What does the October 25 reversal mean for the economies of the United States and its allies?

The USTR’s withdrawal of support for trade rules that promote cross-border information access will produce significant economic costs for the United States and its US allies.

Restrictions on cross-border access to information and other digital trade barriers harm GDP (-0.7-1.7%); investment flows (-4%); productivity (4.5% loss); and small business (up to 80% higher trade costs). As the World Bank has noted, “restrictions on data flows have large negative consequences on the productivity of local companies using digital technologies and especially on trade in services.” These burdens are borne most heavily by developing and least developed economies. As the United Nations has stated, “regulatory fragmentation in the digital landscape…is most likely to adversely impact low-income countries, less well-off individuals, and marginalized communities the world over, as well as worsen structural discrimination against women. A future of exclusionary digital development must be avoided at all costs.”

Despite their heavy economic costs, cross-border data restrictiveness continues to increase. It is estimated that these restrictions increased by 600% between 2013 and 2019 in the Asia-Pacific, and increased at a rate five times higher in 2022 than in 2021.

Conversely, studies also show that removing cross-border data restrictions benefits workers, consumers, and enterprises across the economy. According to the World Bank, “studies show that countries would gain on average about 4.5 percent in productivity if they removed their restrictive data policies.” The Organisation for Economic Co-operation and Development has found that a 0.1 point reduction in a country’s level of digital services trade restrictiveness is associated with a 145% increase in overall exports.

What does the October 25 reversal mean for digital inclusion, worker and consumer welfare, and marketplace competition?

Cross-border access to information is necessary to promote digital transformation and digital inclusion for consumers, workers, and enterprises of all sizes, at every stage of the value chain, and across every sector, including the agriculture, automotive, clean energy, finance and insurance, healthcare and medical technology, logistics, media, pharmaceutical, and telecommunications sectors. Digital barriers to the exchange of connected goods and services including aircraft, vehicles, semiconductors, creative content, and financial and other services also hurt the workers who design, produce, and deliver them, and the consumers who purchase them. In the United States, 1 in 5 jobs (40 million jobs) is supported by international trade, a proportion that is even higher among many of America’s closest allies.

Small businesses across all sectors are particularly vulnerable to restrictions on the cross-border access to information. For example, in one recent study conducted across markets in the 12 member states of the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP), the TPP’s successor, roughly 70% of small businesses surveyed stated that the CPTPP’s rules on data transfers and data localization were somewhat or very beneficial to their ability to engage in online commerce. At the same time, 30% to 40% percent of small businesses surveyed said that fragmented and inconsistent digital policies and data localization barriers were top challenges.