The rise of e-commerce and rapid expansion of digital trade flows since 2005 mean many countries now have enormous commercial and cultural interests in preserving the freedom of cross-border digital traffic. Strong international agreements could keep digital highways open, but sticking points for the United States and China make their joint participation in a future digital trade pact unlikely.
China's "red lines" in digital trade feature provisions that are incompatible with many international trade agreements. The Regional Comprehensive Economic Partnership (RCEP) agreement text included provisions—largely at the insistence of China—that permit substantial government interference in the digital market, including one that would allow members to require that firms locate computing facilities within the country and divulge their source code as a condition of trade. Almost no other previously negotiated free trade agreement allows these measures, and the United States and others likely would not accept their inclusion in a future text.
The United States also has priorities that may exclude it from the digital trade agreements currently under negotiation. The US position on platform liability provides immunity to companies that host third-party content, like Facebook and Twitter, from being held legally accountable for content posted on their sites. The United States got that provision included in the United States-Mexico-Canada Agreement (USMCA), but it is a contentious issue abroad and no other digital agreement offers similar protections.
This PIIE Chart is based on research from Gary Clyde Hufbauer and Megan Hogan's Policy Brief, Digital agreements: What's covered, what's possible.