By Doug Kelly, CEO of American Edge Project

In a bewildering act of self-sabotage, the U.S. Trade Representative (USTR) recently walked away from digital trade proposals that are pivotal to safeguarding America’s global technology leadership position. By withdrawing these proposals from the negotiations table at the World Trade Organization (WTO), the USTR has not only undercut America’s global tech prospects, but also strengthened China’s position in the race for tech dominance.

Bipartisan Congress members decried this move. Senator Ron Wyden (D-OR) bluntly saidUSTR’s decision to walk away from the negotiating table in Geneva is a win for China…. In addition to abandoning our democratic allies in these negotiations, USTR is leaving a vacuum that China — an active participant in these negotiations — will be more than pleased to fill.” Similarly, Senator Todd Young (R-IN) noted that the “decision to walk away from the WTO negotiating table on digital trade is a win for China. This is unacceptable and goes against Congress’ explicit direction.

The three digital trade proposals that the USTR withdrew are:

  • Promoting the free flow of data across borders.
  • Rejecting requirements for companies to store data they collect locally.
  • Prohibiting countries from requiring companies to transfer software source codes.

Each of these provisions plays a crucial role in ensuring America’s leadership in the tech industry.

The free flow of data is the linchpin for global innovation, fostering seamless collaboration, and driving the digital economy as well as the spread of Western values. When restricted, not only is our own economic vigor stifled, but we also concede the global digital marketplace to nations like China, whose closed, censored, and controlled vision of the internet is at direct odds with democratic values.

Data localization, or the requirement by foreign countries to store data within their local borders, presents a number of challenges. It not only exponentially raises operational costs for U.S. tech entities but also jeopardizes data security. Such constraints give countries like China the upper hand, and can provide them direct access to customer data that is required to be stored in their country.

Lastly, the transfer of software source code risks wholesale intellectual property theft and the release of cloned or manipulated versions of original software. In the hands of a tech-hungry giant like China, this spells a recipe for rapid reverse engineering and the potential erosion of U.S. tech uniqueness. China steals approximately $500 billion annually in intellectual property each year from America, and forced transfers of software source code will only make it easier for China to acquire American trade secrets.

The USTR’s withdrawal of key digital trade proposals jeopardizes U.S. tech leadership, gifting China an undue advantage. Regrettably, too many U.S. and European policymakers, driven by a myopic short-sighted anti-tech bias, are willing to compromise Western strategic advantages. Recent U.S. antitrust initiatives and the EU’s Digital Markets Act disproportionately target American tech firms, while regulatory moves by the Federal Trade Commission (FTC) and the Department of Justice (DOJ) threaten America’s innovation landscape.

The U.S. tech industry is the vital engine that drives our national security, our economic prosperity, and our values. It is also a critical source of American power and influence in the world. The USTR’s decision to withdraw these digital trade proposals jeopardizes America’s leadership in the tech industry and its ability to compete with China. The Biden administration must reverse this decision and work to promote digital trade rules that will advance America’s strategic interests, especially when it comes to technology.