By Doug Kelly, CEO of American Edge Project

As Small Business Saturday approaches (November 25, 2023), American Edge applauds our country’s 33.3 million small businesses for their significant contributions to our country, to our communities, and to our combined prosperity. Powered by a wide range of technology tools, small businesses embody America’s “can do” spirit of entrepreneurship, driving growth and innovation across the economy.

But a recent decision by the United States Trade Representative (USTR) could limit the ability of U.S. small businesses aiming to grow internationally. USTR abruptly withdrew support for key digital trade proposals from the World Trade Organization (WTO) negotiations. These principles, long supported by previous U.S. Administrations, would have barred foreign governments from discriminating against U.S. tech companies, requiring that U.S. companies store data on local servers, or forcing U.S. companies to turn over proprietary source codes.

Strong digital trade rules matter because they help level the playing field by preventing other countries from using protectionist regulations to lock out American companies from their markets, especially those businesses that export digital-delivered services. In 2022, these services accounted for more than 67 percent of all U.S. services exports and 20 percent of all U.S. exports. USTR’s move also contradicts numerous other government initiatives aimed at supporting small business expansion, and it threatens to hinder their ability to compete effectively in the global marketplace.

For instance, by moving away from policies that encourage the free exchange of data across borders, USTR could hinder a small tech company in Texas from sharing information with its partners in Europe, leading to delays and inefficiencies. Foreign data localization storage mandates could force a small e-commerce business in New York to set up expensive, separate data storage facilities in each country in which it operates. Such requirements would increase costs, introduce security risks, and complicate business operations. Moreover, the reduced protection for software source codes could leave innovative startups vulnerable to intellectual property (IP) theft by international competitors, dampening their competitive edge and potentially putting them out of business, as happened to an American wind turbine company doing business in China. Collectively, such international barriers could hamper the ability of U.S. small businesses to innovate and to grow in the global digital economy.

In addition to potentially harming the success of our small businesses, USTR’s withdrawal of key digital trade proposals risks seriously endangering U.S. technological leadership, while inadvertently granting China, our foremost competitor, an undue advantage in setting digital commerce rules. As China executes on its decade-long plan to become the global tech leader, it’s shaping digital trade agreements with countries to slow the free flow of information, to create greater state control of digital commerce, and to undermine the principles of an open, accessible internet. This maneuvering not only bolsters China’s position in the global tech race but also threatens Western security, our values, and the competitiveness of our private sector companies.

This situation leads to a critical domino effect: without a level playing field, U.S. small businesses find themselves at a significant disadvantage in the global digital economy, potentially leading to job losses, stifled innovation, and slower economic growth in the United States.

The impact of USTR’s misguided decision becomes even more apparent when we consider the growing role of U.S. small businesses in the global economy. A recent U.S. Chamber of Commerce study found that small business exports currently contribute $541 billion and nearly six million jobs to the U.S. economy, but that they face numerous obstacles in accessing international markets. If small businesses had better access to global markets, the U.S. Gross Domestic Product (GDP) could increase by $81 billion and add 900,000 new jobs.

The bottom line: Small businesses are the heart and soul of the American economy, and their success is essential to our nation’s future. The USTR should reconsider its decision and Congress should hold hearings on the importance of promoting digital trade rules that level the playing field for small businesses. By ensuring a fair and open digital trade environment that protects IP, the free flow of information, and avoids onerous data localization requirements, the USTR can build on its longstanding legacy of promoting U.S. businesses and pave the pathway for even greater small businesses success in the digital age.