Earlier this month, international trade took center stage as the U.S. and its Pacific neighbors met for the annual Asia Pacific Economic Cooperation (APEC) Leaders’ Meetings. But just weeks before these critical meetings, the Office of the U.S. Trade Representative (USTR) withdrew its proposals for key trade rules at the World Trade Organization (WTO) in ongoing negotiations to facilitate digitally enabled trade. The justification was to give Congress the “policy space” to regulate technology companies — even as many in Congress highlighted that digital trade agreements are not a barrier to regulation. The Wall Street Journal reported that “Federal Trade Commission Chair Lina Khan and Justice Department antitrust chief Jonathan Kanter” had asked USTR to “jettison” the WTO provisions. However, the FTC and DOJ have declined to publicly release their communications with USTR and have only made a heavily redacted letter available. The USTR’s announcement was met with strong bipartisan and industry pushback, with many warning of serious consequences ahead for the U.S. economy and America’s security relationship with China.  

Here’s what they are saying: 

The decision throws away a crucial opportunity to set American businesses and workers up for fair competition with their counterparts in China, India, and the EU. Now, it will be easier for other countries to undermine them for decades to come.

Democrats in Congress sound the alarm that those seeking U.S. competition regulations similar to Europe’s have pressured USTR to stand down on some digital trade issues:

— Saying he is “so disappointed to see USTR abandoning” digital trade rules, Senator Chris Coons warned that the USTR is putting the future of the economy at risk by getting caught up in domestic regulation battles. “Important domestic debates on regulating technology should not hold us back from continuing to work with our allies to develop guardrails for the global digital economy that reflect our shared values. If we are not at the negotiating table, we are giving China a free pass to set the rules of the road for the future of the global economy.” 

— Senator Tom Carper added that “today’s decision by USTR sets us back from the standards outlined by [the United States-Mexico-Canada Agreement] when we need to be leading global competition and innovation.”

— Senator Ron Wyden lamented that the USTR was giving an unambiguous win to the Chinese government’s priorities and interests. “USTR’s action today is a win for the Chinese government’s efforts to have unlimited access to U.S. data, a win for Chinese tech giants who want to bully smaller countries into following the Chinese model of internet censorship, and a win for China’s Great Firewall.”

— The 11-member New Democrat Coalition Trade Task Force called on the Biden Administration to “defend American values against digital sovereignty campaigns by China” and “push the European Union to amend its proposals targeting American technologies.” “It is critical that the U.S. leads in shaping the rules that govern the digital economy,” they added.

Republicans in Congress sound the alarm that having the U.S. retreat on digital trade benefits other countries competing to offer tech products and services: 

— Senate Finance Committee Ranking Member Mike Crapo and eight other senators said that the U.S. was surrendering on the world stage. “We have warned for years that either the United States would write the rules for digital trade or China would. Now, the Biden Administration has decided to give China the pen.” They continued: “The Biden Administration’s claim that it wants to ensure ‘policy space’ is spurious… the only party getting any ‘space’ here is China, and that space allows China to assume the leadership role formerly held by the United States.”

— House Ways and Means Committee Chairman Jason Smith highlighted that, to everyone but the USTR, it was clear that the U.S. absolutely could not drop their digital trade demands without grave consequences. “The Biden Administration’s decision to walk away from longstanding bipartisan positions on digital trade undermines American leadership and competitiveness, surrenders the playing field to the Chinese Communist Party, and abandons our closest trading partners. There is absolutely nothing in the Biden Administration’s decision that will benefit American workers.”

— House Judiciary Committee Chairman Jim Jordan warned that the U.S. cannot afford to underestimate how other countries’ trade policies will disadvantage American businesses. “The protectionist policies by foreign governments, like the Chinese Communist Party, protect foreign business and create barriers for American businesses.”  

Both sides of the Congressional aisle unite to sound the alarm that the U.S. is reversing decades of bipartisan efforts: 

— Washington Democrat Susan DelBene and Illinois Republican Darin LaHood, co-chairs of the Digital Trade Caucus, criticized the decision to abandon decades of important bipartisan work, including efforts to “protect against the forced transfer of American technology, enable the free flow of information across borders, and defend American industries, small businesses, and workers against discrimination.”

— 38 bipartisan House members raised their “opposition to USTR’s decision to abandon important bipartisan digital trade proposals.” These members said they are “concerned by an increasing number of policies and proposals around the world that unfairly target American businesses and workers and threaten to undermine the leading position U.S. innovators have achieved.” They added that “the void created by this decision will harm American workers, companies, security, and innovation, while benefiting our largest competitors in the digital space.”

Industry groups sound the alarm that abandoning successful precedent weakens U.S. companies’ global positioning: 

— The U.S. Chamber of Commerce wondered how there could be any good reason to abandon years of trade precedents that worked. “The digital trade rules that USTR abandoned this week have governed U.S. trade with three of our top four trading partners [Mexico, Canada, Japan] for years—benefitting many Americans and harming none.”

— Jonathan McHale, Vice President of Digital Trade at the Computer & Communications Industry Association, warned that the decision will signal that the U.S. is less willing to fight for American businesses, workers, and consumers. “The United States has led the world in the development of robust trade rules that facilitated exports and jobs they support — for most of recent history… Failure of the U.S. in rejoining its patterns in negotiating the key rules will leave U.S. businesses, workers, and consumers worse off as more restrictive visions of digital trade — whether protectionist or authoritarian — would be given the space to proliferate.”