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Updated July 30, 2024
Digital Trade and Data Policy: Key Issues Facing Congress
Digital trade includes trade in all goods and services for
an increase of 28% since 2017. This growth outpaced the
which orders are placed digitally. E-commerce generally
11% growth in total U.S. services exports during this time.
refers to digitally ordered goods. Services that are digitally
Some international organizations are discussing how to
ordered may also be delivered digitally (e.g., online
improve the accuracy of statistics on digital trade, including
banking) or provided through a subscription (e.g., streaming
enhanced tracking of international business-to-consumer
or cloud services). Cross-border data flows are essential to
(B2C) or business-to-business (B2B) e-commerce and
the technologies used to digitally order and deliver goods
cross-border data flows (see text box).
and services, and to many facets of the digital economy,
including digital platforms. Because of this, much debate on
Cross-Border Data Flows vs. Digital Trade
digital trade has focused on data policy and technology.
Digital trade issues facing Congress include data privacy,
Most cross-border data flows are transfers of information
data localization, artificial intelligence (AI), and regulation
between servers unrelated to commercial transactions. Digital
of the technology sector. Congress could also monitor
trade involves the cross-border transfer of a good or service
outcomes and impacts of U.S. negotiations involving digital
for money in a commercial transaction. Some cross-border
trade, and consider action to encourage or require the
data flows are digital trade (e.g., the online purchase of a
executive branch to pursue certain objectives.
dataset from a foreign company) or related to a digital trade
Measuring the Digital Economy
transaction (e.g., data flows associated with international e-
commerce). As a result, the treatment of cross-border data
Output in the U.S. digital economy, consisting mainly of e-
flows may impact digital trade. Digital trade is increasingly
commerce, digital services (e.g., telecommunication,
interconnected with data policy and regulation of emerging
internet, and cloud services), and infrastructure (software
technologies (e.g., AI) and digital platforms, both of which rely
and hardware), was $4.3 trillion (9% of the value of all
on cross-border data flows.
goods and services produced in the United States) in 2022
(most recent data available), an increase of 42% since 2017
(Figure 1). E-commerce was the largest activity by output,
U.S. Digital Trade and Data Policy
while cloud services was the fastest growing.
Until 2023, the United States generally supported policies
Figure 1. Digital Economy Gross Output
in its free trade agreements (FTAs) that promote the free
flow of data across borders with limited exceptions. In fall
2023, the Office of the U.S. Trade Representative (USTR)
ended its support for certain proposed provisions in
plurilateral negotiations on the Joint Statement Initiative
(JSI) on E-commerce at the World Trade Organization
(WTO) related to cross-border data flows, data localization,
and source code. The United States also suspended digital
trade talks in the Indo-Pacific Economic Framework for
Prosperity (IPEF). USTR Katherine Tai attributed the
decisions to the need for domestic policy space on digital
economy issues given rapid technological advancement and
shifting debates on technology regulation since the
Source: CRS calculations using U.S. Bureau of Economic Analysis
proposals were introduced in the WTO in 2019.
(BEA) data.
Note: Excludes federal nondefense digital services due to their small
The decision was supported by some Members of Congress
size ($402 million in 2017 and $457 million in 2022).
who described the suspended provisions as a potential
hindrance to data privacy, anti-monopoly, and other digital
safeguards sought by the Biden Administration and some in
The total value of digital trade flows is difficult to estimate
in part because official international trade statistics do not
Congress. Other Members criticized the decision as
explicitly measure e-commerce or trade in digitally ordered
negatively impacting U.S. businesses and workers since e-
commerce is vital to many industries and as ceding U.S.
or delivered services. Some measures of trade in digital
services exist and provide insight into the growth of digital
leadership to other governments such as China. Several
trade over time. The U.S. Bureau of Economic Analysis
industry groups across a range of sectors expressed concern
with the potential for restrictions on data flows to harm
(BEA) tracks trade in services that could be delivered
digitally, including telecommunications, business, and
American workers. A coalition of technology companies
information services. U.S. exports of such services were
that support more competition in the app marketplace
praised the decision and urged the Administration to replace
$626 billion in 2022 (67% of total U.S. services exports),
the provisions with regulation of technology firms. Some
https://crsreports.congress.gov
Digital Trade and Data Policy: Key Issues Facing Congress
Members have criticized USTR for not adequately
Digital Economy Regulation
consulting with Congress on the decision, which they
The United States does not have federal legislation that
assessed was a major change in U.S. digital trade policy. In
establishes standards for digital platforms and technology
March 2024, the Chairman of the House Committee on
firms. Bills include the Future of AI Innovation Act (S.
