Global Innovation Forum Comments on Indo Pacific Economic Framework Digital & Small Business Priorities

Apr 11, 2022

These comments regarding the Indo Pacific Economic Framework were submitted by the Global Innovation Forum to USTR and the Department of Commerce. Docket Number USTR-2022-0002; Docket Number ITA-2022-0001. 

The National Foreign Trade Council Foundation’s Global Innovation Forum (GIF) appreciates the opportunity to submit the following comments as recommendations for the Notice of the “Proposed Fair and Resilient Trade Pillar of an Indo-Pacific Economic Framework” published by the Office of the United States Trade Representative and the U.S. Department of Commerce on March 10, 2022.

GIF is a non-profit organization that connects small businesses and policymakers to foster an inclusive policy landscape that enables companies of all sizes to innovate, trade, and engage in the global digital economy. GIF works with a global network of thousands of small businesses, government officials, civil society, and private sector leaders to emphasize how technology and trade policies can advance resilience and inclusive growth.

We applaud the leadership of the Biden-Harris Administration as the United States pursues the development of an Indo-Pacific Economic Framework (IPEF).

It is critical for the IPEF to support inclusive and resilient digital supply chains that create concrete benefits for small and medium-sized enterprises (SMEs) that rely on digitally-enabled trade to reach and sell to customers around the world.

Despite the opportunities that digital trade creates, high costs to entry derived from burdensome regulations disproportionately harm small businesses. But when services trade restrictions are eased SMEs are the first to experience the benefits. Advancing digital trade rules under the IPEF will stimulate U.S. economic growth and safeguard small business potential in global markets against the threat of digital protectionist measures.

Such an initiative could be leveraged to close the digital divide and to promote greater inclusion in the digital economy for small businesses, especially women and minority-owned businesses and those operating in the informal economy. Women-owned businesses in particular are driving economic growth in the region. In the United States, 42 percent of businesses are owned and operated by women, and in East Asia and the Pacific women represent 47 percent of businesses.

We encourage the Biden Administration to seize this opportunity to reengage with key trading partners and lead the region in shaping digital trade rules in the Indo-Pacific.

To support small businesses and workers in the digital economy, we recommend that the Administration focus on the following key priorities:

Strengthening the digital trade ecosystem

Indo-Pacific governments should commit to high-level rules and principles based on openness, non-discrimination, and shared values to improve the rules that support small businesses’ access to the global e-commerce ecosystem.

With limited resources, small businesses are disproportionately impacted by growing protectionist policies that are often designed to restrict the flow of data, force the localization of data and block digital services and content. The panoply of digital laws and regulations that differ across markets also make compliance extremely challenging and costly for small businesses that simply do not have the resources to tailor their products to meet the specific requirements of each market. To help small businesses make the most of digital trade opportunities, the U.S. should advance high-standard digital trade rules, such as those included in the digital trade chapter of the U.S.-Mexico-Canada Agreement (USMCA), and seek digital regulatory alignment wherever possible. The IPEF should:

  • Prohibit limits on cross-border data flows and forced data localization requirements. The ability to transfer data internationally is critical to businesses of all sizes, in all sectors. Requirements for local data, presence, or content raise barriers to entry for SMEs. Digital laws and regulations which are country-unique and veer from international standards and norms create unnecessary challenges, thus stifling investments, innovation, and engagement. Governments should agree to support secure and reliable cross-border data flows and oppose forced data localization while appropriately protecting privacy.
  • Ensure technology choice. Companies should be able to use and access technologies of their choice and not be forced to use local and at times less competitive digital options.
  • Ban the application of customs duties and other discriminatory measures to digital products. The increased administrative and financial burdens of tariffs on e-commerce transmissions would create increased barriers to entry, likely discouraging more SMEs from engaging in the global marketplace.
  • Eliminate the requirement to open a foreign office or to have a local representative as a condition of doing business. The internet has allowed for unprecedented opportunities for small businesses to engage in the global marketplace without having to set up a physical presence in foreign markets. Given the considerable costs of setting up in multiple markets, local presence requirements risk depriving small businesses of the chance to scale internationally and to benefit from digital trade.

