"Regulatory Capture" in Digital Trade Policy: Report

Academic study shows Big Tech's Influence on Trade


The Biden administration's trade policies, such as the proposed Indo-Pacific Economic Framework (IPEF), have drawn criticism from progressive trade advocates for containing measures reminiscent of the neoliberal free-trade era, despite the “worker-centric” verbiage.  

A dynamic of “regulatory capture” has been identified, with tech lobbyists influencing trade negotiators to prioritize industry interests.

David Dayen of the liberal The American Prospect draws our attention to recent work by a University of Wisconsin academic, Wendy Li, detailing these strategies in her paper "Regulatory Capture's Third Face of Power."

Li's research found that tech lobbyists redefined and reframed digital trade so that policymakers saw no distinction between industry interests and national interests. The IPEF's digital trade chapter is a prime example, containing provisions that favor the tech sector without restrictions on personal data usage or added legal liabilities for user-generated content.

Li conducted interviews, reviewed communications between government officials and lobbyists, and performed fieldwork in Washington to uncover the lobbying efforts. Tech lobbyists used various means, such as ad hoc meetings, social gatherings, and public appearances, to supplement formal actions like congressional hearings.

Tech companies formed the Internet Association, a lobbying group led by Amazon, Facebook, and Google, and joined existing organizations like the Coalition of Service Industries and the Information Technology Industry Council. By positioning themselves as expert "stakeholders," these lobbyists provided essential information to trade officials unfamiliar with the industry.

The U.S. International Trade Commission (USITC) revised its projection of digital trade's potential to increase economic growth, which influenced trade negotiators. The U.S.-Mexico-Canada Agreement (USMCA) featured an even stronger digital trade chapter than the Trans-Pacific Partnership (TPP), and a subsequent bilateral deal with Japan had similar features.

Despite the IPEF continuing this tradition with a digital trade chapter borrowed from the USMCA, Li asserts that regulatory capture isn't static. The Biden administration has shown some signs of considering alternatives to the tech industry's worldview. However, the digital trade chapter has become institutionalized, making it an uphill battle to change that perspective.


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