An employee of a foreign exchange trading company works near monitors showing U.S. President-elect Donald Trump speaking on TV news (top) in Tokyo, Japan, November 9, 2016. (Toru Hanai/Reuters).
With Donald Trump’s victory, the prospects for digital trade have dimmed. This development owes much to the hostility towards trade that Trump brings to the presidency. But it also involves shifts more fundamental than Trump’s rejection of trade agreements. The rise of digital commerce is rooted in the stability provided by international trade agreements, the global reach of the internet, and the innovations associated with digital technologies. U.S. leadership and global engagement underpinned each of these sources of digital trade’s growth. Now, Trump’s election combines with other forces afoot around the world to threaten the future of digital trade.
The internet’s emergence as a global communications platform coincided in the mid-1990s with the remaking of the international economic order through the adoption of regional trade agreements (such as NAFTA), the WTO’s establishment, and the proliferation of bilateral trade and investment treaties. This web of agreements opened markets for goods and services, including those emerging from internet-based commercial activities. The internet’s global reach and the economic incentives provided by e-commerce fueled innovation in digital technologies. The U.S. government considered these developments strategically important to American interests and engaged globally to support, advance, and defend them.
Following this trajectory, President Obama sought to promote digital commerce by integrating it more directly into international trade law. Despite previous efforts to integrate e-commerce in U.S. trade agreements, the speed, scale, and significance of digital trade outpaced the development of trade law. The Obama administration wanted to close this gap in ways that would ensure the continued global growth of e-commerce. This strategy’s high-water mark was the e-commerce chapter of the Trans-Pacific Partnership (TPP) agreement. The U.S. Trade Representative hailed the chapter as the “most ambitious trade policy ever designed for the internet and electronic commerce.” The Obama administration saw the TPP as a way to anchor U.S. leadership in the international trading system, ensure the functioning of a globally accessible internet, and promote U.S.-led technological innovation.
However, with Trump’s election, the TPP is dead and U.S. commitment to the web of trade agreements built over decades to advance American interests is crumbling. President Trump will not seek to stabilize and expand digital trade through existing or new trade agreements, nor does he perceive that embedding e-commerce more deeply in trade agreements supports a global, open internet. His threats to tear up trade agreements and impose punitive tariffs on other countries threatens to damage e-commerce in the United States and globally. The U.S.-led political and economic environment that nurtured breathtaking innovation in digital technologies faces a wrenching transformation of unknown proportions and consequences.
In addition, the incoming Trump administration signals the end of U.S. trade and digital commerce leadership in a period of intensified geopolitcal competition and multipolar diplomacy. The rise of digital trade began in the Cold War’s immediate aftermath when U.S. influence and interests dominated world affairs. American power and principles provided the political space for the internet and e-commerce to become engines of economic growth and technological innovation.
The United States no longer enjoys such preeminence. President Obama’s arguments that TPP was strategic in geopolitical terms signaled his desire to ensure that U.S. leadership in trade and digital commerce continued amidst the challenges of multipolarity. Trump’s hostility to trade agreements comes with no alternative strategy for navigating U.S. interests through a more fluid, unstable balance of power. China will exploit the TPP’s demise and the Trump administration’s role in killing it.
Trump’s positions on trade might also derail the Transatlantic Trade and Investment Partnership (TTIP) agreement the Obama administration has been negotiating with the European Union. Proponents of TTIP see this agreement as another important way to bolster digital commerce, including as a venue to bring stability to U.S.-EU politics on digital technologies. Without TTIP, the European Union has fewer incentives to moderate its intensifying scrutiny of U.S. technology companies, and the U.S. government will lack leverage to bargain on behalf of these companies. The European Union will, thus, shape e-commerce in ways that significantly change how U.S. technology companies operate in the single market.
For nearly twenty years, digital commerce enjoyed growth facilitated by a favorable international political environment and supportive U.S. trade policies. After Trump’s election, neither of these conditions holds, which creates great uncertainty about what happens next. This uncertainty will continue until the Trump administration provides clarity about how it plans to turn the anti-trade rage from the campaign into policies that do not hurt U.S. participation in all forms of international commerce.
CFR seeks to foster civil and informed discussion of foreign policy issues. Opinions expressed on CFR blogs are solely those of the author or commenter, not of CFR, which takes no institutional positions. All comments must abide by CFR’s guidelines and will be moderated prior to posting.
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