subjects of surveillance. 
        They are content creators, gig workers, innovators and 
        inventors, and small business entrepreneurs. This means they 
        have rights that must be protected--both by government policy 
        and through arrangements with other governments.\4\
---------------------------------------------------------------------------
    \4\ Amb. Tai, ``Remarks of Ambassador Katherine Tai on Digital 
Trade at the Georgetown University Law Center Virtual Conference,'' 
USTR Press Office, November 3, 2021.

Congress should monitor ongoing trade negotiations to ensure that any 
``digital trade'' talks advance this vision and do not replicate 
problematic provisions pushed by Big Tech that were included in the 
USMCA.\5\ Trade agreement rules on digital trade should not shrink the 
policy space of U.S. regulators and the U.S. Congress.
---------------------------------------------------------------------------
    \5\ See Global Trade Watch, ``Analysis of the NAFTA 2.0 Text 
Relative to the Essential Changes We Have Demanded to Stop NAFTA's 
Ongoing Damage,'' Public Citizen website, accessed December 13, 2022.
---------------------------------------------------------------------------

Limiting Government Regulation of Data Flows

Big Tech demands for ``free flow of data'' refers to binding rules to 
limit the ability of governments to regulate where Big Tech firms send 
and store our data. That would mean high-tech giants like Amazon, 
Google, and Facebook would be free to transfer our data to any other 
country. People's every move on the Internet and via cell phones is 
increasingly tracked, stored, bought and sold--as are interactions with 
the growing ``Internet of things,'' that many people may not even be 
aware are tracking them nor from which they have a feasible way to opt 
out.

``Digital trade'' terms that ban data localization requirements would 
significantly undermine the ability of governments to secure their 
citizens' data against unauthorized or unlawful exposure or processing, 
or against cyber-crime, accidental loss, destruction or damage, as 
these rules would mean consumers have no guarantee that their data 
would be protected where the data were transferred--even if domestic 
laws require such protections. Further, countries that have superior 
privacy laws could see their data protection rules undermined, and U.S. 
congressional efforts to enact privacy rules could be thwarted.

Concepts prohibiting limits on data flows appear in trade negotiations 
everywhere from the Trans-Pacific Partnership (TPP) to the Digital 
Economic Partnership Agreement, to the WTO ``e-commerce'' talks, and 
governments are signing up to these terms without understanding the 
implications for their domestic policymaking. We urge adoption of the 
precautionary principle when it comes to rules governing the storage of 
data, and as such, we urge lawmakers to not cement a ban on data 
localization requirements into binding law.

Limiting Algorithm and Source Code Transparency Requirements

Everyday decisions made by artificial intelligence (AI) components of 
online platforms affect which individuals and communities can access 
public and private services. AI uses emotion recognition, facial 
analysis, and social scoring, often with the intent to materially 
distort a person's behavior beyond their consciousness and exploit 
vulnerabilities. Critical components of economic and social stability 
like home loans, job postings, medical treatments, targeted ads, and 
much, much more are influenced and determined by AI algorithms, 
enabling modernized redlining. Governments are likewise increasingly 
turning to these algorithms developed by private corporations for aid 
with ``predictive policing'' and other surveillance functions.\6\
---------------------------------------------------------------------------
    \6\ Jane Chung, ``Racism In, Racism Out: A Primer on Algorithmic 
Racism,'' Public Citizen report, accessed December 13, 2022.

It is clear that there is a huge need for a collaborative effort to 
address this growing crisis, as demonstrated by the concept of the AI 
Roadmap, a broad document produced by the U.S.-EU Trade and Technology 
Council meant to operationalize trustworthy AI.\7\ However, in 
negotiating the terms of such collaboration, the work carried out in 
the name of ``digital trade'' should not lead to the lowest common 
denominator of legal protections for consumers, and as it stands, the 
AI Roadmap leaves room for unintended consequences with regard to 
domestic regulation.\8\ Instead, all AI systems should comply with 
mandatory rules that include, but are not limited to, transparency, 
accountability, and fairness, as well as audits and impact assessments 
that focus on discriminatory impact, statement of appropriate purpose, 
and capability.
---------------------------------------------------------------------------
    \7\ Read the text of the AI Roadmap: https://digital-
strategy.ec.europa.eu/en/library/ttc-joint-roadmap-trustworthy-ai-and-
risk-management.
    \8\ University of Maryland. (December 5, 2022). U.S. Department of 
Commerce Roundtable for U.S. and European Stakeholders [Video]. 
YouTube, https://www.youtube.com/watch?v=MHH6
TmAwlEo.

