April 14, 2017 at 5:00 am ET
When Vice President Mike Pence travels to Tokyo next week to meet with Japan’s Deputy Prime Minister Taro Aso, it will mark the start of a promising economic dialogue for the Trump administration with a pivotal Asian power.
The leaders have the opportunity to form a partnership that reflects the like-minded approach to digital trade in the United States and Japan. They also can combine efforts to lead our respective regions toward international legal rules that would safeguard free data flows against unjustified restrictions. It’s a chance both governments should seize.
There may be headlines from the meeting about difficult discussions around U.S. efforts to open Japanese markets for American automobiles and agricultural products, perennially difficult topics that were part of the Trans-Pacific Partnership negotiations. But I encourage both the vice president and deputy prime minister to use this opportunity to launch a strategic collaboration on another subject of great future importance to both countries — the key role digital trade has come to play in economic growth and job creation.
Much of international trade today depends on the unrestricted international movement of data. Digitally enabled trade to and from the United States amounts to more than $500 billion. American companies are world leaders in the new data-driven economy, dominating the fields of cloud computing, data analytics, the Internet of Things and artificial intelligence. And the software industry is critical to the health of the U.S. economy itself. A recent study by BSA | The Software Alliance showed that the software industry contributes more than $1 trillion to U.S. gross domestic product, almost 10 million jobs, and $52 billion in research and development.
I was in Tokyo earlier this week and had the opportunity to meet with both company and government officials. There is excitement in Japan for job and economic growth through better use of software and data. Japan realizes the rapidly growing importance of trade in digitally delivered services. Cross-border data flows between the United States and Japan and its neighbors have grown at an exponential rate in recent years – more than quintupling in the years between 2008 and 2013, according to a McKinsey study.
But this dynamic growth in cross-border data flows can’t be taken for granted. Governments have the power to prevent or limit data flows – and increasingly they are doing so. Several of Japan’s Asian neighbors, for example, have adopted or are considering measures that lack well-grounded privacy or security rationales. Rather, they seem designed to favor local companies, protecting them from the rigors of international competition. This impulse exists in other parts of the world as well. It jeopardizes the services the software industry provides to local companies around the world – and it will chill the development of emerging technologies.
The digital economy will only grow if governments work together to develop international frameworks that sustain cross-border data flows. Fortunately, some encouraging efforts are underway. For example, Japan and the United States, along with several other countries in the Asia Pacific region, have developed rules that protect personal information when it moves in international commerce. Japan’s new privacy law holds promise for enabling other flexible mechanisms for international data transfers as well.
The Trump administration already has signaled that it understands the promise of digital trade for the United States. Secretary of Commerce Wilbur Ross told the Senate during his confirmation hearing that he would “advocate for open digital trade and push back on restrictive digital policies overseas, such as restrictions on the free flow of data and forced localization requirements.” Robert Lighthizer, nominated to serve as U.S. trade representative, similarly affirmed during his confirmation hearing that “it is essential to moving forward that we have free flow of data, and that you can store the data where it makes sense economically.”
There have been indications from the White House that digital trade will form part of efforts to modernize the North American Free Trade Agreement, a pre-internet agreement. Starting a dialogue about it with Japan would help underscore that it’s a global issue, demanding leadership in every region.
Victoria A. Espinel is president and CEO of BSA | The Software Alliance. Previously, she was an adviser to former President Barack Obama on intellectual property and a chief trade negotiator under former President George W. Bush.
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