link to page 1



March 16, 2023
Digital Trade and Data Policy: Select Key Issues
Background
Amazon cloud computing services by a foreign company is
Digital trade refers to all forms of commerce conducted by
a U.S. export of cloud services.
electronic means and includes trade in both goods and
services. The digitization of the global economy in the 21st
Select Key Issues for U.S. Trade Policy
century has facilitated traditional trade in goods by allowing
The important role of data flows in all economic activity
businesses to access markets worldwide more easily in
and the fast growing digital economy have created new
addition to generating trade flows in services sectors that
types of trade barriers and policy questions, in addition to
businesses can deliver digitally (e.g., financial services) and
creating new areas in which countries can negotiate and set
creating trade in services integral to the digital economy
rules. Barriers to digital trade can directly affect e-
(e.g., cloud computing services). The Biden
commerce (e.g., limitations on cross-border credit card
Administration’s policies emphasize addressing barriers to
payments) or have broader implications (e.g., data privacy).
digital trade because cross-border data flows play a large
role in facilitating trade and overall economic activity.
Figure 1. Digital Services Trade Restrictiveness Index
Congress may consider setting negotiating priorities related
for Select Key U.S. Trading Partners, 2022
to digital trade, in addition to implementing legislation
related to data privacy, an important aspect of the digital
economy.
Because digital trade covers different methods of trading
goods and services, its total value is not captured by one
statistic. According to the U.S. Bureau of Economic
Analysis (BEA), U.S. exports of one component of digital
trade, information and communications technology (ICT)
services—which consist of telecommunications, computer
services and charges for the use of intellectual property—
were $89 billion in 2021 (11% of total U.S. services
exports), a 21% increase since 2016. Total U.S. services
exports grew by only 1.5% during this time. U.S. exports of
all services that can be delivered digitally, including
business services, were $594 billion in 2021 (75% of total
U.S. services exports), an increase of 33% since 2016.
The digital economy is also growing quickly. The BEA

defines the digital economy as consisting mainly of digital
Source: CRS calculations using Organisation for Economic
services (e.g., telecommunication, cloud, internet and data
Cooperation and Development (OECD) data.
services), infrastructure (software and hardware) and e-
The Organisation for Economic Cooperation and
commerce. The U.S. digital economy contributed $3.7
Development (OECD) Digital Services Trade
trillion to output (9% of total U.S. output) and employed 8
Restrictiveness Index measures barriers that primarily affect
million workers (5% of total U.S. workers) in 2021, an
e-commerce and digitally traded services in infrastructure
increase of 36% and 11%, respectively, from 2016.
and connectivity, electronic transactions, payment systems
Data Flows in the Digital Economy
and intellectual property rights. According to the index, the
United States is less restrictive in these barriers than all
Cross-border flows of data are essential to the technologies
countries except Canada in a select group of key trading
used to digitally order and deliver both goods and services.
partners (Figure 1).
A 2021 United Nations Conference on Trade and
Development (UNCTAD) Report notes that in the digital
economy “everything” is data; any activity on the internet
Barriers to digital trade, however, also may have an impact
beyond e-commerce. Such barriers affect data flows or
can be digitized by converting it into binary code, and data
privacy, digital platforms, or emerging technologies. A
flows are transfers of digitized activities. The majority of
country’s data governance regime captures the different
cross-border data flows are exchanges related to the
policies that may impact the use and flow of data and, by
operation of the internet. Only cross-border data flows that
extension, digital trade. When compared to its trading
are commercial transactions are considered international
partners, the United States does not have some attributes of
trade. For example, the purchase and use of U.S.-based
what some stakeholders view as a comprehensive data
governance regime, such as a federal data privacy law and a
https://crsreports.congress.gov

