Election Year Uncertainty: The Future of U.S. Digital Trade Policy
In an era marked by rapid technological advancement and global connectivity, the digital economy has emerged as a frontier of opportunity for ingenuity. Micro-, small-, and medium-sized entities (MSMEs), the lifeblood of every economy, have expanded their digital footprint, transcending traditional borders and unlocking international markets. Yet while the global digital ecosystem holds great promise for small technology companies like those in ACT | The App Association’s membership, small businesses continue to face a diverse array of challenges when entering or operating in new markets.
These challenges, combined with the unpredictable shifts in political priorities during election years, bring forward a wave of policy uncertainties that can either fortify or undermine the progress of entrepreneurial MSME pioneers. The fluctuations in trade policy—rooted in the ebb and flow of political administrations—can cast a long shadow over the global digital landscape. It raises a pertinent question: Can small businesses confidently stride into new markets amidst election-year uncertainty?
Policies in the Digital Economy
The global digital economy, valued by the World Trade Organization (WTO) at more than £3 trillion, has become a primary means for small businesses to innovate internationally and provides unparalleled empowerment and equity.
Historically, the United States has upheld digital trade through steadfast support in international forums and treaties, promoting fair access and robust competition. However, recent signals from the U.S. Trade Representative (USTR) hint at a troubling retreat from foundational digital trade policies, which could potentially lead to increased barriers and less favorable conditions for small businesses.
There has never been a more urgent need for U.S. government trade support than today. For example, as we have outlined in past blogs and formal comments on trade barriers, the European Union’s Digital Markets Act (DMA) presents a significant protectionist barrier to digital trade by interjecting government into the operations of competitive and well-functioning digital markets. These online marketplaces enable countless small businesses to grow and create jobs, and the DMA could expressly jeopardize key platform functionalities on which small businesses rely (cybersecurity, privacy, IP protection, accessibility, etc.).
U.S. Digital Trade Withdrawal
In late 2023, the USTR announced plans to withdraw its support for foundational digital trade policies in the World Trade Organization, including principles supporting cross-border data flows, preventing forced data localization mandates, protecting source code, and ensuring that digital products are not unduly discriminated against. As we made clear, this move reduces the global competitiveness of U.S. startups and small businesses and cedes leadership to competitors like China. Furthermore, the USTR’s 2024 report to Congress downplays several significant digital trade barriers, including data localization policies, the DMA, and others.
Significant Questions Remain
The U.S. government's rationales for their unprecedented digital trade policy shifts do not provide much reassurance. Many questions remain about why the United States suddenly withdrew support for digital trade policies that have promoted small business competition and supported over 6 million jobs for more than 25 years.
With the election looming, the next U.S. Administration must understand that domestic small business innovators require consistent, scalable regulations and do not seek to replicate interventionist policies seen around the globe.
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