As the incoming Administration takes power, it must support the digital services that have epitomized our thriving digital economy and fostered the trade surplus we’ve seen grow in 2023 by 267 billion dollars.
Trade
How to approach trade moving forward has sparked significant debate. As the incoming administration considers various options, avoiding highly distortive policies should be a core principle guiding these decisions. Sweeping trade punishments could do more harm than good for U.S. interests, while also damaging relationships with trusted trading partners and undermining American economic interests. In sum, derailing global commerce to the detriment of U.S. consumers must be avoided.
Consider Canada’s recent Digital Services Tax (DST) as an example. The DST unfairly discriminates against American tech companies, creating an uneven playing field and violating principles of fair trade. This is the kind of policy that justifies focused, strategic pressure. A robust, targeted response to unfair measures like the DST would send a strong message without unnecessarily punishing broader trade relationships. Moreover, when trade disputes target specific policies, it is much easier to achieve the desired objective from our trading partners and declare victory in the trade war. Pursuing too many objectives with an individual trade dispute is more likely to lead to repeated rounds of retaliation and risks a trade war quagmire.
Ultimately, trade policy works best when it encourages fair competition while addressing specific abuses. By refining our trade strategy to emphasize precision over blunt force, the U.S. can better protect American interests and strengthen the global economy at large.
Digital Economy
As the incoming Administration looks for ways to boost economic growth that was promised during the campaign, one area to look to would be an already bright and growing sector – the digital economy. Technology companies are facing increasing scrutiny through state, national, and foreign legislation and litigation. It is crucial to recognize the significant positive impacts of the digital economy that resonate across the United States. In September, CCIA’s Research Center published its Digital Economy State-by-State report, highlighting the undeniable force of the digital economy, employing nearly 8.5 million Americans with high-wage jobs. Using data from the U.S. Census Bureau and the Fred Database, we estimate that there are at least 382,000 firms in the digital economy, producing $93.3 billion in exports, and contributing 1.8 trillion dollars to the GDP of the U.S. That’s seven percent of the entire GDP.
This growth comes despite policies both in the US and abroad that aim to handicap U.S. tech companies or preemptively crack down on emerging technologies like AI.
Instead of pursuing fringe policies that target successful U.S. companies offering products consumers value, and contribute to significant trade surpluses, the new Administration could prioritize restraint against overregulation, enforce existing trade agreements and support infrastructure growth. Adding more broadband spectrum and support for data centers that help the U.S. compete with government-backed firms across the globe would be a great next step.
More on the digital economy here.
Competition
Broader economic impacts arise with increased regulatory measures and enforcement actions against digital services, culminating in far-reaching implications on American economic growth. Some of these proposed measures could lead to higher prices for consumers and small businesses, and even the degradation or elimination of services consumers enjoy. For example, our economic estimates suggest that smartphone prices could increase by as much as $87 per device in certain scenarios and the annual cost of accessing some digital services could climb by up to $80 per person.
Federal agencies, Congress, and the incoming administration should carefully re-evaluate competition postures through a consumer-focused lens to avoid unintended consequences that burden the very people they aim to protect. A thoughtful, evidence-based approach is critical to ensuring that any action taken benefits consumers and bolsters economic growth rather than driving up costs.
The incoming Administration serves a critical role in supporting U.S. interests both domestically and abroad. Maintaining a regulatory environment that empowers U.S. companies should be top of mind when approaching regulatory and enforcement decisions. Getting the balance right matters—for competition, for innovation, and, most of all, for the wallets of everyday Americans.
