Digitrade Digest #23
FTC revives Facebook case, Kamla Harris to visit Asia: Chambers of Commerce ask to focus on digital trade and more....
US
U.S. Revives Facebook Suit, Adding Details to Back Claim of a Monopoly
The New York Times: The suit submitted Thursday contains the same overall arguments as the original, saying that Facebook’s acquisitions of Instagram and WhatsApp were made to create a “moat” around its monopoly in social networking and arguing that the social network should be broken up. But the updated suit is nearly twice as long and includes more facts and analysis that the agency says better support the government’s allegations.
“Facebook lacked the business acumen and technical talent to survive the transition to mobile,” Holly Vedova, the acting director of the bureau of competition at the agency, said in a statement. “After failing to compete with new innovators, Facebook illegally bought or buried them when their popularity became an existential threat.”
Facebook responded: “There was no valid claim that Facebook was a monopolist — and that has not changed. Our acquisitions of Instagram and WhatsApp were reviewed and cleared many years ago, and our platform policies were lawful.”
The agency had to refile the case after the judge overseeing it said in June that the government had not provided enough evidence that Facebook was a monopoly in social networking. The judge’s decision, and a similar one he made in a case against the company brought by more than 40 states, dealt a stunning blow to regulators’ attempts to rein in Big Tech.
His decision presented the first major test for Lina Khan, the F.T.C. chair, who was only days into her role at the time. Ms. Khan represents a wave of new thinking about the industry among administration officials and many lawmakers, arguing that the government needs to take far more aggressive action to stem the power of technology giants like Facebook, Google, Amazon and Apple. President Biden has appointed multiple regulators with similar aims and lawmakers proposed updates to antitrust laws to target the power of technology companies.
Eyes on Asia: Ahead of Harris trip, Chamber calls for digital standard talks
InsideTrade: The White House in recent months has been mulling talks on a digital trade deal in the Indo-Pacific as a way to counter China. Australian Minister for Trade, Tourism and Investment Dan Tehan said this month that prime candidates for such a deal included Singapore, Japan, South Korea, Canada, New Zealand, Chile and Australia. Tehan also said Australia’s digital economy agreement with Singapore could serve as a blueprint.
Countries in the Asia-Pacific region belong to “a web of trade agreements” that provide preferential market access for their members, Goyer noted. Almost a dozen countries have signed onto the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, for one, while others, including China, have been eyeing membership.
Several lawmakers in recent months have called on the Biden administration to join CPTPP after the Trump administration withdrew the U.S. from its predecessor in 2017. But the Biden administration has said the U.S. would not join CPTPP unless it were reformed. More than a dozen Asia-Pacific countries, including China, also signed onto the Regional Comprehensive Economic Partnership in 2020.
The U.S.’ lack of involvement in these trade agreements – which include “Chinese and European competitors” – put American companies and workers at a disadvantage, Goyer contended.
“There is no better way to better establish the United States as a trusted regional partner than by enhancing our economic engagement in the region,” he wrote.
Harris also should use her visit to Vietnam as a chance to enhance the two sides’ Trade and Investment Framework, Goyer said. The Chamber, he noted, welcomed the administration’s decision not to impose tariffs on goods from Vietnam in response to a Section 301 currency investigation. The Office of the U.S. Trade Representative in July announced it would not impose duties following the probe, launched last year by the Trump administration, in lieu of a currency agreement between the Treasury Department and the Vietnamese State Bank that USTR will continue to monitor for compliance.
An upgraded TIFA would be a “strong follow-up" to that decision and provide “a way to address the myriad regulatory and market access issues that are increasingly large irritants in the commercial relationship,” Goyer said. The two sides held their last TIFA meeting in 2017.
Digital Commerce at the Crossroads: The Case for a Digital Trade Agreement
U.S. Chamber of Commerce: The WTO Joint Statement Initiative on E-commerce is a multilateral effort to lay the foundation for trade rules to safeguard digital trade flows. Some 80 countries are now engaged in this negotiation. However, this agreement is unlikely to be completed in the near term, notably due to the participation in the negotiations of several countries that do not share the goals cited above.
While the United States must remain a leader within these WTO negotiations, the Chamber believes it is important to advance a digital trade agreement with a coalition of like-minded countries that share U.S. ambitions. Building on the model set out in the digital trade chapter of the United States-Mexico-Canada Agreement (USMCA) and the U.S.-Japan Digital Trade Agreement, the United States should launch negotiations for a high-standard plurilateral digital trade agreement with other economies that share this vision.
The Asia-Pacific region is home to a number of economies that are already showing interest in such an initiative. In addition to Canada, Mexico, and Japan, the members of the CPTPP have already agreed to relatively strong disciplines in this area. Several regional economies have inked a “Digital Economy Partnership Agreement,” though its provisions fall short of the high standards of the USMCA’s digital trade chapters in some areas. In any event, interest in the undertaking from a number of countries is substantial.
