In October 2023, the US Government announced its withdrawal of support for controversial trade provisions – including provisions relating to data flows, localization of computing facilities, and access to source code – at the World Trade Organization’s (WTO) plurilateral Joint Statement Initiative on E-Commerce (JSI). The JSI is an attempt by a group of countries to craft binding global rules on digital trade-related issues outside the mandated Work Programme on E-Commerce at the WTO. JSI negotiations have been ongoing since 2017 despite many terming it an illegitimate process. Following the change in the US position, the co-convenors of the JSI announced that relevant provisions would be excluded from the current text of the agreement as “they would require substantially more time for discussions as divergent approaches and sensitivities remain”.

The change in the US position on the JSI, which brings consistency to its positions in other trade frameworks it is negotiating, such as the Indo-Pacific Economic Framework for Prosperity (IPEF), was made to preserve the ability of the government to regulate the technology sector, particularly in the emerging field of artificial intelligence (AI).

Proposed provisions in the JSI on cross-border data flows and localization of computing facilities have been controversial, as they essentially guarantee companies the right to freely move data across borders. While the purported objective of these provisions is to facilitate international data transfers and lower costs of business, they prioritize unhindered data flows over fundamental rights, such as the right to data protection and privacy. Restrictions on cross-border data flows can also be imposed to achieve other legitimate interests such as ensuring access to data for regulators and supervisory authorities or to meet economic goals.

The change in the US position on the JSI […] was made to preserve the ability of the government to regulate the technology sector, particularly in the emerging field of artificial intelligence (AI).

Proposed provisions on access to source code would have restricted governments, regulators, and third-party experts from requiring source code disclosure for purposes of scrutiny or audit, thus hindering transparency and accountability of algorithms and AI-based systems. The proposals would have made it difficult for authorities to require pre-market launch audits of AI systems to review for, say, discriminatory or anti-competitive practices. They would also prevent civil society organizations and independent experts from alerting authorities to domestic regulation infringements. For example, this provision would have prevented consumer organizations and academics from investigating suspected biases in an AI system used to assess creditworthiness and to alert authorities in case of confirmed bias. Third-party vetting of algorithms could be particularly important in contexts of low state capacity.

Big technology companies have sought to limit the ability of governments to regulate the digital ecosystem in public interest by lobbying for these provisions in several recent international trade agreements. Thus, provisions in the JSI sought to replicate clauses from trade agreements commonly recognized as pro-Big Tech, such as the U.S.-Mexico-Canada Agreement (USMCA) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). Big Tech also wanted similar provisions included in the IPEF.

While the purported objective of these provisions is to facilitate international data transfers and lower costs of business, they prioritize unhindered data flows over fundamental rights, such as the right to data protection and privacy.

US Trade Representative Katherine Tai stepped away from these positions, which had been proposed during the Trump administration, citing a need to safeguard domestic policy space. There is growing interest in the US to regulate the digital ecosystem, as evidenced by a number of proposed laws in the US Congress and state legislatures. In addition to recognizing privacy and data protection rights, there is a broader interest in regulating the AI ecosystem as demonstrated by President Biden’s Executive Order on the Safe, Secure, and Trustworthy Development and Use of AI in October 2023. Undergirding these legal and policy efforts is a recognition that technology companies have become incredibly powerful and need to be reined in.

The change in the US position has sparked consternation amongst Big Tech companies and their supporters, who have ratcheted up attacks on all those they see as responsible, notably Tai, as well as various progressive organizations. Given the historically close ties US businesses have had with trade agreement negotiators, the change in position has clearly caught many off-guard. The decision by the US administration is now being falsely portrayed as an abandonment of long-held US positions, which would not only hurt American economic interests, but also play into the hands of countries such as China, who would purportedly now be able to shape the rules of international trade to suit their agenda. Critics ignore the fact that the US is still an active participant in the JSI talks, and that these talks also include China.

It is important to keep in mind that while the US administration has indicated that it no longer supports the most extreme versions of pro-Big Tech provisions found in trade agreements such as the USMCA, it is yet to articulate an alternative agenda. A contentious inter-agency process is now underway to craft a new US position on these issues, though it is still unclear what shape it will ultimately take. That said, with the US Presidential elections scheduled for later this year, the development of a new trade agenda is likely to be slow.

While the change in the US position at the JSI is undoubtedly welcome, unfortunately, the US administration seems likely to continue to push for other trade rules that favor Big Tech interests.

Insofar as progress on the JSI is concerned, its convenors have indicated a “substantial conclusion” of negotiations on a number of issues, with agreement having been reached on 13 topics. Provisions pertaining to data flows, localization, and source code have been entirely excluded from the draft JSI text released in February 2024. Thus, if agreement is reached by the end of the imminent Ministerial Conference in Abu Dhabi, it will be on a more modest list of issues.

While the change in the US position at the JSI is undoubtedly welcome, unfortunately, the US administration seems likely to continue to push for other trade rules that favor Big Tech interests. For instance, the US supports the continuation of the WTO’s moratorium on customs duties on electronic transmissions (which has been opposed by many developing countries).

Still, the shift in the US government’s stance on data flows and source code presents an opportunity for governments around the world to look for alternatives to trade provisions that restrict sovereignty and the ability to implement public interest regulation. As pointed out by over 50 global civil society and consumer groups, governments should, as a priority, seek to protect their citizen’s digital rights.