Manuel Balce Ceneta/AP Photo
From left, Secretary of Commerce Gina Raimondo, Secretary of State Antony Blinken, and United States Trade Representative Katherine Tai are seated before the start of the U.S.-European Union Trade and Technology Council Strategic Discussion, December 5, 2022, in College Park, Maryland.
Progressive trade advocates continue to express confusion over the Biden administration’s trade policies. Despite a U.S. trade representative (USTR) in Katherine Tai who has prioritized a worker-centered trade vision that breaks with the past, negotiations coming out of her office, like the proposed Indo-Pacific Economic Framework (IPEF), contain measures that would not be out of place in the neoliberal free-trade era.
Last month, I wrote about the prevalence of corporate trade advisers and their influence over what policies ultimately get enacted. That could be part of the explanation. But another piece involves a dynamic of regulatory capture that has been newly detailed in a remarkable academic paper.
It involves a case study of what is known as digital trade, a concept that didn’t really exist less than a decade ago. Lobbyists for the major tech industries set out to reverse how trade negotiators think about tech platforms, and what policies they should pursue in trade agreements. Through developing social ties and personal networks, they got their position adopted as official policy, and have kept it there by cultivating career staff rather than the ever-changing cast of political appointees.
The IPEF’s digital trade chapter bears all the telltale signatures of the tech sector’s model digital trade policy, with no restrictions on companies’ use of personal data, and no added legal liabilities to the platforms based on what users post. It represents an unalloyed triumph for an industry that in other contexts is under siege from the Biden administration.
It’s a powerful example of how corporate America quietly bends official Washington toward its will. And we know exactly how the lobbyists did it, because they told the researcher.
Wendy Li, a Ph.D. candidate in sociology at the University of Wisconsin, worked as a special assistant in the U.S. trade representative’s office from 2015 to 2017, overlapping the Obama and Trump administrations. She scheduled meetings for the general counsel, and got to know the lobbyists who wanted to talk to her bosses. When she decided to write a research paper about how corporate power shapes policy, she called up those lobbyists, who were happy to explain their strategies.
Li’s paper, “Regulatory Capture’s Third Face of Power,” features a refreshingly blunt series of quotes from anonymous tech lobbyists, explaining how they infiltrate the minds of trade professionals. “Sometimes, [meetings are like] hey, let’s grab lunch, let’s grab coffee, and catch up. And half of it is about our kids, and half of it is about this [work related issue],” one tech lobbyist told Li. “We’ll have a formal meeting, but obviously we chitchat before and after … a lot of it is just normal human interaction.”
Sprinkled in with the small talk is a libertarian construction of how digital trade policy should work, where any regulations that constrain tech platforms are seen as illegal barriers to commerce. Even supposedly nonpartisan research into digital trade has adopted this frame; it’s a cognitive capture that facilitates the corporate capture. And with digital trade now etched into model agreements before the U.S. completes a Big Tech regulatory regime, it could significantly hamper the lawmakers’ ability to protect consumer data or rein in monopolistic corporations.
Li, who conducted 33 interviews with trade professionals for the paper, also obtained communications between government officials and lobbyists through Freedom of Information Act requests, and did six months of field work in Washington, and analogizes the situation to sports. “The first face of power is measured through the winner of the game, and the second face of power can be understood as the referee,” she writes. “The third face of power is the field, the rulebook, and agreement that there is even a game at all.” Tech lobbyists, in other words, redefined and reframed digital trade so that policymakers now see no difference between industry interests and the national interest.
TO THE EXTENT THAT THE DIGITAL TRADE AGENDA existed a decade ago, it flowed from copyright holders, like Hollywood studios, music labels, and software companies. They wanted tech platforms to be held responsible when website users published copyrighted material, and they made some headway. USTR negotiated the Anti-Counterfeiting Trade Agreement and generally took the industry line that tech policy needed to protect intellectual property. This was a separate form of capture, of course, since copyright holders represented powerful industries.
Tech companies, who didn’t want the legal risk and compliance burden of constantly monitoring their sites for copyright infringement, devised a game plan. They formed the Internet Association, a lobbying group led by Amazon, Facebook, and Google. But they also joined existing organizations like the Coalition of Service Industries and the Information Technology Industry Council, which were familiar to trade negotiators.
After that, the charm offensive began. Li details how tech lobbyists used ad hoc meetings, social gatherings, and public appearances to supplement formal actions like congressional hearings. Many of the key lobbyists were former legislative staffers or trade officials; Chris, the lobbyist who told Li about grabbing lunch or coffee with trade negotiators, previously worked at the Department of Commerce.
The revolving door spun both ways. Robert Holleyman became deputy trade representative during Obama’s second term; formerly, he’d been the president and CEO of the Business Software Alliance. Around this time, software started to migrate to the cloud, aligning that industry’s beliefs on digital trade with the tech platforms, which controlled major cloud computing operations.
Lobbyists for the major tech industries set out to reverse how trade negotiators think about tech platforms.
The lobbyists positioned themselves as expert “stakeholders” with essential information for trade officials, who were untutored in how the industry worked. “I spend a lot of time with the companies trying to understand their business model, trying to understand how they interact with the governments in different countries, and then of course, socializing it within the building,” Mike, a trade official and negotiator, told Li.
In an interview with the Prospect, Li highlighted one quote that laid out the cognitive capture. A second trade negotiator, Ben, explained how USTR officials would hold substantive negotiations with other countries, and then brief industry associations. “They’re not coming in and spouting talking points. They’re not giving us draft text because we haven’t gotten to the text phase yet,” Ben told Li. “We provide an update on what is happening and what approach we’re taking … companies [are] talking about their particular interests, and inquiring as to whether and how their issues are being addressed in that forum.”
