Trade and the Digital Economy: Opportunities for U.S.-Japan Global Leadership

Ambassador Daniel A. Sepulveda
Deputy Assistant Secretary and U.S. Coordinator for International Communications and Information Policy, Bureau of Economic and Business Affairs
Brookings Institute
Washington, DC
March 30, 2015

As prepared

Three billion people are connected to the Internet today. And trillions of devices are set up to join them in the Internet of Things. Together, those connections and the data and economic activity that they generate constitute the global digital economy. Our trade policy and other bilateral efforts can and should enable its growth.

America and Japan are leaders in the global digital economy, not just as producers and consumers, but as advocates for the policies that enable its existence and continued development. Our partnership is strong because we both believe that promoting continued global connectivity, with as little friction as possible injected into the transfer of ideas and information, holds the potential to help lift people out of poverty, formalize the informal economy around the world, increase the efficiency of supply chains, increase the productivity of workers, raise wages, and improve people’s lives.

We both believe that the promotion of the global digital economy is an enabler of human progress. It forms a foundational platform for broadly shared prosperity.

So what does that mean for our trade policy and why should advocates for the global Internet support our work in this space, including Trade Promotion Authority and the TPP? The answer is this: the value that trade agreements can add to the strengthening of the global Internet as a platform for progress lies in language that America and Japan are championing. The goal is to establish a joint commitment among signatories to policy that encourages private sector investments in the networks that enable the transmission of data across borders by protecting cloud computing against data localization for example and provisions preserving the free flow of information over the communications networks that connect people and nations. These are two critical elements to the future of the Internet.

Those provisions applied to as many markets as an agreement like the TPP will cover can create the certainty of a safe space for the Internet to continue to grow that covers millions of people and can set an example for the rest of the world to follow.

Senator Ron Wyden, the ranking member on the Senate Finance Committee, has made the argument that, "America’s trade negotiating objectives must reflect the fact that the Internet represents the shipping lane for 21st Century goods and services… Trade in digital goods and services is growing and driving economic growth and job creation all around the country. U.S digital exports are beating imports by large margins, but outdated trade rules threaten this growth by providing opportunities for protectionist policies overseas. The U.S. has the opportunity to establish new trade rules that preserve the Internet as a platform to share ideas and for expanding commerce..."

Senator Wyden is absolutely correct. He is widely acknowledged as one of the strongest champions for the open Internet in our Congress and his work on trade is consistent with that body of work.

Our pending agreements with nations in the Pacific community will establish rules for the preservation of those virtual shipping lanes as enablers of the transport of services and ideas, allowing startups and the voices of everyday people to challenge incumbent power in markets and ideas.

We know that both old and new American businesses, small and large alike, are dependent on the global Internet as the enabler of access to previously unreachable consumers. In the U.S. alone, American Internet companies and their global community of users contribute over $141 billion in annual revenue to the overall U.S. GDP, simultaneously employing 6.6 million people. And the Internet is not simply about the World Wide Web, it is the communications platform for managing global supply chains, distributing services, and acquiring the market information necessary to succeed anywhere.

As Ambassador Froman has said, “Trade, done right, is part of the solution, not part of the problem.” It is, when done right, an enabler of the values America holds dear. And that idea is neither new nor partisan.

It was Woodrow Wilson who said, “The program of the world's peace, therefore, is our program; and that program, the only possible program, as we see it, is this” and he listed his fourteen points. Among them was number three: “The removal, so far as possible, of all economic barriers and the establishment of an equality of trade conditions among all the nations consenting to the peace and associating themselves for its maintenance.”

It was Franklin Roosevelt who asked the New Deal Congress for the first grant of trade negotiating authority.

In his remarks at the signing of the Trade Expansion Act of 1962, it was JFK who said, “Increased economic activity resulting from increased trade will provide more job opportunities for our workers. Our industry, our agriculture, our mining will benefit from increased export opportunities as other nations agree to lower their tariffs. Increased exports and imports will benefit our ports, steamship lines, and airlines as they handle an increased amount of trade. Lowering of our tariffs will provide an increased flow of goods for our American consumers. Our industries will be stimulated by increased export opportunities and by freer competition with the industries of other nations for an even greater effort to develop an efficient, economic, and productive system. The results can bring a dynamic new era of growth.”

If he were alive today, he would have also cited what increased trade could do for the global Internet.

It is fully consistent with the sentiments of these giants in our tradition, from Wilson to Kennedy, that President Obama most recently stated, “Twenty-first century businesses, including small businesses, need to sell more American products overseas. Today, our businesses export more than ever, and exporters tend to pay their workers higher wages. But as we speak, China wants to write the rules for the world’s fastest-growing region. That would put our workers and our businesses at a disadvantage. Why would we let that happen? We should write those rules. We should level the playing field. That’s why I’m asking both parties to give me trade promotion authority to protect American workers, with strong new trade deals from Asia to Europe that aren’t just free, but are also fair. It’s the right thing to do.”

Preservation of these ideals is and should remain a bipartisan and broadly held goal. It is critical to our future and contained within the language we are asking Congress to approve.

Beyond trade policy and the critical provisions in the TPP for the future of the Internet, America and Japan can and are working together to ensure that our domestic digital initiatives are both enabling the digital economy and leveraging it for positive purposes. We conduct annual dialogues on the subject and share information and ideas on issues ranging from how we use communications for disaster response, how we encourage competition, and how we are working to sensibly construct rules for the collection, use, and distribution of data in our markets in a way that protects privacy while enabling innovation.

In the multilateral space and of most direct relevance to the work of my office, American and Japan are strong partners in multilateral forums and negotiations where we work together to ensure that we preserve the decentralized, multistakeholder system of Internet governance. Last year, our two governments partnered at the International Telecommunication Union’s Plenipotentiary treaty conference to protect the Internet’s existing system of voluntary protocols and multistakeholder-led governance against initiatives by other nations to centralize control over the Internet in the hands of governments at the UN. At the same time we partnered at the NETMundial conference in Brazil, the Internet Governance Forum, and other institutions and gatherings in an effort to encourage and facilitate greater participation and representation from the developing world in the multistakeholder system of Internet governance.

Together, we will continue to focus the world on expanding connectivity, keeping digital trade routes open, and ensuring that we continue to expand the digital economy and make it more inclusive. These are valuable, long term efforts and we have the kinds of bonds between friends and allies that will help us succeed.

Thank you for your time. I look forward to your questions.