Oversight and Accountability launched an investigation
4178) and bills to regulate TikTok.
over the alleged lack of consultations and the transparency
of USTR’s communications with civil society.
U.S.-EU Relations on the Digital Economy
The United States and the EU have cooperated on standards
Negotiations in the JSI on E-commerce, a plurilateral
for AI and other technology issues in the U.S.-EU Trade
negotiation with around 90 WTO members, concluded in
and Technology Council (TTC). More broadly, the EU’s
July 2024. The United States, among others, did not sign
strategy for the digital economy includes several pieces of
the joint statement, stating that “more work is needed.” U.S.
enacted legislation (see text box). Some observers have
officials have expressed concerns with whether the use of a
voiced concerns that some EU digital regulations
security exception by a country should be subject to review.
discriminate against U.S. technology companies.
Data Localization
EU Regulations on the Digital Economy
Until 2023, the United States sought provisions within trade
agreements to limit the use of data localization measures
General Data Protection Regulation (GDPR). Aims to
and raised concerns over the use of these measures in other
protect individuals when their personal data is collected.
countries. Data localization policies require that data
Digital Markets Act (DMA). Aims to increase competition
generated within a country be stored and processed on
in the digital marketplace; designates some large platforms as
servers within that country or in a cloud environment
‘gatekeepers’ subject to additional regulations.
hosted and controlled by a firm physically located in the
Digital Services Act (DSA). Sets rules on user safety,
country. This restriction on the movement of data across
content moderation, and platform accountability and
borders may act as a trade barrier by requiring firms to
transparency; designates some large platforms as ‘Very Large
comply with different regulations across countries and
Online Platforms’ (VLOPs) subject to additional regulations.
increase the cost of storing data. Data localization policies
may be considered when privacy and national security
AI Act. Sets rules on transparency, placing systems on the
concerns exist, particularly for the storage and transfer of
market, monitoring, and supporting innovation; requirements
sensitive data. TikTok’s Project Texas is an example of a
based on four risk levels: unacceptable, high, limited, minimal.
planned data localization effort to address data security
concerns for U.S. user data; the project would store all data
Considerations for Congress
generated by U.S. users in Oracle’s U.S. cloud environment
Since removing support for some digital trade provisions at
with access controlled by a U.S.-based data security team.
the WTO in 2023, USTR has not proposed new digital trade
objectives. Congress is considering legislating in a number
Data Protection
of areas that may shape the future of U.S. digital trade
The United States has not enacted comprehensive federal
policy, including data privacy and regulation of the
data protection legislation. Legislative proposals have been
technology sector. Congress could consider, for example,
discussed in Congress (e.g., the American Privacy Rights
how proposed data protection legislation might impact
Act). Data protection legislation generally aims to secure
consumer data protection, treatment of cross-border flows
the privacy of consumer data. Protection of personal data
of sensitive information, minimization of foreign
can ease privacy and national security concerns. Restricting
adversaries’ access to data on U.S. citizens, and regulation
cross-border data flows could interfere in some firms’
of data brokers. Congress could also consider legislating or
ability to conduct international trade.
conducting oversight on specific data localization issues
(e.g., whether or not to mandate localization of data
Congress and the Administration are considering more
generated by U.S. TikTok users). When considering the
limited data protection measures related to restricting cross-
overall digital economy, Congress could consider
border data flows in instances when national security or the
regulation or oversight of digital platforms and emerging
security of sensitive data on U.S. citizens is at risk. A
technologies such as AI.
February 2024 executive order issued by President Biden
aims to restrict data brokerage activities and prohibit certain
Congress could also consider to what extent future policy
transactions with foreign adversaries when the U.S.
may depart from or conflict with standards set in
government assesses a national security risk exists. The
agreements such as the U.S.-Mexico-Canada Agreement
Justice Department issued an Advanced Notice of Proposed
(USMCA) and the U.S.-Japan Digital Trade Agreement.
Rulemaking (ANPRM) to provide information on potential
Given the debate over the appropriate level of USTR’s
restrictions and solicit feedback. Bills that aim to
consultation with Congress in 2023, Congress could
implement data protection measures includes the Protecting
consider to what degree Members should be consulted by
Americans’ Data from Foreign Surveillance Act of 2023 (S.
USTR on digital trade issues. Congress has set
1974, H.R. 4108) and the Protecting Americans’ Data from
requirements for consultation and transparency in
Foreign Adversaries Act (H.R. 7520).
legislation such as Trade Promotion Authority, the most
recent version of which expired in 2021 (P.L. 114-26).
https://crsreports.congress.gov
Digital Trade and Data Policy: Key Issues Facing Congress
Danielle M. Trachtenberg, Analyst in International Trade
and Finance
IF12347
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