By The American Contemporary
The House Small Business Committee released a letter criticizing and questioning the actions of the United States Trade Representative (USTR) Office, as well as its head, Ambassador Katherine Tai, who has been serving under President Biden since 2021. The letter calls attention to the capricious shift in policy and attitude the US has taken in the WTO when it comes to e-commerce and data-related businesses. Here, we will explore these criticisms, and consider the implications of them from a politically fundamental perspective.
To provide context, the World Trade Organization (WTO) is an inter-governmental international body of 164 member states. The primary goal of the WTO is to foster and promote international trade between countries, which is accomplished through trade agreements, tariff policy, and discourse between state ambassadors. Throughout 2023, the WTO engaged in a series of policy crafting discussions regarding e-commerce and online business policy, specifically as it related to international trade. Many of these discussions were spearheaded by developed nations, including the USA, as their economies were more heavily focused on technology which would have been more directly impacted by these policy changes. Examples of this included data flow regulations, rights and access to source code and the retention of said properties, and information management/storage policy. Up until October of 2023, the US showed support for these discussions and policies, however near the end of October, the USTR unexpectedly and abruptly withdrew its support for these policies. At the time, the reasoning behind such a decision centered around a desire to prevent “prejudice or [hindrance] to [those] domestic policy considerations”.
The decision was met primarily with surprise and confusion, as well as criticism (though it is worth noting that a considerable degree of criticism did come from technology lobbies, which would have gained from these policy changes). However on February 26th, 2024, the House Committee on Small Business published a letter rebuking the decision and providing new insight into what it perceives as a threat to American Small Business. In the letter (which can be read here), the committee details how this unexpected and dramatic shift from established policy presents new legal and regulatory challenges to companies which operate internationally, and disproportionately targets small businesses. Additionally, the committee argues that the costs associated with increased research, paperwork, and alternations to policy to reflect new international standards only stand to negatively impact smaller businesses. This, in the committee’s eyes, threatens American economic success as well as American innovation, as it provides additional burdens on businesses. Finally, the committee chastised the USTR for what it perceives as a unilateral executive decision that was made without consultation with congress.
From a more fundamental perspective, this concept of regulations disproportionately affecting small business is not new or unexpected. Whether it is shifting tax policy, hiring requirements, or environmental policy, the truth of the matter remains that larger firms have the legal and monetary resources to weather storms and pivot around the issues they face, while smaller companies without those resources are left to make the changes or cease operations. In this way, I would agree with the House Committee’s assessment of the situation. Further, I do worry that an executive agent appointment by the president would make a dramatic policy shift without having previously consulted with congressional committees on the matter. This represents a concerning consolidation of power and action within the executive branch of government, which undermines the distribution of power amongst the federal branches. Finally, by stepping back support for the WTO policies, the US has conceded a considerable degree of power in shaping and molding international trade policy. While the discussions are ongoing and the US has not completely removed itself, the lack of support now shown by the US opens the door for opposing forces to take up a leadership position in the policy making process, which could negatively impact future trade agreements.
That being said however, it is important to realize that while the US has removed its formal support, it has not stepped away from the discussion as a whole. Further, the specific impacts of this change in policy are not fully comprehended, as the specific details of the proposed policies are not fully released. As such, while this change in policy is a dramatic change, it may not be as impactful at scale as one would expect. It is also worth noting that while small businesses do tend to suffer at greater levels, considerable lobbying power resides in big business, and these firms frequently challenge and scold any changes which could pose a threat to their operations. Should these policies be enacted, it could impact big business as well, curbing their influences and impact on international trade.
Ultimately, this new letter gives us more questions than answers. However it does draw attention to the impact that individual, non-elected executives can have on international policy and trade. Regardless of whether the trade ambassador is outstanding or terrible at their job, the fact remains that this one individual was able to make sweeping changes without consultation with congress, something that while necessary draws attention to the potential threat of consolidated power in the federal government. Whether this change in position will continue remains to be seen, however we would encourage continued collaboration, and more clarity in the logical behind policy changes such as these.