But ``digital trade'' terms that require governments to provide trade 
secret protections for source code and algorithms would limit 
governments from accessing such information only to instances of known 
violations of law. Congressional committees, scholars, and public 
investigators would be barred from reviewing code and related data to 
identify racist, sexist and other practices deserving of scrutiny and 
correction. Rather than shield these ``trade secrets'' from public 
scrutiny, continuous, independent oversight and transparency is key to 
ensuring human and civil rights are maintained in the digital age.

Undermining Workers' Rights

Corporate surveillance of workers has reached new heights. Workers' 
activity is being surveilled in and out of work, and their data is 
being created, collated and sold by and to employers to make managerial 
decisions. Managers are increasingly relying on source code-protected 
algorithmic decision systems, allowing employers to sidestep 
accountability and limit the ability of workers and unions to resist 
unfair labor practices, discriminatory hiring and firing, and further 
intrusive surveillance and monitoring.\9\ Data stored by employers is 
personal and sensitive, including real-time and past physical 
locations, health information, and more, so we must not make it harder 
for countries to protect that data via bans on data localization.
---------------------------------------------------------------------------
    \9\ Duncan McCann, ``e-Commerce: Free Trade Agreements, Digital 
Chapters and the Impact on Labour,'' International Trade Union 
Confederation, published April 30, 2022, accessed December 13, 2022.

Further, there is a false notion that workers providing services online 
or in the gig economy are somehow different from those in their brick-
and-mortar counterparts, and so domestic policies that generally apply 
to protect the rights of workers do not apply to them. Trade terms such 
as ``discrimination'' and ``market access'' may serve legitimate 
business concerns, but they can be manipulated by Big Tech companies to 
---------------------------------------------------------------------------
disguise attempts to avoid worker protection regulations altogether.

For instance, regulations that require large ride-sharing companies to 
meet driver hours-of-service rules or to contribute to drivers' social 
security have been illegal ``trade barriers.'' Big Tech corporations 
allege such industry standard regulations to be applying ``burdensome 
measures'' that impose ``unilateral regulations or taxes that deviate 
from global norms and single out digital platforms for special 
treatment, often with the intention of giving domestic companies an 
advantage.''\10\ Similarly, government action that shuts down 
operations of a company in their territory due to violations of local 
labor laws have been characterized by Big Tech companies as illegal 
limitations to ``market access.''
---------------------------------------------------------------------------
    \10\ Internet Association, ``Comments Regarding International 
Internet Priorities,'' Comment Submission to the National 
Telecommunications and Information Administration, published July 20, 
2018, accessed December 13, 2022.

Additionally, firms like Google and others \11\ are seeking trade terms 
that would bar governments from requiring a local representative or 
office as a condition for doing business, which could make enforcement 
of local labor laws that much more difficult.\12\ In the case of unsafe 
labor practices, if a foreign-owned company is not required to have a 
local representative, the authorities' only option would be to enforce 
labor laws against the gig worker themselves, not their employer. Local 
legal entities therefore are extremely useful for holding corporations 
accountable to their workers, consumers, and more.
---------------------------------------------------------------------------
    \11\ Google, ``Comments Regarding the Indo-Pacific Economic 
Framework, Comment on FR Doc # 2022-05206,'' International Trade 
Administration, published April 11, 2022, accessed December 13, 2022.
    \12\ Duncan McCann, ``e-Commerce: Free Trade Agreements, Digital 
Chapters and the Impact on Labour,'' International Trade Union 
Confederation, published April 30, 2022, accessed December 13, 2022.

No trade or other international commercial agreement should limit 
countries' policies that condition permission for an entity to operate 
on compliance with labor, health and safety, civil rights, competition, 
consumer and other policies that apply across an economy or to a 
sector.

Shielding Online Platforms from Corporate Accountability

Some pacts with ``digital trade'' rules require governments to enact 
liability shields for online firms that allow them to evade 
responsibility for discriminatory conduct, online racial incitement, 
and other civil rights violations.

