Jonas Ekstromer/TT News Agency via AP
From left, Secretary of Commerce Gina Raimondo, Secretary of State Antony Blinken, and U.S. Trade Representative Katherine Tai attend a meeting during the Trade and Technology Conference, in Lulea, Sweden, May 31, 2023.
A tenuous alliance between the Biden administration’s leading antitrust officials and Biden’s chief trade official is testing whether the administration will keep its commitment to prevent trade deals from being used by powerful industries to undermine progressive regulation. The officials in question are FTC Chair Lina Khan, the head of the Justice Department’s Antitrust Division Jonathan Kanter, and U.S. Trade Representative Katherine Tai. All are progressives, and all are under intense pressure from industry lobbyists, as well as from not-so-progressive people at the Commerce Department.
Under past administrations, beginning with George H.W. Bush, trade deals such as NAFTA and later the creation of the World Trade Organization were used as vehicles to undermine salutary regulation of health, safety, the environment, and labor, by defining them as illicit barriers to commerce. The Obama administration was well on the way to consummating yet another such deal, the so-called Trans-Pacific Partnership (TPP), until Congress balked and the deal was killed.
Two immensely powerful industries, Big Tech and Big Pharma, are especially invested in using trade agreements to create rights for themselves and stunt public-interest regulation in the United States and other participating nations. In the case of deals with Asian nations, the proposed agreements are conceived and marketed as ways to more closely link the U.S., economically and geopolitically, to other nations in a region dominated by China, as part of a China containment strategy. But in practice, the deals are more for the benefit of U.S. multinationals seeking to shield themselves from regulation.
The latest such deal is called the Indo-Pacific Economic Framework (IPEF), launched in May 2022 by the U.S. and 12 Asian partners, including Japan, South Korea, India, and Australia. Most trade deals include carrots for trading partners, notably tariff reductions. But tariffs are not part of IPEF at all.
Rather, the proposed agreement pursues such goals as stronger supply chains, common progress on environmental goals, better coordination of anti-bribery and tax enforcement, as well as higher labor standards. All of that sounds benign. But unlike the tough and enforceable labor rights provisions in the revised version of NAFTA, the U.S.-Mexico-Canada Agreement (USMCA) that Tai herself helped draft, the labor sections of IPEF are weak on enforcement and merely aspirational.
The worrisome parts of the proposed deal involve what the White House describes as “high-standard rules of the road in the digital economy, including standards on cross-border data flows and data localization.” The White House also promises to address “issues such as online privacy and discriminatory and unethical use of Artificial Intelligence.”
Here is where the real mischief creeps in. The entire concept of “digital” rules in trade agreements was the brainchild of Big Tech. The idea is to create corporate rights that undercut national regulation. For example, Big Tech seeks to use IPEF to define regulations in areas such as antitrust that have the effect of constraining abuses by Google, Apple, or other firms as discriminatory against the U.S., because Google and Apple happen to be U.S.-based companies.
South Korean consumer protection legislation requires companies that run app stores to let users pay for purchases using other payment systems. Google and Apple, which dominate the cellphone operating system market and therefore the app store ecosystem, fiercely lobbied against the law, which reduces their market power and excess profits. Having failed to block it in South Korea, and with a similar bill sponsored by Sen. Richard Blumenthal (D-CT) enjoying bipartisan support in Congress, the companies now hope to get a provision in IPEF to disallow such laws as discriminatory against the U.S.
The entire concept of “digital” rules in trade agreements was the brainchild of Big Tech.
As a textbook case in the privatization of policymaking, the process of developing the official language of a trade deal is like no other. For decades, the process has involved panels of several hundred “advisers,” most of whom are corporate. There are also a small number of advisers from labor and other noncorporate groups. These lobbyists get access to the official text, which is otherwise classified information.
They are allowed to review and comment on the negotiating proposals via a secure website, and can request one-on-one sessions with negotiators. Meanwhile, members of Congress are denied access to the classified text, except by going to a secure room on Capitol Hill to read documents, which they are not permitted to download, or even take notes. They must check pens, notepads, and laptops at the door.
In this fashion, industry lobbyists get privileged access that is denied to elected representatives. The administration could shut down this double standard if it chose to. Yet despite the shift toward Biden’s pro-worker trade policy, some aspects remain on autopilot in a process that favors corporate special interests.
When it comes to deals like IPEF, when you get beyond the high-sounding White House rhetoric, the devil is in the details. While agreement has been reached on an entirely anodyne coordinating process that will supposedly produce more resilient supply chains, the digital language is still the subject of fierce contention.
