Congress to Scrutinize USTR's Retreat on Digital Trade Rules
The U.S. Trade Representative (USTR) has faced criticism for its recent retreat from advocating for digital trade rules, a move that could impact the fast-growing sector worth $2.6 trillion to the U.S. economy. Congress is set to scrutinize this shift in policy during oversight hearings on April 16 and 17, featuring Ambassador Katherine Tai.
Last summer, USTR paused negotiations on key digital rules with Asia-Pacific partners. In November, it backed off advocating similar rules within the WTO, citing alignment with foreign policymakers seeking to rein in U.S. tech companies. However, this retreat comes as digital trade, which supports 8.9 million U.S. jobs, has significantly expanded and is the fastest-growing sector in trade services.
Congress has expressed concern about this regression in U.S. trade policy. The House and Senate hearings will likely focus on the potential economic uncertainty, weakened domestic demand, and negative impacts such as shrinking GDP, reduced investment, and rising inflation passed on to consumers, especially lower-income households. In 1998, Congress expanded USTR's scope to investigate trade barriers in electronic commerce, indicating its long-standing interest in the sector. Digital trade is the foundation for exporting a wide range of goods and services, including agriculture, healthcare, finance, transportation, and tourism.
USTR's National Trade Estimate (NTE) report has been criticized for minimizing long-recognized barriers to digital trade, suggesting a step backwards for U.S. digital trade advocacy. Trade barriers in digital products and services have significantly increased over the past decade, further emphasizing the need for robust U.S. engagement in digital trade negotiations.
As the digital economy accounts for 10% of the U.S. GDP, the USTR's retreat from advocating digital trade rules raises concerns about the future of this crucial sector. The upcoming congressional hearings aim to address these concerns and hold USTR accountable for its role in shaping U.S. trade policy in the digital age.
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