The rules that govern the Internet are still hotly debated, 
particularly Section 230 of the 1996 Communications Decency Act.\13\ 
Section 230 states that no provider or user of an interactive computer 
service shall be treated as the publisher or speaker of any information 
provided by another information content provider. Online platforms use 
this law to claim they are not liable for content posted by third 
parties; for example, fraudulent or defamatory posts on Facebook. Some 
experts argue this is a core component of free speech online, while 
others say it mainly serves Big Tech companies to avoid liability for 
negligence.
---------------------------------------------------------------------------
    \13\ Anna Edgerton, ``Tech Liability Shield Has No Place in Trade 
Deals, Groups Say,'' Bloomberg Law, published May 27, 2021, accessed 
December 13, 2022.

There is vigorous opposition to and support for Section 230 by 
Democrats and Republicans. Such contentious, still-debated issues 
should not be locked in via a trade agreement, but should be decided in 
an open and democratic forum. Policymakers must have flexibility to 
address concerns with Section 230, not have the expanding digital 
policy space preempted by international trade agreements. Using trade 
pacts to prevent signatory countries from determining the best ways to 
protect the public interest online is unacceptable.

Undermining Antitrust Regulation

In October 2020, the House Judiciary Committee's Subcommittee on 
Antitrust, Commercial, and Administrative Law published a report on the 
monopolistic practices of the four largest tech firms: Apple, Amazon, 
Alphabet, and Facebook (now Meta).\14\ The report concluded that the 
dominant platforms have:
---------------------------------------------------------------------------
    \14\ Rep. Jerrold Nadler, Rep. David Cicilline, ``Investigation of 
Competition in Digital Markets: Majority Staff Report and 
Recommendations,'' Subcommittee on Antitrust, Commercial, and 
Administrative Law of the Committee on the Judiciary of the House of 
Representatives, October 2020, accessed December 13, 2022.

      Consolidated segments of the digital marketplace and abused 
monopoly power by advantaging their own products and services on their 
platforms over independent or smaller ones;
      Acquired hundreds of companies within the past decade, including 
purchasing potential competitors and shutting down or discontinuing 
services to foreclose the market; and
      Developed and acted on a financial incentive to abuse their 
significant and durable market power.\15\
---------------------------------------------------------------------------
    \15\ Ibid.

Big Tech companies seek ``digital trade'' terms that ban limits on 
size, services offered, or break-ups. As corporations and conglomerates 
exert increasing control over important social functions, governments 
must have the authority to combat anti-competitive business practices, 
place limits on corporate mergers, and break up monopolies where 
---------------------------------------------------------------------------
warranted.

In further manipulation of trade rules to undermine worker and consumer 
safety, there is a concerning trend of encouraging U.S. trade officials 
to consider other countries' enforcement of their domestic laws to be 
``discriminatory'' if such laws affect U.S. Big Tech companies more 
than the tech companies from other countries. But sometimes laws of 
general application addressing market concentration might impact U.S. 
firms because they have monopolized the industry. For example, Apple 
and Google are pushing U.S. trade officials to challenge a Korean 
antitrust law to end anti-competitive App Store practices, claiming the 
law is ``discriminatory'' because, due to their monopoly practices, it 
would affect them more than other businesses.\16\
---------------------------------------------------------------------------
    \16\ David McCabe, Jin Yu Young, ``Apple and Google's Fight in 
Seoul Tests Biden in Washington,'' New York Times, published August 23, 
2021, accessed December 13, 2022.

The United States federal government has a long history of intervening 
when mergers and consolidations have reduced competition to protect 
workers' safety, consumers' rights, and economic health. Manipulating 
trade rules for the consolidation of corporate power does not fit into 
the Biden administration's new approach to trade policy that empowers 
workers, defends their rights, and stops the global race-to-the-bottom. 
Therefore, ``digital trade'' rules must not include terms that forbid 
countries from establishing or maintaining policies that limit the size 
or range of services offered by companies, limit the legal structures 
under which they may be required to operate, nor otherwise restrict the 
---------------------------------------------------------------------------
regulation or break-up of Big Tech monopolies.