Fostering small business participation in the digital economy

Mainstreaming the use of digital tools in physical trade lanes and encouraging the simplification of customs rules would reduce costs and supply chain bottlenecks, decreasing entry barriers for SMEs. The IPEF should:

  • Expand the acceptance of electronic signatures, electronic authentication, and paperless trading. By adopting policies recognizing and permitting electronic signatures and transactions, and facilitating contactless customs clearance, governments would improve the regulatory framework for small businesses and encourage their global engagement.
  • Establish simplified customs procedures to ease the movement of lower-value goods across borders. SMEs have already begun to benefit from the global growth in e-commerce as it provides them with new opportunities to expand to new markets, find new customers, etc. At the same time, SMEs face significant challenges when taking their business abroad, particularly the delays and added costs presented by often outdated customs procedures for cross-border shipments. This is so because SMEs often have limits on the amount of capital or expertise needed to navigate these complex customs requirements in U.S. export markets. To help alleviate these burdens, the U.S. should explore new methods of clearance for shipments with values above the de minimis level, but below a higher dollar threshold for formal clearance. If implemented, such an approach will allow SMEs to focus on growing their businesses, subjecting them to less documentation, fewer data demands, and less red tape—all while maintaining appropriate controls for health, safety, and security and ensuring that governments collect any revenue due for these shipments.
  • Drive risk-based approaches and solutions to cybersecurity. To respond to the ever-evolving threat landscape, policies need to focus on flexible, risk-based approaches to digital security that leverage global standards and address specific cyber needs.
  • Expand access to open government data and notification mechanisms on regulatory changes. By expanding transparency in non-sensitive government data and the timely publication of draft regulations, SMEs would have the opportunity to weigh in on potential policies that impact them and gain access to critical digital trade information, ultimately helping enable their access to the Indo-Pacific digital economy.

Prioritizing digital skills, access & inclusion 

Digital technologies have made it easier than ever before to participate in digital trade. Still, there are individuals and communities that have limited access to and use of digital tools. The IPEF should serve as a driver in expanding access to digital technologies, supporting digital skills building, and prioritizing the inclusion of underserved communities in the digital economy. The IPEF should:

  • Establish a digital inclusion workstream and ongoing Digital SME Dialogue to promote cooperation. Such an effort should engage various stakeholders including traditionally underserved groups, the private sector, and civil society to share best practices, industry solutions, and innovations for promoting digital inclusion.
  • Promote inclusivity in trade promotion programs. By delivering cohort-based export and digital skills training programs, governments can advance underserved communities across the region, including by equipping such small businesses with tools, information, and skills that ensure digital competitiveness and participation in international markets.
  • Leverage public-private partnerships (PPP) to establish a framework for digital skills-building initiatives. PPPs can play an important role in the development of high-quality skills, advancing expertise in key sectors, improving inclusion, and encouraging SMEs to invest in digital tools and skills. In partnership with the private sector, policymakers should create a regional framework to enhance SMEs’ access to digital tools and support capacity building on the use of exporting technologies, enabling small businesses to reach their full digital potential.
  • Expand government support to help SMEs adopt digital tools. Indo-Pacific governments should explore avenues to assist small business adoption and use of digital tools. Policymakers should consider public-private partnerships and new opportunities to establish designated funds to offset the cost of SME adoption of digital tools, building on programs like the U.S. Small Business Administration’s State Trade Expansion Program (STEP) grants to help small businesses globalize their digital presence and Australia’s Technology Investment Boost to assist small businesses digitalize their operations, through a bonus tax deduction.

Impactful engagements and commitments on the aforementioned issues directly support the Administration’s worker-centric approach to an inclusive, open, secure, and resilient digital economy in the Indo-Pacific.

We encourage the U.S. to drive a digital trade agenda that secures the rapidly growing opportunities of the global marketplace for American workers and small businesses.

 

About Global Innovation Forum (GIF)

The Global Innovation Forum (GIF) elevates small business voices to foster an inclusive policy landscape that enables companies of all sizes to innovate, trade, and engage in the global digital economy. By leveraging a global network of government officials, civil society, and private sector leaders, GIF delivers actionable insights and impactful programs to emphasize how technology and trade policies can advance resilience and inclusive growth.

As an educational project of the 501(c)(3) National Foreign Trade Council Foundation, GIF connects small businesses and policymakers to bridge the gap between big-picture trade policy and the experiences of entrepreneurs, workers, and people.