The architecture for the agreement should be open, leaving room for countries to join later if they can demonstrate they are willing and able to make robust commitments to join even if they are from other world regions (e.g., the UK). There is precedent from plurilateral agreements within the WTO winning new accessions over time, so devising a path for new parties to join later is important.
UK
U.S. states plot U.K. trade and climate missions as COP26 looms
PoliticoPro: Britain is hoping to use the gathering to burnish its post-Brexit standing on the international stage. With hopes of a speedy trade deal with the U.S. fading, the U.K. is instead looking to build bilateral trade ties with individual states and has invited state leaders to a series of trade and investment events around the November climate conference.
Last week Minnesota Governor Tim Walz announced he is leading a delegation of 30 industry representatives from the state’s medical, green technology, food and education sectors. Walz will visit London and make a stop in Helsinki, Finland, during a trade mission that runs from Nov. 12 to 19.
“The U.K. is our eighth market for exports and we believe the time is right to open even more doors for Minnesota’s exporters, including those at the cutting edge of technology for medical companies and addressing the realities of climate change,” said Steve Grove, commissioner of Minnesota’s Department of Employment and Economic Development, who is part of the delegation.
California, meanwhile, plans to send its own delegation to COP26. The state’s Lieutenant Gov. Eleni Kounalakis met U.K. Trade Secretary Liz Truss last month as Truss stopped off in Sacramento on a trade mission.
“The U.K. is a very significant trade and investment partner for California,” said a spokesperson for Gov. Gavin Newsom. At COP26, “governments around the world have a vital opportunity to show leadership by aligning trade agendas with climate and sustainability commitments in bold new ways,” they added.
California has the largest economy of any state in the U.S. and “plays an outsized role” in trade policy, they said, as well as being a major exporter of zero-emission vehicles. Details of the delegation “are still being finalized,” they added.
Washington state Gov. Jay Inslee “is interested in coming over too,” said a person familiar with several U.S. states’ plans to visit the U.K. A spokesperson for Inslee said plans “for November have not been finalized yet.”
China
China’s Neighbors Hope Afghanistan Pullout Means Pivot to Indo-Pacific
ForeignPolicy: The catastrophic turmoil in Afghanistan following the withdrawal of U.S. troops has raised serious concerns in East Asian capitals. The scenes of desperate Afghans trying to get a spot on a U.S. military aircraft departing Kabul have left a deep, indelible image of declining U.S. leadership.
However, Asian countries do not see this week’s turmoil as an event that marks a major shift in U.S. foreign policy. It was the Obama administration that decided on the withdrawal as part of a broader pullback from the greater Middle East, the Trump administration negotiated with the Taliban to set conditions, and the Biden administration only implemented what everyone already knew to be U.S. policy, even if the timing and method of withdrawal were far from ideal.
Now, Asian countries are watching closely to see whether and how the end of military involvement in Afghanistan will affect U.S. President Joe Biden’s approach to the Indo-Pacific region. Governments from Tokyo to Taipei don’t believe that the turmoil in Afghanistan has negative repercussions for the Indo-Pacific, not least because of their region’s geostrategic importance. On the contrary, insofar as the U.S. withdrawal from Afghanistan allows Washington to engage more deeply in the Indo-Pacific, they even welcome the pullout.
So far, China’s regional neighbors have applauded Biden’s diplomacy—not because he is doing anything fundamentally new but because he is continuing the Trump administration’s policies in the Indo-Pacific, just as he did in Afghanistan. Biden, like his predecessor, has defined China as a strategic competitor and emphasized his determination to meet the challenge posed by Beijing.
On trade strategy, the Biden administration has been significantly behind—if it even has a strategy at all. The anti-trade Trump administration withdrew from the Trans-Pacific Partnership Agreement (TPP). Given domestic opposition to trade agreements and the 2021 midterm elections to win, it will be difficult for the Biden administration to return to trade negotiations for the time being.
If this situation continues, China’s domination of the Indo-Pacific trade system is likely to become overwhelming. And if China takes an irreversible lead in the regional economic order, it will have a deep impact on the security order as well.
In November 2020, Chinese President Xi Jinping expressed a clear desire to participate in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, the revised TPP signed in 2018 by 11 countries, not including the United States. There is a strong view in Washington that China will not be able to meet the agreement’s required standards and that Xi may be bluffing. But Beijing should not be underestimated. According to a Japanese government source, Beijing is seriously studying how Vietnam—whose economic system is closer to China’s than to Japan’s—was able to join the agreement with an aim to prepare for future negotiations.