New trade agreement good for US digital products, says Baker Institute expert

Style Magazine Newswire | 1/27/2020, 12:15 p.m.

The United States-Mexico-Canada Agreement (USMCA) sends a clear and welcome message acknowledging the enormous importance of digital products produced in the U.S. for sale around the world, according to a report from the Center for the United States and Mexico at Rice University’s Baker Institute for Public Policy.

The report, "USMCA Provisions on Intellectual Property, Services and Digital Trade," authored by David Gantz, the Will Clayton Fellow in Trade and International Economics at the Baker Institute, acknowledges the increasing interrelationship among goods, services and intellectual property (IP) in the U.S. economy.

"It is worth noting that the USMCA, as with other regional trade agreements beginning with the North American Free Trade Agreement (NAFTA), has recognized the importance of all three sectors to the U.S. economy and to encouraging U.S. trade," wrote Gantz, who is also the Samuel M. Fegtly Professor of Law Emeritus at the University of Arizona’s James E. Rogers College of Law and director emeritus of its international trade and business law program. "Increasingly, issues relating to the digital economy, which incorporate aspects of both IP and services, are critical to fostering global trade."

According to the U.S. Department of Commerce and the U.S. Patent and Trademark Office, “IP-intensive industries support at least 45 million U.S. jobs and contribute more than $6 trillion to, or 38.2% of, U.S. gross domestic product,” Gantz wrote. "Some 81 U.S. industries are identified as relying on patents, copyright or trademark protections extensively, including software publishers, sound recording, auto and video equipment producers, cable and subscription programming, performing arts companies, and radio and television broadcasting. Total merchandise exports of IP-intensive industries amounted to $842 billion in 2014, with licensing rights worth $115.2 billion in 2012."

Gantz's paper marks the seventh installment in a series he has authored on the USMCA. The agreement has been signed and ratified by the United States and Mexico; Canada is expected to approve it within the next eight weeks.

The IP chapter in the USMCA encompasses 64 pages including annexes. Gantz highlights key changes, including the establishment of a Committee on Intellectual Property Rights; extended copyright and trademark protection; enforcement in the digital environment; enhanced protection of trade secrets; patent terms for pharmaceutical products; and enforcement generally.

"In the USMCA, the digital trade chapter was, in my view, one of the most important modernizing elements adapted from the Trans-Pacific Partnership," Gantz wrote. "The United States Trade Representative (USTR), with considerable justification, boasts that 'the new Digital Trade chapter contains the strongest disciplines on digital trade of any international agreement, providing a firm foundation for the expansion of trade and investment in the innovative products and services where the United States has a competitive advantage.'

"This language is a clear and welcome recognition of the enormous importance of the global sale of digital products produced in the U.S.," he wrote.

Gantz also notes that this USMCA chapter promotes openness in digital trade while another chapter promotes simplified procedures for exporting small shipments by such U.S. enterprises as Amazon. "Enterprises like Amazon are creatures of the internet, but most of the goods ordered from Amazon must still be shipped from bricks-and-mortar warehouses using standard shipping services, whether the packages are destined for customers in the U.S., Canada or Mexico."

Gantz points out that at the conclusion of the USMCA negotiations, the USTR Services Advisory Committee strongly objected to the reduction of investor-state dispute settlement (ISDS) protections with Mexico and their elimination with Canada.

"Presumably, the impact of eliminating ISDS for IP and services will not become fully apparent until several years after USMCA has entered into force, when the three-year grace period for NAFTA Chapter 11 will no longer be available to U.S. companies providing IP and services to Mexico and Canada," Gantz wrote. "Given the enormous importance of IP and services exports for the U.S. … it is not unreasonable to predict that this omission will be among the costliest for the U.S. and U.S. enterprises of any of the USMCA changes."