The Economic Impact of Digital Trade

Ambassador Daniel A. Sepulveda
Deputy Assistant Secretary and U.S. Coordinator for International Communications and Information Policy, Bureau of Economic and Business Affairs
Hyatt Regency Chesapeake Bay
Cambridge, MD
April 12, 2014

Thank you for having me here today. I appreciate the invitation to provide an overview of how the State Department is working to protect and promote the global and open Internet as an enabler of international trade and international commerce.

As you know, there are 2.7 billion people connected to the Internet, creating immense economies of scale, and enabling unprecedented communication and commerce between people, and within and across national boundaries.

The State Department works with the Department of Commerce, USTR, the FCC, the private sector, and allies abroad to promote the open and global Internet. We are guarding against the efforts of some governments to create new regulatory barriers to digital commerce either within their countries or through international organizations.

We work to create alternatives to burdensome regulatory proposals to help governments connect their people to communications at affordable rates, protect them from cyber threats, enable Internet startup businesses and use the Internet to boost innovation, productivity and job creation.

We do that by working to make the Internet community’s existing multistakeholder system of governance more inclusive and transparent. We also have programs and public-private partnerships to enhance the capacity of nations in the developing world to attract investment, defend their networks, and enable their people and businesses to take advantage of all that the Internet has to offer. In markets with different regulatory philosophies and structures, we work to facilitate data transfers across borders with as little friction as possible.

We have had some success but challenges remain. For example, when it comes to success, we have established shared principles on Internet policymaking and privacy issues at the OECD, which have drawn support through our international diplomatic efforts. We also have multiple successful models for mutual recognition and trans-border accountability relative to differing privacy protection regimes. These include the US-EU Safe Harbor Framework, the EU’s Binding Corporate Rules and the Cross-Border Privacy Rules System for APEC. Nonetheless, some policymakers in Europe and elsewhere want to see increased protection in the U.S. of their citizens’ personal data. We are working with them to show that privacy is a shared value by explaining our system of sectoral privacy protection. For example, our communications, health care and financial services sectors have very specific privacy protections that, in combination with our laws against unfair or deceptive practices, establish strong protections for consumers.

In the area of challenges, our analysis of foreign data localization proposals suggests a variety of motivations for them. Some are blatantly protectionist, some reflect the frustrations of local law enforcement officials, and some are rooted in concerns about privacy and security. Most of them pre-date the unauthorized disclosures of alleged NSA surveillance activities. Recent disclosures have simply served to embolden certain actors pursuing a pre-existing agenda. What all data localization proposals have in common is that they will discourage the use of affordable cloud computing services, which will ultimately affect investment and diminish economies of scale that enable small and medium sized businesses in the countries where these proposals are being advanced to be more productive and reduce the time to market. We are committed to pushing back against unnecessary data localization requirements, which sometimes requires nothing more than clearing up misconceptions about U.S. laws and practices, and sometimes requires more pointed forms of engagement. Most recently, Brazil backed away from a data localization proposal it was pursuing in response to very effective external and internal advocacy.

On the larger question of Internet governance and the role of governments in that process, we continue to stand firm in our support for the existing multistakeholder system. We will work with others in good faith to strengthen that system, making it more inclusive, responsive, and transparent but we will not support efforts to supplant it.

As you all know, the Internet is open and global by design. That is how its founders established it. It is how the worldwide Internet community of network operators, service providers, device manufacturers, programmers, activists, businesses, and consumers has come to thrive on it.

The Internet community itself, through voluntary cooperative multistakeholder organizations, establishes the protocols that enable the interconnection of networks and the transfer of data across the Internet. The community executes the function of naming and numbering that ensures each device is uniquely detected and connected to other devices on the network. And in today’s operating environment, market opportunities and needs drive investment decisions ranging from where to place data centers to how information is routed and protected, not governments.

That system is working. We would all like it to work better and faster, but its effectiveness to date is unprecedented. Governments are stakeholders in the future of the Internet and there is a place and a role for them to play in the world’s multistakeholder institutions. We agree that those institutions should be more inclusive and transparent. They are making progress toward that end. But, we do not believe that we should supplant or duplicate the work of those institutions with government mandates.

That debate will continue. We will engage in it respectfully and work cooperatively with anyone that wants to see the Internet continue to grow and become increasingly secure in a way that makes economic and technological sense. We look forward to working with you in that effort.