Tech firms face new international restrictions on data and privacy

Tom Brady

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The rapid growth of e-commerce in recent decades has been accompanied by an increase in digital trade barriers. Those include requirements for companies to store their data in the country where it is collected or to hand over their source code to a joint venture partner in order to do business in a particular market. Until now, the United States has been a leading voice on the international stage pushing back against such provisions, which it argued not only hurt big tech companies but small and medium-size companies that increasingly rely on the internet to do business.

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The move

With the support of Sen. Elizabeth Warren (D-Mass.) and some other progressive Democrats, the Office of the U.S. Trade Representative withdrew longtime bipartisan positions on data flows and source code in digital trade talks among 90 members of the World Trade Organization. The Biden administration said withdrawing the proposals would allow “policy space” for Congress, as well as other WTO members, to legislate and regulate in the tech space without bumping into trade commitments.

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The impact

The move represents a significant shift in the U.S. stance on global tech policy as the motives and actions of big tech companies come under increasing scrutiny. Key members of Congress, including the bipartisan leaders of the Senate Finance Committee and the House Digital Trade Caucus, harshly criticized the move, which they said would hurt U.S. competitiveness and give China and Russia more scope to craft harmful digital trade rules. It also signaled a broader retreat on the issues in U.S.-led trade talks, including the administration’s proposed Indo-Pacific Economic Framework with 13 other countries in the region.

The upshot

The decision aligns the Biden administration’s trade policy with its antitrust actions against big U.S. tech firms. However, it also has triggered a debate that could play out in future administrations over whether the U.S. will continue to defend the interests of its own domestic tech industry in foreign markets as part of future trade agreements.