June 18, 2019

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LETTER: TechNet Letter to the Senate Committee on Finance regarding “The President’s 2019 Trade Policy Agenda and the United States- Mexico-Canada Agreement” hearing

The Honorable Chuck Grassley (R-IA)
Chairman
Senate Committee on Finance
135 Hart Senate Office Building
Washington, D.C. 20510

The Honorable Ron Wyden (D-OR)
Democratic Leader
Senate Committee on Finance
221 Dirksen Senate Office Building
Washington, D.C. 20510

RE: Comments of TechNet for the June 18, 2019 hearing of the Senate Committee on Finance titled, “The President’s 2019 Trade Policy Agenda and the United States-Mexico-Canada Agreement”


Dear Chairman Grassley, Democratic Leader Wyden, and Distinguished Members of the Committee on Finance:

As the committee meets today for a hearing to discuss the 2019 trade agenda, we welcome this opportunity to express the tech industry’s support for the U.S.-Mexico-Canada Agreement (USMCA) and encourage Congress to ratify it this year.

TechNet is the national, bipartisan network of innovation economy CEOs and senior executives. Our diverse membership includes dynamic American businesses ranging from startups to the most iconic companies on the planet and represents over three million employees and countless customers in the fields of information technology, e-commerce, the sharing and gig economies, advanced energy, cybersecurity, venture capital, and finance.

Much has changed in our economy since the North American Free Trade Agreement (NAFTA) was ratified 24 years ago. Since then, the internet has revolutionized the way we do business, and digital trade has become a major driver of economic growth worldwide. Online platforms have helped local American entrepreneurs and small businesses reach new markets and grow, tearing down barriers to entry that once prevented them from growing beyond their communities. Advancements in cloud technologies have facilitated the transfer of data, goods, and services at speeds once thought unimaginable, a phenomenon that has generated enormous economic value: the U.S. runs a $159 billion trade surplus in digitally-deliverable services, and these services are responsible for 7.1 percent of U.S. gross domestic product (GDP) and nearly 6.7 million American jobs.

When the Trump Administration announced its intention to renegotiate NAFTA in May 2017, we saw an opportunity to update the trade agreement to account for the many transformative changes that have upended global commerce. A little more than a year later, the leaders from the U.S., Canada, and Mexico realized this goal with the signing of the USMCA on November 30, 2018. The USMCA makes significant progress in eliminating barriers to digital trade and promoting economic growth and opportunities that benefit American workers, businesses, and entrepreneurs. We fully support its ratification.

We understand that some lawmakers have outstanding concerns they want resolved before they can support the agreement, and we encourage members of both parties and the Trump Administration to continue working in good faith to accomplish this. We were encouraged that, in April, one important concern was addressed by the Mexican government’s passage of labor reform legislation.

As you consider this issue, below are several reasons we support the USMCA because it will promote economic growth and opportunities that benefit American workers, businesses, and entrepreneurs.

A top objective of any trade agreement entered into by the U.S. must be to reduce tariff and non-tariff barriers to information and communications technology products, services, and investments. We support the USMCA’s provisions allowing for freer trade in remanufactured goods, greater flexibility in approaches to telecommunications regulation, light-touch approaches to value-added telecommunications services, and safeguards to help protect technology choice. Greater economic competition and growth will also be enhanced in this agreement by binding Mexico to its 2013 telecommunications reforms.

In the modern digital economy, protections for the free flow of data across borders, strong protections for intellectual property (including source code), and safeguards against intermediary liability are essential. We support the USMCA’s provisions restricting the three governments’ ability to constrain cross-border data flows, the absence of duties on digital products, improved protections for intellectual property rights (including criminal and civil prosecution of trade secret misappropriation), allowing products with commercial encryption to be traded freely, and improved market access for trade in all services, including those that are digitally delivered. Together, these measures will facilitate digital trade between the U.S., Mexico, and Canada and result in greater economic growth for our nations’ digital economies in the years to come.

In the nearly two and a half decades since NAFTA was ratified, global supply and value chains have become highly prevalent in international production and trade. They have proven to be essential for global innovation, as the production process for complex technology products is increasingly spread out across several countries and, in some cases, continents. Innovators face challenges and higher costs, however, when these chains are disrupted by localization requirements, including forced technology and investment conditions that discriminate against U.S. interests. The USMCA preempts this potential problem and streamlines the supply and value chains in North America in part by prohibiting governments from requiring localization of communications infrastructure.

Each new trade agreement is an opportunity to modernize customs systems in ways that facilitate trade. For the digital economy, customs modernization and the promotion of open payment systems that support digital trade flows, particularly by small and medium-sized enterprises (SMEs), are especially important. The USMCA succeeds on both counts. One critical way the agreement enhances customs-related trade facilitation is by providing for advanced rulings and requiring governments to post trade documentation online.

It is important that trade agreements address cybersecurity, given the economic harm that cyberattacks can inflict. In 2016, more than four billion records were stolen by cyber criminals, and cybercrimes were estimated to cost the American economy between $57 and $109 billion. By the end of 2019, cybercrimes are expected to be a $2.1 trillion problem or the global economy. As our three nations are poised to become even more integrated as a result of the USMCA, we must be prepared to protect against the cyberthreats we will continue to face. We are encouraged that the USMCA promotes the use of risk-based approaches to cybersecurity and requires governments to recognize telecommunications certification test reports from each other’s countries. This is an important step to ensuring the proper protocols are in place to protect the flow of information across our borders.

In sum, the USMCA makes important progress in eliminating barriers to digital trade and promoting economic growth and opportunities that benefit American workers, businesses, and entrepreneurs. It represents a significant upgrade from NAFTA on issues important to the digital economy, including protections for intellectual property rights, the facilitation of cross-border data flows, and cybersecurity standards, among others.

Thank you for considering our industry’s perspective. We welcome the opportunity to serve as a resource as the committee, its members, and both the House and Senate chart a path forward on the USMCA.

Sincerely,


Linda Moore
TechNet President and CEO

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