Q&A: Gary Hufbauer of the Peterson Institute

Gary Hufbauer from the Peterson Institute discusses the challenging relationship between global trade policy and digital innovation. Trade policy isn't keeping up, he says.

May 2013

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Major trade policy agreements at the World Trade Organization (WTO) are at an impasse. The Trans-Pacific Trade Partnership (TPP) negotiations are inching along. A new trade initiative with the European Union and an International Services Agreement have been announced. Will these initiatives move forward in 2013?

Access recently discussed the possibilities with Gary Hufbauer.

Hufbauer is the Reginald Jones Senior Fellow at the Peterson Institute for International Economics, with expertise in international trade, investment and capital markets.

Access: Is global trade policy keeping pace with digital innovation?

Gary Hufbauer: Absolutely not. Multilateral trade policy liberalization has slowed down. There are things happening on the regional and bilateral levels, but the WTO is not going anywhere right now. It’s been at work for 11 years but negotiations are pretty well stalled.

I think the TPP will yield something big, but Ministers are still in the talking stage.

On the digital side of things, there’s retrogression. Countries are increasingly passing “do-it-here” legislation on data flows and servers. At the Institute, we have a study under way on local content requirements. LCRs are erupting in quite a few countries. To the extent they are not being restricted, digital flows are doing great. But what’s happening on the policy front is an array of new restrictions that in many ways are backward-looking.

Access: Talking about cross-border data flows, what kind of trade policy would be put in place in an ideal world?

Hufbauer: The two things countries always argue on cross-border data flows is the need to protect the privacy of individual citizens, and national security concerns — which can be pretty encompassing. In order to combat protectionist tendencies on data flows, the presumption has to be that data can flow between companies, unless there are significant threats to national security or privacy.

Access: Over the next 12 to 16 months, what are the key events to be aware of for global trade?

Hufbauer: In 2013, the United States needs to be ambitious about the TPP. The U.S. is going to have to put in a lot of political energy to get those negotiations past the difficult hurdles.

Access: What else will be on the trade agenda through the end of 2013?

Hufbauer: The other big negotiation in which the U.S. is one of the leaders, along with Australia, is the International Services Agreement. I think the U.S. can accomplish both the TPP and the ISA if it puts the needed political energy into the negotiations, both with our foreign partners and with Congress.

The third thing is agreeing on something worthwhile from the WTO negotiations — in particular, trade facilitation. 2013 is a make-or-break year for the WTO. The trade-facilitation package is pretty well wrapped up from a technical standpoint. The question is breaking that agreement out from the rest of the Doha agenda. If efforts to wrap up the package flounder and collapse, many influential people will decide that the WTO is no longer a useful negotiating forum. But I’m very optimistic if the U.S. decides to push the talks to a worthwhile conclusion at Bali in December 2013, with trade facilitation as the core agreement, and then adds things like discipline on agricultural subsidies and a deal on digital equipment.

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