THE TTALK QUOTES 

On Global Trade & Investment
Published By:
The Global Business Dialogue, Inc.
Washington, DC  Tel: 202-463-5074
 
No. 68 of 2019
WEDNESDAY, OCTOBER 23, 20219

Click HERE f or the October 11 quote from
Terence Stewart on the WTO.


THE ECONOMY AND DIGITAL TRADE

 "There's really no such thing as the digital economy; it's just the economy." ...

"The Administration has concluded an exceptionally high-standard agreement with Japan on digital trade."

Jonathan S. (Josh) Kallmer
September 26, 2019
CONTEXT
Josh Kallmer was one of four panelists at the GBD September 26 event on the new U.S. Japan trade agreement. He is the Senior Vice President for Global Policy at the Information Technology Industry Council or ITI. As he explained, ITI represents “seventy of the world’s leading innovation companies.” Most of them he said, “are in the technology sector …. , but we also have a number of companies that are not truly or purely technology companies but [are companies that] rely instinctively on technology to do business.” Reading between the lines, all of them have a big stake in digital trade. Or in the clear words from Mr. Kallmer’s presentation:

“There’s really no such thing as the digital economy; its just the economy.”

To recap briefly, President Trump and Japanese Prime Minister Abe , meeting in New York on September 25, announced a new U.S. Japan Trade Agreement. At the GBD event the following day, Rep. Adrian Smith of Nebraska talked about the significance of the new agreement as did the private sector panel that followed him.  

Subsequent developments have underscored that we are really talking about two separate agreements. One is a trade agreement that improves market access for suppliers in both countries to the markets of the other. Critically, it promises U.S. agricultural producers the same opportunities in Japan as those enjoyed by countries in the Comprehensive and Progressive Trans-Pacific Partnership agreement or CP-TPP.  The other agreement is the U.S.-Japan Digital Trade Agreement. Both agreements were signed by officials of the two countries on October 7.  Ambassador Lighthizer signed for the United States and Ambassador Shinsuke Sugiyama , Japan’s ambassador to the United States, signed for Japan. In each case, the agreement is scheduled to go into effect 30 days after both countries have completed the necessary internal procedures. 

Usually we stick to just one featured quote. In this case, however, we felt that Mr. Kallmer’s insight about the economy was as important as his assessment of the agreement on digital trade, and so we included both. To expand a bit more, here is the context for the statement about the digital trade agreement:

We’re really happy from a sector and subject matter point of view that the Administration has concluded an exceptionally high-standard agreement with Japan on digital trade. I’m a cleared advisor. I can’t, obviously, disclose the contents of it, but I feel great about the language that has been negotiated. It’s as good as any in the world. And it’s important, not just because of the expectations, and the rules, and the commitments that it sets between these two countries but because of the message that it sends to the rest of the world. 

One of the things that one learns as a trade negotiator is that every agreement you negotiate is not just with the country you’re negotiating with. In a way, it’s with the rest of the world, because you’re making a statement to the rest of the world about what the prevailing values ought to be. 

And so, to have an agreement that has gold-standard provisions on cross-border flow of data , that has very strong prohibitions on data localization requirements, that ensures that customs duties can’t be applied to digital products, and so on down the line. That has high-standard recognition of the importance of privacy and cyber security to governments. That is not only important as between the United States and Japan but with respect to the rest of the world, recognizing that it does take time to change minds in other countries. 
COMMENT
The United States and Japan have said they are committed to the larger task of negotiating a more comprehensive agreement. More on that tomorrow. As for the two signed agreements, we think it is a good thing that an effort has been made to remove the handicap that CP-TPP created for U.S. agriculture in Japan. The Digital Trade Agreement has the strong virtue of establishing, or trying to establish, global norms for various aspects of digital commerce, from cross-border data flows to data localization requirements. The digital trade component of USMCA, the new NAFTA, represents a similar effort.

There was a time when provisions like these might have been described, at least in the United States, a “motherhood and apple pie," things upon which the agreement was so broad as to be almost unchallengeable. In today’s world, however, “motherhood,” some aspects of it, could hardly be more contentious, and even apple pie has its detractors. We haven’t had a chance to watch Mark Zuckerberg’s testimony earlier today before the House Financial Services Committee, but our impression is that it was stormy. In short, it was one of several recent reminders that the age of incubation for the high tech companies, an age when the legislative attitude was “leave them alone and let them grow,” is coming to an end if it is not already over.

One element of that shift in attitude came up in the discussion with Josh Kallmer on September 26. A questioner referenced the fact that Democrats and Republicans in the House had both questioned the USMCA provision that, in effect, provides a safe-haven for platforms like Facebook. There is a similar provision in the U.S.-Japan agreement on digital trade. Both provisions parallel Section 230 of the Communications Act of 1996.  Asked about that language, Mr. Kallmer acknowledged that it is being questioned by some members of Congress. “It’s a complex topic,” he said, “but as of today, it reflects U.S. law, and we continue to support it.”

***

We don’t want to overstate the importance of these issues. We think both governments deserve praise for these new U.S.-Japan agreements, and we very much hope Congress will approve implementing legislation for USMCA. But in moving forward, it is worth keeping in mind that new issues will arise, new solutions may be proposed, and, from time to time trading relationships may need to be adjusted accordingly.  
SOURCES & LINKS
Josh Kallmer’s Remarks takes you to the GBD transcript of Mr. Kallmer’s remarks at the GBD colloquium on U.S.-Japan trade, which was held at the National Press Club in Washington on September 26. 

September 26 Event is the page of the GBD website with material from our recent event on U.S.-Japan trade. These include audio recordings of all of the presentations and selected transcripts. 

Agreement Texts is a page on the USTR website with links to the texts of the two agreements and to the related annexes and side letters.   Market Access takes you to the text of the first agreement and Digital Trade to the other. 

Congress and Online Extremism is an article from The Hill, published earlier today, that deals with one element of the Section 230 issue. 

From the House Commerce Committee. This was the TTALK Quote from August 22, which highlighted a letter from the Chairman and Ranking Member to USTR on Section 230 of the Communications Decency Act.
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