by Lori Wallach, Director of Rethink Trade
This blog is an unusual tribute to one of the Big Tech lobbyists working overtime to insert binding provisions into the Biden administration’s major Asian trade negotiations to undermine efforts by governments worldwide to regulate against Big Tech monopoly, privacy, civil rights, and other abuses.
Hats off to Jonathan McHale of the Computer and Communications Industry Association (CCIA). CCIA is a lobby group representing Google, Amazon, Facebook and Apple. Many of its firms are among the mainly corporate representatives in the official U.S. trade advisory system with access to otherwise secret Indo-Pacific Economic Framework (IPEF) texts.
Why the shout out for McHale? In a recent blog he admitted what we — and members of Congress and competing tech firms and many others — correctly understand the scope of a particular USMCA rule that Big Tech wants inserted into IPEF to thwart anti-monopoly policies from being applied to Big Tech platforms and their services. (This Washington Post story “Big Tech trying to ‘weaponize’ U.S. trade talks, Democrats warn” offers a good overview of the fight.)
You should trust McHale knows the scope of the provision, which is framed as disciplining discrimination against foreign “digital products.” Why? He wrote it.
Before officially joining the Big Tech lobby in 2022, he worked for two decades at the Office of the U.S. Trade Representative (USTR) and negotiated the term in question. It appears in the 2020 U.S.-Mexico-Canada Agreement (USMCA).
U.S. Trade Representative Katherine Tai called for a new U.S. approach to digital trade. But in February 2023, USTR submitted IPEF digital trade language that is reported to replicate some USMCA terms and modestly modify others.
These Big Tech-favored digital trade terms conflict with congressional and Biden administration privacy, AI, online civil rights, anti-monopoly, and other digital initiatives. (See Rethink Trade’s side-by-side analyses of congressional and White House proposals versus USMCA’s “digital trade” terms.) Someplace there is a disconnect between the president’s agenda — from his State of the Union call out of “Big Tech” abuses and promise to fix them to an all-of-government competition policy initiative — and some of the IPEF “digital trade” proposals.
Unsurprisingly, Big Tech lobbyists want to shut down Members of Congress and Biden officials outside of the insular IPEF negotiating world who are concerned with IPEF digital trade rules getting rigged to gut anti-monopoly policy here and in other nations.
One of the lobbyists’ main arguments, also repeated by USTR officials who argue that the rules proposed for IPEF are not a problem, is that critics don’t understand what the text means.
The USMCA “non-discrimination” rules label as illegal trade barriers domestic policies that apply equally regardless of where a platform, online service or digital product or its owners or developer are from, but that may have a disproportionate effect on platforms that are larger.
This rule is a bastardization of a trade theory call non-discrimination. Helpfully, Big Tech interests have listed the policies around IPEF nations, many the same as initiatives here, they say violate this expansive rule. (What Industry Identified as “Digital Trade Barriers” in the Indo-Pacific Region as Part of the National Trade Estimate Report Process)
But the implications of making this sort of broad, vague rule a U.S. standard are much broader. Consider the European Digital Markets Act and Digital Services Act. These policies target large platforms. Big Tech interests claim that the policies discriminate against U.S. firms because they disproportionately apply to U.S. firms even though this is because the firms are big, not because they are American.
This is the same logic behind Big Tech attacks on Korea’s App Store law that is similar to one proposed here. The laws require App stores to allow different payment systems beyond their own and allow developers to list on numerous App Store. This policy has a greater effect on Google and Apple because they dominate the market.
Current trade-pact e-commerce terms do not provide a legal basis for challenging such a policy. Until Big Tech firms rigged the USMCA and the Trans-Pacific Partnership (TPP) deal, which the U.S. never approved, trade pacts treated these two situations differently. The previous standard bifurcated between de jure discrimination, which is discriminatory treatment of foreign entities written into a law that is forbidden versus de facto discrimination, which means a facially neutral policy has an inadvertent different impact but is only deemed a trade barrier if the challenging party can prove that origin-based discrimination was the intention of the policy.
Despite all of the times that Big Tech interests have targeted various anti-monopoly policies in writing as being discriminatory, when this problem is raised in the context of IPEF, the lobbyists pushing these toxic terms and their USTR allies say: “Nothing to see here!”
For instance, in a CCIA “Myths and Facts about Digital Trade Rules” sent around Capitol Hill, you can see the claim that the anti-antitrust rules don’t cover the platforms or services but only apply to discriminatory treatment related to the sale of specific “digital products,” such as games, music and videos. This is the claim:
“Critics are erroneously conflating how a government treats a supplier generally with how that supplier’s products are treated in comparison to those of its competitors. Regardless of whether new competition-inspired regulation is justified measures seeking to constrain the behavior of specific suppliers (eg. Europe’s Digital Markets Act, Korea’s App store legislation) do not typically result in creating explicit “preferences” for domestic products, the target of digital non-discrimination rules.” (emphasis added)
But, just recently, in his blog taking yet another approach to try to counter critics growing spotlight on Big Tech “digital trade” Trojan horse move, McHale and CCIA say:
“Rather, trade rules (including those applying to digital products and services) require that a party alleging discrimination demonstrate that the design of a governmental measure disproportionately affects a foreign supplier…” (emphasis added)
So, thank you Jonathan McHale and CCIA for admitting that the anti-anti-trust non-discrimination rule for “digital products” covers services and services suppliers and could be used to target policies like the DMA, DSA and Korea’s App Stores Law, all of which have U.S. counterparts that are being considered by the U.S. Congress and are undermined when similar policies elsewhere are under assault. (Check out this Rethink Trade analysis for a side-by-side of such U.S. proposals and the Big-Tech-demanded “digital trade” terms that would undermine them.)
There has been a lot of criticism about the revolving door between USTR and Big Tech lobby shops, including a report by U.S. Senator Elizabeth Warren based on emails obtained through the Freedom of Information Act showing current USTR officials soliciting advice from their former colleagues now representing Big Tech interests.
But this is one situation where there is a small upside: The former USTR official who wrote the USMCA rules has clarified that the anti-antitrust terms do indeed cover mega platforms and services, even if revealing that fact is unhelpful to his current interests as a Big Tech lobbyist.