Li marveled at how industry groups were holding dozens of private meetings to shape the framework of the debate even before there was any text being exchanged. “I feel like in D.C., people tend to speak in euphemisms and phrases they kind of take for granted,” she said. “When you expand the audience outside trade negotiators, it does show what they do in a new light.”
TO REORIENT POLICY, TECH LOBBYISTS got officials to see digital platforms, and in particular the data those platforms collect, as no different than other goods and services. That took the issue out of the hands of intellectual-property negotiators, and over to the services office, where it was treated like a free-flow-of-data issue.
Placing any regulations on tech data was seen as tantamount to hobbling the fast-moving digital economy. Preserving the “freedom” to innovate was described as “essential to the vitality of the Internet itself and the resulting economic prosperity” in a 2012 Internet Association statement.
Li cites a 2013 event at the Brookings Institution where a USTR official, Jonathan McHale, expressed ambivalence about how to deal with tech data, but industry lobbyists on the panel were insistent that any barrier to data should be treated like a tariff. Eventually, McHale was won over to those arguments; he now serves as a vice president for the Computer & Communications Industry Association, a tech industry trade group.
“There are so many emails and public remarks where you see the lobbyists introduce talking points that start getting adopted and echoed,” Li told the Prospect.
The first taste of the lobbyists’ success came in the Trans-Pacific Partnership (TPP), which contained an e-commerce chapter that adopted the industry frame. But the Trump administration was sharply critical of TPP, and it was unclear whether their trade officials would take the same approach as Obama’s appointees. So the lobbyists worked to stamp their perspective into the bowels of the USTR building.
Holleyman, the deputy trade rep, convened a Digital Trade Working Group at the end of the Obama administration, which literally began its life with a stakeholder meeting at the U.S. Chamber of Commerce. These meetings, between industry officials and career civil servants in the trade office, were designed to sustain the digital trade agenda. As one lobbyist told Li, “The top politicals have not focused on it as a major area … so the career staff has continued it.”
Placing any regulations on tech data was seen as tantamount to hobbling the fast-moving digital economy.
Cognitive capture spread to other venues. The U.S. International Trade Commission (USITC) is a quasi-governmental research body that trade negotiators rely upon for up-to-date information about the issues they work on. The Digital Trade Working Group asked USITC to expand its research into digital trade over a two-year period. Much of the data for that research, like estimates of the value of social media or search engine traffic, came from the tech companies themselves. Tech lobbyists also testified before the USITC and sat on panels with USITC analysts at public events. This was natural for USITC, which specializes in measuring industry impact.
As a result, USITC revised upward its projection that digital trade, as defined by the industry, would increase economic growth. Industry groups then amplified those findings to trade negotiators. Just like that, the industry got the key independent research organization on trade, which sets the basic assumptions around the key issues, to parrot their belief that any changes to data flows or corporate liability would harm the economy.
Li described the scene in the Trump years as a frenzy. “There were so many events I could go to on digital trade, every week a trade association was on the Hill,” she said. “Everyone was trying to maintain this chorus that digital trade needs to stay.”
It worked. The U.S.-Mexico-Canada Agreement (USMCA) had an even stronger digital trade chapter than the TPP; Li unearthed emails showing tech lobbyists explicitly exchanging suggestions on the text with trade negotiators. A subsequent bilateral deal with Japan had similar features. Eighteen countries around the world have now adopted digital trade provisions of this type into their trade deals. Even the World Trade Organization is considering reproducing digital trade concepts in its multilateral agreements.
During the Trump administration, USTR officials were questioning countries like Vietnam about proposed laws that would affect digital trade, even though the U.S. had no digital trade agreement with the Southeast Asian country. In 2019, USTR investigated and later imposed a retaliatory tariff on France for enacting a tax on digital services, seen as a digital trade barrier. Again, the U.S and France do not have a digital trade agreement.
“USTR has effectively internalized technology industry interests into their own mission,” Li wrote in the paper.
IPEF CONTINUES THIS RECENT TRADITION. This deal with a dozen-plus Pacific Rim countries representing 40 percent of the global economy includes a digital trade chapter, borrowed from the USMCA. It would prohibit governments from reviewing or prescreening algorithms for violations of labor law, competition policy, or nondiscrimination statutes. It would bar limitations on data flows or storage. And it would treat policies that have greater impacts on the large tech firms as illegal trade barriers. These terms could block signatory countries from writing laws that take on any of these issues.
The Prospect asked national-security adviser Jake Sullivan about the IPEF digital trade chapter at a conference last month. He disagreed with the premise, saying, “We are pursuing a set of standards and rules in the digital space that are aligned with the basic values of the administration.”
Sen. Elizabeth Warren (D-MA) said at a public event last month that “lobbyists and lawyers are trying to rig the digital trade deals.” Roll Call quoted Christine Bliss, president of the Coalition of Services Industries, who disagreed that anything in IPEF would hamper the United States’ opportunity to pass laws cracking down on Big Tech. Bliss represents the drift seen in Li’s paper; before joining the industry trade group, she was a career civil servant at USTR.
Though President Biden has been criticized by corporate America for his “reluctance” to pursue new trade agreements, the IPEF framework would set standards for economic transactions with Pacific Rim countries much like those in the TPP, although without instituting lower tariffs. Crucially, the administration doesn’t believe the IPEF needs to be ratified by Congress, to the chagrin of leading lawmakers.
Yet it would continue what is now practically an axiomatic standard for digital trade, the fruits of a decade-long Big Tech project to ingrain the terms of the debate.
Li cautioned that regulatory capture isn’t static, and that the Biden administration has shown some signs of being aware that there are alternatives to the tech industry’s worldview. However, she said, “the digital trade chapter has become institutionalized. It’s going to be an uphill battle to erode that.”
