America Must be the Standards Setter — Especially in the Digital Sphere

Author: ALI CEO Orit Frenkel, as published in The Hill, February 11, 2022

Five years ago, the U.S. pulled out of the Trans-Pacific Partnership (TPP), a trade agreement that both parties ran against in 2016. By then, trade agreements had lost public trust and political appeal. Reasons for this turn against trade included the lack of a U.S. social safety net for workers and communities who were the losers from trade, frustration with China and other countries flaunting trade rules, and the escalation of outsourcing.

After years of multilateral trade negotiations, traditional trade barriers are, with some exceptions, quite low. Today, many global challenges arise from a disparity in the standards that countries use.

Since the U.S. withdrawal from TPP, China has steadily advanced its economic leadership in the region. This culminated with announcements in 2021 of China’s intent to join both TPP’s successor, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), and the Digital Economy Partnership Agreement (DEPA), a digital governance agreement between Singapore, New Zealand and Chile, together with the China-led Regional Comprehensive Economic Partnership (RCEP) entering into force on Jan. 1, 2022.

China has pursued economic and infrastructure dominance through its Belt and Road Initiative, promoting its standards while selling its equipment. China’s infrastructure projects typically include substandard labor practices, eschew environmental and social impact assessments, ignore project management best practices, pursue financial arrangements that put countries into irresponsible levels of debt, and use procurement practices that often overlook corruption.

To build its projects, China often imports Chinese workers who labor in dismal conditions, and China sells abroad the coal-fired power plants that it is no longer installing domestically, potentially locking countries into carbon-intensive power generation for decades to come.

Of greatest concern is the digital space. As China’s Digital Silk Road has expanded, it has brought authoritarian standards of surveillance, monitoring and censorship with the internet and telecommunication equipment it sells.

To be a 21st century global leader, the U.S. must focus on being a standard setter — worker, environmental, digital, and infrastructure standards, to name a few.

The Biden administration entered office with a commitment to re-engage with allies and a desire to look at trade through a worker-centric lens. The new Indo-Pacific Economic Framework (IPEF), announced by the administration last fall, is an opportunity to launch a worker-centric framework focusing on standards that could enable U.S. leadership in Asia.

This framework also could become a bulwark against China’s authoritarian standards, protecting workers and facilitating the ability of small and medium-sized businesses (SMEs) to participate in the global marketplace.

The IPEF has several pillars, including trade facilitation, digital standards, worker standards, decarbonization, supply chain resiliency and infrastructure standards. The approach appears to be modular; countries can opt into various modules. The U.S. should use this opportunity to develop robust and transparent standards in each category that will create a “preferred partner” supplier classification for countries that can subscribe to the package of standards. This likely would entail starting with a small group of more advanced countries and offering a phase-in opportunity for less-developed countries. Ideally, the U.S. would offer technical assistance to developing countries adopting and implementing standards.

Given the Biden administration’s pledge to elevate worker and environmental standards, these pillars of the IPEF are critical. Countries must commit to robust worker standards, including making commitments to eliminate forced labor and gender-based violence, and have worker standards be part of the infrastructure and digital pillars. Countries also should agree to phase out coal-fired power plants, eliminate fossil fuel subsidies and conduct environmental impact assessments on new infrastructure projects.

While all the pillars are critical, digital standards must be the heart of the IPEF. Many stakeholders have expressed the national security imperative for the Biden administration to initiate negotiations for an Indo-Pacific digital agreement, with U.S. digital governance standards of democracy and transparency.

As the American Leadership Initiative has discussed in its recent paper, “A Worker-Centric Digital Agenda,” such a digital agreement could promote digital inclusivity, access for small businesses, and address worker concerns such as surveillance, algorithm biases and protection of data, while also providing for the free flow of data and promoting vital democratic standards.

Negotiators should pursue both digital trade facilitation standards and a worker-centric digital agreement to position the U.S. as a leader in digital governance. Many digital trade facilitation provisions are addressed in the DEPA, including electronic versions of customs documents, electronic invoicing, and facilitating express shipments and cross-border electronic payments.

Digitizing and expanding the use of digital technologies to facilitate trade would ease access for SMEs and make regional trade easier, cheaper and more transparent. Digital trade facilitation does not, however, address the widespread national security concerns stemming from China’s growing brand of repressive digital diplomacy. Negotiating such an agreement will be complex; however, a U.S. announcement of its intent to negotiate a digital governance agreement would offer regional countries a much-needed center of gravity and model for democratic and transparent standards.

DEPA and previous U.S. agreements have good language to build upon. This must be an agreement that ensures the free flow of data, while promoting access and inclusion across the signatory countries, providing protections for workers’ privacy and their data, and advancing small and entrepreneurial businesses.

The IPEF can position the U.S. as a leader in Asia, one that provides high standards and gives countries a vital alternative to China’s regressive standards. Negotiation of a worker-centric digital agreement will provide protections for workers and facilitate the participation of small businesses in the global economy, while countering China by promoting standards of transparency and democracy.