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NAFTA’s Sweet Spot for a Tech Enabled Economy

The North American Free Trade Agreement (NAFTA) agreement negotiated 25 years ago predates many technologies we use every day, even some of the companies that created them, and would benefit from an update. A modernized NAFTA that addresses a wide range of digital priorities would turbocharge the U.S. economy.

Already strong U.S. exports of technology goods and services—in 2016, total U.S. exports of technology goods exceeded $202.1 billion and, in 2015, U.S. exports of services that are provided over information and communications technology networks were $398.7 billion—would only stand to increase. Technology companies already employ over 6.9 million Americans – 5% of private sector employment – and account for 7.5% of U.S. GDP. But that is only part of the picture because industries across the economy are leveraging our innovations, meaning that a modernized NAFTA would lead to more job creation and economic growth.

The Office of the U.S. Trade Representative (USTR) has taken good first steps in this direction. Its initial negotiating objectives for NAFTA modernization, released on July 17, include several important objectives (e.g., allowing cross-border data flows, prohibiting data localization requirements, and prohibiting parties from requiring companies to turn over software source code) for digital provisions fit for the 21st century.

At the same time, the objectives omit many global tech sector priorities for NAFTA modernization. In the public comments ITI submitted to USTR in June, we outlined 41 priorities that we believe are essential to modernizing NAFTA in a manner that reflects how digital the economy is today and will be in the future. USTR’s negotiating objectives clearly address only 16 of these 41 priorities.

Before the negotiations commence on August 16, ITI urges the administration to enhance its negotiating objectives to include:

  • Promoting a free and open internet;
  • Ensuring that data can move freely across borders;
  • Prohibiting requirements on companies to localize data or production, or to turn over technology, source code, algorithms, or encryption keys;
  • Seeking industry-led, globally “interoperable” approaches to privacy and cybersecurity;
  • Ensuring that regulation of online services and applications targets genuine regulatory objectives, and that governments do not make internet intermediaries, platforms, and cloud providers liable for activity by third parties that they do not control;
  • Eliminating restrictions, tariffs, taxes, and fees on all technology products and committing Mexico to join the World Trade Organization (WTO) Information Technology Agreement (ITA);
  • Eliminating burdensome customs regulations that technology products face at the border;
  • Prohibiting discrimination against “new services” – i.e., services not yet conceived;
  • Ensuring the use of industry-led international standards in technical regulations; and,
  • Promoting balanced copyright rules and strong protections for patents and trade secrets.

We urge the administration to be as ambitious as possible and thoughtfully and deliberately negotiate an agreement that comprehensively sets out the core priorities for future U.S. trade agreements, including in the area of digital trade. Only by doing so will the administration maximize its opportunity with the modernization of NAFTA to truly turbocharge the U.S. economy. This was the intent of the direction provided when Congress gave the administration trade promotion authority through the Trade Priorities Act.

In recent weeks Congress reinforced its bipartisan, bicameral support for many of these priorities in the form of letters from forward-looking leaders on trade in the House and Senate. ITI and our members will engage constructively with the U.S. administration and Congress to ensure that a modernized NAFTA is a high standard, high ambition NAFTA built for the digital age.

Public Policy Tags: Trade & Investment