The draft digital trade text, which was proposed to other nations in February as the official U.S. position, closely reflects provisions sought by Big Tech. The language would substantially constrain government regulation of AI, thwart government access to algorithms needed to screen for racial bias and corporate self-preferencing, and handcuff government efforts to protect consumer privacy and data security. It would undermine antitrust enforcement as well as consumer laws such as South Korea’s.
The language was put forward to representatives of other IPEF nations during a congressional recess last February, before any concerns could be addressed or remedied. The more that the FTC and the Antitrust Division of the Justice Department analyzed the hidden intent and likely implications of the language, the more alarmed they became.
And here is where the story sheds real light on just how hard it is to fundamentally change trade policy, despite a stated commitment from President Biden to have a pro-labor rather than pro-corporate approach. Khan and Kanter sent Tai a detailed confidential letter outlining their concerns. The letter, which was closely held at USTR, was soon leaked, presumably by one of Tai’s adversaries at USTR, to the U.S. Chamber of Commerce. The Chamber is especially aggrieved that U.S. antitrust officials are collaborating with their European counterparts, since the EU’s pro-consumer digital regulation is a model of everything that corporate America opposes.
The Chamber sent a letter to the White House demanding that Kanter and Khan be reined in. Meanwhile, corporate allies at USTR redoubled their effort to undermine Tai’s alliance with Kanter and Khan. A senior USTR official named Victor Mroczka, whose job title is Director for Trade Remedies and Competition, WTO & Multilateral Affairs, posted at LinkedIn articles critical of Khan and commented, “I have yet to see a legal article that supports what Khan is doing.”
This is an example of what Tai is up against in her own agency. Mroczka, apparently realizing that his post was incautious, later took it down. I have a screenshot of it and several other of his posts.
After USTR media relations pushed back on a previous article of mine in which I was critical of other USTR career staff, I asked on the record whether Tai had requested an investigation of how a sensitive letter from the FTC and DOJ had been leaked to the U.S. Chamber. I was told in an email, “Ambassador Tai trusts her staff and wants this office’s focus to remain on delivering for President Biden and the American people."
Meanwhile, the process of revising the negotiating text, so that it is consistent with President Biden’s whole-of-government competition policy, and not a giveaway to Big Tech at the expense of antitrust and privacy policy, grinds slowly on. The FTC and DOJ registered their concerns months ago (not long after Biden called out Big Tech for privacy incursions in his State of the Union speech). But as far as I can tell, the draft text is unchanged.
For this article, I checked in with congressional critics who had put Tai on notice that they expected her to revise the draft language. An April 22 letter to Tai and Commerce Secretary Gina Raimondo, led by Sen. Elizabeth Warren (D-MA) and signed by four senior senators and three senior members of the House, warned: “Big Tech wants to include an overly broad provision that would help large tech firms evade competition policies by claiming that such policies subject these firms to ‘illegal trade discrimination,’” and asked for assurances that this and other objectionable language would not be part of the final text. The letter explicitly called on Tai to address the concerns of the FTC and DOJ.
Lately, Tai has succeeded in reassuring key legislators that she is totally on board with these concerns. But somehow, the objectionable language is still unchanged.
Why not act to speedily align the digital chapter with Biden tech and competition policy? I am not privy to Tai’s thinking. She may be trying to balance the cross-pressures she is under, and working to bridge differences among other agencies. But delay also has its risks. Lobbyists will be scrutinizing every possible change and working with their allies in government to keep the current text. Though Tai chairs the interagency trade committee, which gives her some discretionary power, there are differing views on how much USTR can alter unilaterally. Ultimately, the problem is not Tai. It’s the structure of power.
IPEF, as noted, was created more as a national-security initiative than as a trade deal, using economic agreements to strengthen political ties with trading partners. But negotiations of other national-security agreements are typically conducted with utmost secrecy. This one, following practice in trade deals, is conducted in a corporate-lobbyist fishbowl, compounded by unauthorized leaks.
By the same token, many other agencies have advisory panels. But I can’t think of a case where the system is more tilted to corporate interests than in the trade arena. Even in the case of the FDA, where the agency itself has been substantially captured by Big Pharma, the medical and scientific advisory panels sometimes function as counterweights.
As a structural story of permanent corporate power, this entire saga displays the immense influence of Big Tech. It reveals the challenges faced by even the best appointees in a progressive administration. It’s a huge lift to alter a pro-corporate policy legacy and turn around a compromised agency, some of whose permanent staff is either naïvely committed to discredited conceptions of free trade, or deliberately waiting their turn at the lucrative corporate revolving door.