---

link to page 2
Digital Trade and Data Policy: Select Key Issues
national data strategy, although it has attributes such as
Chile, and Singapore aims to help businesses engage in
binding protection of data flows and an artificial
digital trade by removing barriers in the overall digital
intelligence (AI) strategy (Figure 2). While the existence of
economy.
legislation or a strategy does not necessarily indicate that a
country is fully protecting consumer data or imposing few
Bilateral cooperation between the United States and EU
restrictions on data flows, countries legislating and
happens in multiple settings, including the U.S.-EU Trade
conducting oversight in these areas may have a greater
and Technology Council (TTC), a forum for cooperation on
opportunity to set international standards on data policy.
high tech and digital economy issues, to include green
Protection of personal data and cross-border data flows and
technologies and best practices on AI.
strategies for digital markets, data and AI, among other
attributes of a data governance regime, may provide a
U.S. Digital Trade Negotiations
blueprint for future economic conditions and challenges.
The digital trade provision under Trade Promotion
Authority (TPA) in 2015 established issues such as cross-
Figure 2. Select Key Indicators of a Comprehensive
border data flows and data localization as negotiating
Data Governance Regime
objectives. The United States has negotiated more
expansive sets of rules on digital trade beginning with the
U.S.-Mexico-Canada Agreement (USMCA) signed in 2018
and the U.S.-Japan Digital Trade Agreement signed in
2019. In addition to provisions on nondiscrimination of
digital products and digital trade facilitation that were
common in the e-commerce chapters of previous FTAs,
these newer agreements include more advanced provisions
(see text box). Digital trade issues are a focus of current
U.S. trade discussions, including in the Indo-Pacific
Economic Framework for Prosperity (IPEF), an upcoming
trade initiative with Taiwan and talks at multilateral fora.

Source: Digital Trade and Data Governance Hub, available at
Select Provisions of USMCA and the U.S.-
https://datagovhub.el iott.gwu.edu/. Figure, CRS.
Japan Digital Trade Agreement
ï‚·
Cross-border data flows and data localization.
Data Privacy and Protection
Prohibits restrictions on cross-border data flows and
Data protection legislation generally aims to secure the
requirements for data localization.
privacy of consumer data, including sensitive data that can
ï‚·
Consumer protection and privacy. Requires parties
be biometric or personally identifiable information. In
to adopt or maintain consumer protection laws.
addition to easing cybersecurity concerns, protection of
ï‚·
Source code and technology transfer. Prohibits
personal data provides a foundation for uninterrupted data
requiring the transfer of source code or algorithms.
flows between countries, which is critical for cross-border
ï‚·
e-commerce and the operation of digital platforms. The

Liability for interactive computer services. Limits
EU’s
liability for third-party content for digital platforms.
General Data Protection Regulation (GDPR),
implemented in 2018, is an example of comprehensive data
Source: USTR.
privacy legislation.
Current Considerations for Congress
Data Localization and Cross-Border Data Flows
Although the United States has no federal data privacy law,
Data localization policies require that data generated within
the 117th Congress introduced relevant bills (e.g., H.R.
a country be stored and processed on servers within that
8152). Congress may consider if federal data privacy
country. This restriction on the free movement of data
legislation is necessary and, if so, what the objectives
across borders may act as a trade barrier by increasing the
would be with respect to consumer data protection and
cost for businesses to store data by requiring them to
treatment of cross-border flows of sensitive information.
comply with different regulations across countries, in
addition to causing inefficiencies in business operations.
Congress also may consider whether or not to set
Prohibiting data localization requirements in free trade
negotiating priorities, including in TPA, for ongoing and
agreements (FTAs) appears in nearly 100 FTAs, but
future negotiations. In assessing U.S. trade policy
circumstances exist in which limits on cross-border data
approaches to digital trade, Congress may examine issues
flows may be considered, such as for privacy and national
related to the overall digital economy, including protecting
security concerns, particularly for flows of sensitive data to
personal data, balancing prohibitions on data localization
foreign firms or governments.
requirements with privacy and national security concerns,
Strategies for Digital Markets and Technology
establishing global standards to counter China’s growing
influence in the digital space, and best practices with new
The EU implemented the Digital Markets Act (DMA) and
technologies. Oversight issues regarding the impact of new
Digital Services Act (DSA) in 2022, which regulate large
technologies and foreign legislation on U.S. firms and
digital platforms, create content moderation and increase
workers also may come before Congress.
competition, among other objectives. The Digital Economy
Partnership Agreement (DEPA) between New Zealand,
https://crsreports.congress.gov

---

Digital Trade and Data Policy: Select Key Issues

Danielle M. Trachtenberg, Analyst in International Trade
and Finance
IF12347


Disclaimer
This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan shared staff to
congressional committees and Members of Congress. It operates solely at the behest of and under the direction of Congress.
Information in a CRS Report should not be relied upon for purposes other than public understanding of information that has
been provided by CRS to Members of Congress in connection with CRS’s institutional role. CRS Reports, as a work of the
United States Government, are not subject to copyright protection in the United States. Any CRS Report may be
reproduced and distributed in its entirety without permission from CRS. However, as a CRS Report may include
copyrighted images or material from a third party, you may need to obtain the permission of the copyright holder if you
wish to copy or otherwise use copyrighted material.

https://crsreports.congress.gov | IF12347 · VERSION 1 · NEW

---