Digital Trade

Digital Elements of the US-Japan Trade Agreement are a Model for the World

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Last week, I was honored to represent IBM as President Trump and Prime Minister Shinzo Abe announced a new U.S.-Japan trade agreement. Along with the agreements governing certain agricultural and industrial goods, both leaders committed to robust guidelines to promote and protect digital trade between the world’s largest and third-largest economies.

We often rightly speak about the power of data to transform every aspect of our lives. It has quickly become the most valuable resource on earth, and its value is expected to grow exponentially in the decades ahead. In fact, the global volume of data is predicted to increase by more than five times in just the next six years, while much of this data is inextricably linked with economic and societal progress. For example, the U.S. digital economy grew at a rate almost four times faster than the economy as a whole from 2006 to 2016.

We tend to spend less time focusing on how exactly we ensure that this data revolution continues to thrive in a truly global economy. For companies of all sizes, the lifeblood of the digital economy is the secure movement of business data – meaning data flows freely across borders while adhering to strict security and privacy standards. To that end, I’d like to recognize the importance of this deal in shining a light on this critical issue and setting a clear example for others to follow.

With specific provisions on free cross-border data transfers, minimal limits on where data can be stored or processed, and digital distribution of digital products without duties or other protectionist measures, this deal shows that traditional trade discussions are finally catching up with the reality of today’s market. And the deal’s strong protections for digital intellectual property – such as algorithms and source code – recognizes that these assets are just as valuable to businesses in the 21st century as blueprints and product designs were in the 20th.

IBM serves many of the world’s largest multinational corporations that rely on us to not just manage their most valuable data in a responsible and secure manner, but to turn it into a competitive advantage. On a daily basis, I speak with clients who rely on an open digital trade environment to provide banking services, to manage global communications networks, to ship their products around the world, and much more. All of these interactions are entirely dependent on secure cross-border data transfers.

When you think about these touchpoints, it’s easy to understand the repercussions of countries enacting trade policies that throw-up obstacles to the movement of data – just think about being charged different amounts for accessing your files depending on where the server was located. A protectionist approach toward digital trade would add significant cost and complication when it comes to moving, managing and sharing data. This would ultimately restrict innovative services, hamper job creation, and slow global economic growth. We can avoid that.

Looking ahead, the most immediate opportunity to build on the progress made with the signing of this agreement lies with the U.S.-Mexico-Canada Agreement (USMCA), which will update NAFTA for the 21st century. The USMCA will provide essentially the same digital provisions as seen in the U.S.-Japan deal, covering our second- and third-largest trading partners. With the U.S. Congress back in session, it’s time to pick up and pass USMCA as quickly as possible.

More broadly, the U.S. should look to make robust digital trade provisions a top priority across its ongoing and future trade negotiations, such as potential deals with the EU and UK post-Brexit, as well as in its engagement with the World Trade Organization.

We’ve only just begun to unlock the opportunities of the digital age. But when much of our success depends on the ability to connect across markets efficiently and affordably, our trade policies must accurately reflect and protect the economic drivers of the day.

 

Martin Schroeter is senior vice president of IBM Global Markets.

 

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