In addition to the efforts to include binding standards in future trade 
agreements, U.S.-based Big Tech companies are seeking assistance from 
the U.S. government in their quest to undermine robust consumer and 
social protections in other nations.\17\ These efforts can be seen in 
the annual USTR National Trade Estimates report that identifies other 
countries' laws that Big Tech firms (among others) don't like.\18\ In 
the Biden administration, Big Tech has made the greatest inroads with 
the U.S. Commerce Department, which has intervened repeatedly--and with 
deleterious impact--in the EU's adoption of a new digital services 
regime.\19\ Congress should oppose inappropriate U.S. efforts to 
undermine these kinds of regulatory frameworks, which the United States 
should in fact be emulating.
---------------------------------------------------------------------------
    \17\ See Letter from the Transatlantic Consumer Dialogue to Speaker 
Pelosi and Leader Schumer, dated June 9, 2022.
    \18\ See United States Trade Representative, ``2022 National Trade 
Estimate Report on Foreign Trade Barriers,'' published March 31, 2022, 
accessed December 13, 2022.
    \19\ Samuel Stolton, ``Raimondo: U.S. has `serious concerns' about 
EU digital rules,'' PoliticoPro, published December 8, 2021, accessed 
December 13, 2022.
---------------------------------------------------------------------------

Need for Pro-Consumer Rules

There are some legitimate international trade concerns associated with 
e-commerce and the broader digital economy that should be considered in 
IPEF or other trade negotiations. If digital trade rules are to be 
included, they should instead ensure that goods purchased online across 
borders meet labor, environmental and consumer safety standards, 
including by raising de minimis levels so that, for instance, the two 
million packages arriving from China to the U.S. daily to fulfill 
online orders can no longer evade U.S. inspection regimes.\20\ They 
should prevent corporate misclassification so that so-called ``digital 
platforms'' involved in transportation, hospitality, healthcare, 
retail, education and other industries cannot evade labor, consumer and 
other regulations imposed on ``brick-and-mortar'' businesses. To combat 
the growing high-tech discrimination in artificial intelligence, 
international trade rules should guarantee access to source codes and 
algorithms by congressional committees, government agencies, academic 
scholars, labor unions and nongovernmental organizations. Any rules 
should also introduce corporate liability for personal data collected 
via computers, cell phones and the ``Internet of Things'' without 
consumers' explicit, informed permission, shared or sold without their 
permission, and/or stolen.
---------------------------------------------------------------------------
    \20\ Rep. Earl Blumenaur (D-OR), ``Chairman Blumenauer Unveils New 
Legislation to Fix Import Loophole, Level Playing Field, and Boost 
Oversight,'' Congressional Press Release, January 18, 2022.
---------------------------------------------------------------------------

Transparency and Oversight

Congress and the public must monitor, investigate, and publicly debate 
the ``digital trade'' terms that may be sought by Big Tech firms in the 
context of the IPEF, U.S.-Kenya STIP or other trade negotiations, to 
ensure that they do not become tools for weakening, preventing, or 
dismantling labor, consumer, or other public interest policies in the 
digital sphere. In order for Congress to exercise its constitutional 
authority over the regulation of foreign commerce, Fast Track Trade 
Promotion Authority (TPA) must not be renewed. TPA is an extreme 
delegation of Congress' constitutional trade authority. It empowers a 
president to choose prospective trade partners, negotiate deals and 
sign a trade pact all before Congress has a vote on any element of it. 
TPA also empowers the executive branch to control Congress' voting 
schedule, and both the House and Senate are required to vote on a trade 
agreement's implementing legislation within 90 days of the White House 
submitting it. No floor amendments are allowed and debate is limited, 
effectively eliminating the transparency, accountability, and oversight 
necessary for the far-reaching trade and investment agreements that the 
administration is negotiating.

Instead, Congress should insist that the U.S. Trade Representative and 
the Department of Commerce replace the past secretive trade negotiation 
process with an on-the-record public process, including public 
hearings, to formulate U.S. positions and obtain comment on draft and 
final U.S. text proposals. U.S.-proposed texts and draft consolidated 
texts after each negotiating session must be made public. Strict 
conflict of interest rules must be enforced. Only by issuing detailed 
goals and making draft texts available will the American public know in 
whose interest the negotiations are being conducted.

Conclusion

As governments worldwide work to address fundamental issues relating to 
digital governance and build a framework for the future, these 
important policy debates and decisions that will shape every facet of 
our lives must not be constrained, undermined, or preempted via 
``trade'' pacts or policies. To achieve President Biden's worker-
centered approach to trade that will complement the administration's 
efforts to build a more resilient economy, its ``digital trade'' agenda 
must not undermine domestic policy space on critical emerging issues 
like gig economy worker protections, discrimination and algorithm 
transparency, corporate liability, and consumer privacy, but instead 
should be structured to raise the floor to help ensure that human and 
civil rights are protected at home and around the globe.

                               [all]