Trump’s decision to scrap Trans-Pacific Partnership is a lost opportunity for tech.
There aren’t many politicians in the US right now who are prepared to shed public tears over abandoned trade deals.
So when president-elect Donald Trump declared this week that the US, under his administration, would drop its support for the Trans-Pacific Partnership, there was little hand-wringing.
For the US tech industry, however, it is a lost opportunity to set new ground rules for a growing cross-border digital economy. The announcement could also mark the beginning of a broader retreat from trade policies that have supported an unprecedented era of global expansion in tech.
The TPP, a regional pact negotiated by 12 nations, broke new ground in at least one important respect. It was the first time the US had tried to embed the principles of an open internet economy in a trade agreement.
This took two forms: freedom for cross-border data flows and a ban on countries forcing companies to store data about their citizens within their own national borders. Both issues are at the heart of an international tussle over digital control that was given extra urgency by Edward Snowden’s revelations of US internet surveillance.
US companies, eager for a market that gives them access to billions of consumers, have characterised this as nothing less than a fight to save the internet from fragmentation. Consumer groups, on the other hand, see it as a struggle to protect the rights of individual consumers — and citizens — against a new form of global dominion.
As the TPP showed, the battle lines are drawn most clearly over the issue of privacy. Civil advocacy groups such as the Electronic Frontier Foundation in the US railed against the pact. They maintained it would have lifted national protections on data while making privacy protection largely optional.
That argument is over. But if the US backs away from setting the terms of digital trade in the Pacific region, it leaves the question of what will take its place. One likely answer: more influence by China, which has already set its sights on filling the vacuum. Needless to say, China already has rules on keeping data within its own borders and, in the Great Firewall, has one of strongest national barriers to the free flow of data.
The TPP also would have baked a US view of intellectual property rights into regional trade principles in the Pacific, further cementing protections for the country’s tech and entertainment industries. This has been an important principle of US trade policy for a while, though critics such as the Electronic Frontier Foundation protested that the pact would have gone further in entrenching rules that favour corporate interests over important individual rights. Either way, it is now dead.
The demise of the TPP is stark evidence of a change in tone in Washington on trade that does not bode well for tech companies. Tied into global supply chains and looking to foreign markets for a large slice of sales, many could be exposed to trade friction.
During his campaign, Mr Trump appeared to threaten tariffs of 45 per cent on imports from China, though it is unclear how such penal levies would be applied — or if this was anything more than campaign rhetoric.
Were this to lead to a full-scale trade war, Apple would almost certainly find itself squarely in the line of fire. Though Apple’s sales in China fell in 2016, it has become a key market, as well as a central part of Apple’s supply chain.
While that leaves the company exposed to trade barriers, Apple also fulfils an important domestic need for China’s leaders: maintaining high employment. Bringing the factories that assemble the iPhone and its components to a halt is not a step that Beijing would take lightly.
Mr Trump has put pressure on Apple to bring manufacturing jobs back to the US. Such a move would reverse a trend across the tech industry. It was one of the first to export its manufacturing and IT services jobs during the great offshoring boom that began in earnest in the 1990s.
But recasting complex supply chains would not be done quickly, even if US workers could be found in enough numbers to perform what is often tedious work. Bringing manufacturing back home might also turn out to be a Pyrrhic victory if companies turn to automation to make up for the higher labour costs at home. These are good reasons for not upsetting the status quo. But after such a divisive election, there are almost certainly bumpy times ahead.
By Richard Waters