Where’s the Digital? Tech Asks of Trump’s Chinese Trade Deal


 

China

After months of speculation, the Trump administration inked its first trade plan with China. Noticeably absent from the list was any provision related to the digital economy.

In a Bloomberg interview May 12, Commerce Secretary Wilbur Ross said that his department will now focus on developing a one-year trade plan with China. Ross said he recognized that many issues and sectors were not addressed in the May 11 deal.

The Information Technology & Innovation Foundation (ITIF), a nonprofit think tank, and the Internet Association, which represents companies such as Amazon.com Inc. and Dropbox Inc., said the administration must consider the digital economy in its plans for further trade talks with China or risk putting the U.S. behind in advanced technology industries.

The U.S. exported between $68.4 billion and $385 billion in digitally-enabled services in 2014, depending on how those services are measured, resulting in an up to $154 billion trade surplus in this area, according to data from the U.S. Bureau of Economic Analysis.

On May 11, the U.S. Commerce Department announced a series of trade commitments it reached with China as part of a 100-Day Action Plan. The main focus was on commodities, investments and energy, such as beef and natural gas, with one provision aimed at bolstering electronic payment services.

The plan does not address any tech-related issues championed by the U.S. tech industry, such as intellectual property protection, prohibition of data localization requirements and addressing the Chinese-government backed subsidies aimed to grow the country’s domestic semiconductor sector.

“To me the administration is focusing on old economy industries,” ITIF Robert Atkinson told Bloomberg BNA. “The U.S. economy is not fundamentally based on Wall Street and farms, it’s based on advanced industries.”

Ari Giovenco, the Internet Association’s director of trade and international policy, said the agreement did not address obstacles facing U.S. cloud service providers in China. Current Chinese regulations force cloud providers to pair with Chinese-owned entities and hand over proprietary technology and control of their data centers before they can enter the market, he said.

"For the 100-day plan to be credible it must address market access issues that impact U.S.-based technology companies in China,” Giovenco told Bloomberg BNA.

Atkinson said he was also alarmed the deal said the U.S. now “welcomes direct investment by Chinese entrepreneurs.” This is a shift from past administrations, which had signaled they may block Chinese interests from buying U.S. advanced technology companies through the Committee on Foreign Investment in the U.S., or CFIUS, which reviews the national security implications of foreign investments.

“The concern is the buying up of American technology companies with only one purpose here, which is to take their technology and put it in Chinese companies,” Atkinson said.

Without the leverage to block these types of deals, the Trump administration has given away major leverage in gaining future concessions for the tech industry in trade talks, Atkinson said.

U.S. Trade Representative Robert Lighthizer, confirmed May 11, said in his Senate hearing in March he recognized the importance of digital trade provisions.