“While much of the public attention has been focused on the new agreement’s implications for cars and milk, the revised NAFTA—or what’s formally being called the “United States Mexico Canada Agreement” (USMCA)—contains digital economy provisions that have significant implications for emerging tech.”

The most important provisions borrowed from the TPP, and the ones most likely to find themselves in the center of a future trade dispute, are those that bar data localization. Indeed, the USMCA version is stronger than the one in the TPP (it even bars data localization with respect to financial services, though it does so under a different set of rules set forth in the financial services chapter). Data localization is the nemesis of digital trade—permitting foreign companies to work in a country only if they build out or lease costly separate data infrastructures in that country. Data localization thus limits access to global services and serves as the principal instrument for protectionism in the information age. While some argue that this provision limits the ability of countries to protect their citizens, that depends on whether Canadian citizens’ data can be better safeguarded in Canada, Mexican citizens’ data in Mexico, and U.S. citizens’ data in the United States. Uyên Lê and I have argued that that is unlikely to be the case.

“Data localization is the nemesis of digital trade—permitting foreign companies to work in a country only if they build out or lease costly separate data infrastructures in that country. Data localization thus limits access to global services and serves as the principal instrument for protectionism in the information age.”

“where “electronic commerce” might lead some to think only of goods and digital products sold online, “digital trade” seems to invoke a broader set of economic activities—from the services offered by Baidu and Google to internet-powered medical or other professional services. The World Trade Organization, which has long had a work program in electronic ecommerce, might take note.”

“Whatever one’s view of the entire agreement, there are in fact some provisions that significantly advance internet-powered trade should the three countries ratify it. Indeed, the USMCA’s digital trade chapter represents the strongest set of digital trade provisions yet negotiated, at least outside the single market created in the European Union.”


*This article was was originally published on Net Politics and Digital and Cyberspace Policy Program*on the Council on Foreign Relations website and is subject to their Reprint Policy and Copyright Notice.

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