What Trump's Updates to NAFTA Mean for the Internet

Bill Watson, Clark Packard

Security, Americas

Washington's negotiated updates to NAFTA are a good start, but the best parts of USMCA should go global.

Perhaps the biggest change in the quarter-century since the North American Free Trade Agreement (NAFTA) was signed has been the way the internet has fundamentally reshaped how human beings socialize, share culture and do business. Just like the broad reduction in global tariffs following World War II, the digital revolution has driven economic growth around the world by reducing transaction costs, enabling specialization and expanding markets.

But the internet’s full potential as a catalyst of human progress is threatened by digital industrial policies, data protectionism and other backward-thinking interventions that erect virtual walls around a naturally global network. In order to combat this scourge, the newly negotiated U.S.-Mexico-Canada Agreement (USMCA) updates NAFTA with new rules on digital trade that will be critical to secure free trade and innovation in the twenty-first century. While the USMCA needs significant improvement in some areas, its digital trade provisions set a strong precedent for future trade negotiations.

According to the U.S. Bureau of Economic Analysis, the digital economy accounted for 6.5 percent of U.S. gross domestic product in 2016, contributing $1.3 trillion that year. The McKinsey Global Institute has estimated the internet was responsible for 21 percent of all global economic growth between 2005 and 2009, a period when there were half as many internet users as there are today. Meanwhile, a recent report from the World Trade Organization (WTO) found that in 2016, the value of e-commerce transactions totaled $27.7 trillion, the overwhelming majority of which were business-to-business transactions.