Introduction
The trade title of the Senate-passed United States Innovation and Competition Act (USICA) provides Big Tech interests with a powerful new tool to undermine governments’ efforts to counter Big Tech abuses. USICA Section 71011 would newly require the Office of the U.S. Trade Representative (USTR) to monitor the digital governance and anti-monopoly policies of countries worldwide, publish annual reports of such policies deemed to be illegal trade barriers and target for elimination pro-worker, pro-consumer, pro-privacy and pro-competition policies and proposals, including policies similar to those now being developing for the United States by Congress and executive branch agencies.
Countries that refuse to eliminate policies included in the annual report could face U.S. government sanctions under “Section 301.” Section 301, which refers to U.S. trade law provisions that authorize the government to impose tariffs and other trade penalties, is the process through which tariffs are now imposed on more than $360 billion of Chinese imports. Often countries eliminate or change targeted policies upon the mere instigation or publication of a Section 301 investigation report, a step which is required before sanctions can be imposed. This occurred with respect to the Trump administration’s 301 investigation of countries’ digital services taxes.
Effectively, Section 71011 establishes a new “Special 301” process for Big Tech. The pharmaceutical industry pushed for and gained what has become known as “Special 301” procedures in 1988. Pharma interests use Special 301 annual reports, and the U.S. government’s gathering of information about other nations’ policies and practices, to attack generic medicine, compulsory licensing and other drug cost reduction policies. Special 301 reports are a pipeline for Section 301 investigations. Countries that receive the “worst” rating of “Priority Foreign Country” are subject to Section 301 investigations. Thus, simply being listed in any Special 301 “watchlist” can lead countries to eliminate or weaken policies before any formal investigation is even begun. The threat of sanctions is one reason, but also foreign investors review these reports and the U.S. government links other diplomatic and aid considerations.
Sadly, there are several decades of evidence to substantiate how merely being listed in the Special 301 report can derail a new initiative or pressure a government to eliminate or weaken policies. Indeed, imposition of sanctions is rare: With respect to intellectual property issues, Ukraine was an unusual case after not making demanded changes related to copyrights after being designated a Priority Foreign Country. Ukraine had $75 million in sanctions imposed from 2001-2002.
Effectively, Section 71011 would require the U.S. government to become an agent of Big Tech to undermine the best digital governance policies worldwide. This is highly problematic in many ways described below. However, to start with, a new, powerful U.S. trade enforcement tool to target specific policies worldwide, and especially policies on which Congress are currently legislating and the administration acting, should only be established after broad debate and through normal congressional procedures. In contrast, USICA Section 71011, and indeed the entire USICA trade title, was slipped into the 2376-page bill the night before final passage.
Section 71011 is at best unrelated to and perhaps contrary to the ostensible purpose of the legislation, which is improving U.S. competitiveness vis à vis China. It has never been subject to committee mark up or even discussion. Recently five Democratic Senators, including four from the Senate Finance Committee, wrote Leader Schumer and Speaker Pelosi to announce their preference for the House America Creating Opportunities for Manufacturing, Pre-Eminence in Technology, and Economic Strength (COMPETES) Act trade title, which does not include Special 301 for Big Tech.