In advance of next week’s U.S.-EU Summit, U.S. Trade Representative Katherine Tai hinted at a troubling deviation from USTR’s mission and philosophy behind standing up for American businesses and workers during a recent conversation at the Center for American Progress.
Responding to a question about the European Union’s digital sovereignty agenda, Ambassador Tai suggested that the U.S. Government has “to really be cognizant that measures that may look like they have a discriminatory effect may or may not be advanced with a discriminatory intent.”
Adhering to such an approach would signal a fundamental change to U.S. trade policy and send a damaging message to the rest of the world that the U.S. Government doesn’t have industry or workers’ backs.
Evaluating the EU Digital Sovereignty Agenda’s “Discriminatory Intent”
On the specific issue of the EU’s digital sovereignty agenda, it’s hard to argue with a straight face that it wasn’t conceived with the intent to discriminate against American companies and protect EU domestic firms. European officials have repeatedly said the quiet part out loud:
- “We must have mastery and ownership of key technologies in Europe,” European Commission President Ursula von der Leyen
- “Let’s go down the line — one, two, three, four, five [American companies] — and maybe six with [China’s] Alibaba. But let’s not start with number seven to include a European gatekeeper just to please Biden.” German MEP Andreas Schwab
- “The battle we’re fighting is one of sovereignty…If we don’t build our own champions in all areas—digital, artificial intelligence—our choices will be dictated by others.” French President Emmanuel Macron
- In 2019, then-French Secretary of State for Digital Affairs Mounir Mahjoubi assured publicly that Paris’ Digital Services Tax would “not sanction European players.”
These remarks, combined with the design and effect of the EU’s various digital sovereignty measures currently in place and under consideration, would seem to meet Ambassador Tai’s standard of “discriminatory intent” to trigger U.S. concern and advocacy. In confronting these measures, the Biden Administration will find support from the bipartisan leaders of the Senate Finance Committee, dozens of Members of Congress, and former Democratic and Republican U.S. Trade Representatives.
A Narrow Threshold for U.S. Advocacy
Stepping back, Ambassador Tai appears to be suggesting a new and distressingly narrow threshold for the U.S. Government to stand up on behalf of American businesses and workers against barriers or unfair treatment abroad.
As she acknowledged in her remarks at CAP, an approach focused on discerning “discriminatory intent” is inconsistent with the traditional “guiding discipline” of nondiscrimination that the United States has promoted for generations in domestic law, at the World Trade Organization and through its trade agreements.
It’s also inconsistent with the overall approach to trade advocacy advanced by Congress and multiple Administrations over many years, in which addressing discrimination is only one of the guiding principles for U.S. commercial diplomacy. For example, Congress provides other advice and authorities to USTR to address foreign policies and practices that are unjustifiable and burden or restrict U.S. commerce or are inconsistent with our trade agreements, whether or not they overly discriminate against U.S. interests.
What About an Agricultural Sovereignty Agenda?
One question is whether USTR would feel so bound to abide by this new standard of evaluating “discriminatory intent” if a major trading partner focused on developing a “steel sovereignty” or an “agriculture sovereignty” agenda rather than a digital one.
If sleuthing the “intent” behind foreign regulations is truly the new standard for triggering U.S. Government advocacy abroad, the United States will invite widespread discrimination against U.S. exporters (whose firms tend to pay higher wages to workers than non-exporters) and investment by China, India, the EU and even Canada and Mexico. Our trading partners will begin each new discriminatory effort with a long explanation of its noble and-not-at-all-discrimnatory intent to quiet U.S. objections.
If, instead, this standard only seeks to limit U.S. advocacy for digital innovators and workers, it’s a shortsighted approach that completely misses the point of U.S. leadership on digital trade, and whose effects will be felt far beyond large technology companies.
As USTR notes, the manufacturing sector generates more data than any other sector of the economy. Farmers use digital tools and customs procedures to access new markets and prevent food from spoiling. Small businesses that use digital tools intensively conduct a significantly-higher percentage of business globally. President Obama’s USTR noted that strong digital trade commitments are critical for women-owned businesses, which benefit from an export premium that is higher than for other businesses.
If the United States abandons its global leadership on digital trade, and stands down from its defense of the principles of national treatment and nondiscrimination, it will seriously disadvantage American businesses and workers and give a leg up to Chinese, European and Indian competitors whose governments are actively helping them expand their influence domestically and globally.
-NFTC President Jake Colvin