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Page1of4IBMCorporationCommentsonNAFTAModernizationIntroductionIBMsupportstheadministration'seffortstomodernizetheNorthAmericanFreeTradeAgreement(NAFTA).
Wearegratefulfortheopportunitytoshareourobservations,pursuanttoFederalRegisterNotice2017-10603;Docket:USTR-2017-0006,forhowtheagreementcouldbemodernizedtoensurethecompetitivenessoftheAmericaneconomyinthe21stcentury,IBMisaglobaltechnologyandinnovationcompanyheadquarteredinArmonk,NewYork.
Itisthelargesttechnologyandconsultingemployerintheworld,with380,000employeesservingclientsin175countries.
IBM'sexpertiseisintheintersectionoftechnologyandbusiness,providingcognitivecomputingandcloud-basedsolutionsthatarechangingthewaytheworldworks.
IBMinvestsmorethan$5billioneachyearinR&Dand,for24consecutiveyears,hasearnedmoreU.
S.
patentsthananyotherorganization.
IBMisaninternationalbusiness.
Fromourfounding,IBM'sgrowthandsuccesshasdependedontheabilitytobringinnovationstonewmarkets.
Today,morethantwo-thirdsofIBM'srevenuescomefromoutsideouroriginalhomemarkethereintheUnitedStates.
OpenmarketsandtradeareessentialtoIBM'ssuccess–andtothesuccessofourU.
S.
-basedemployeesandclients.
WhileourcommentswillfocusontheimportanceofdigitaltradeinamodernizedNAFTA,IBMsupportsthenegotiationofamodern,comprehensiveagreementthatalsocoversabroadrangeofissues,includingmarketaccessforgoodsandservices,technicalbarrierstotrade,customsandtradefacilitation,intellectualpropertyrights,governmentprocurementandregulatorycooperation,amongotherissues.
AnymodernizationoftheagreementshouldretainimportantprovisionsfromtheoriginalagreementandbuildonthesebyincorporatingnewprovisionstoimprovetheagreementinlinewithnegotiatingobjectivesincludedintheTradePrioritiesandAccountabilityAct(TPA).
ModernizingTradeAgreementsforthe21stCenturyMuchhaschangedintheworldsinceNAFTAwasenactedovertwentyyearsago,andthestunninggrowthoftheinternetande-commerceisperhapsthemoststrikingdevelopmentininternationaltrade.
In1994whentheagreementtookeffect,lessthanonepercentoftheworld'spopulationhadaccesstotheinternet.
Today,thatfigureisclosetofiftypercent,withover3.
5billioninternetusersworldwide.
1Moreover,from2005to2014,globaldataflowshavegrownby45times2.
ThedigitalrevolutionhasenabledAmericanbusinesseslargeandsmalltocompeteinwaysthatnoonecouldhaveexpectedwhenNAFTAwasfirstnegotiated.
Astheglobaleconomycontinuestoevolveinthisnewdigitalera,governmentsmustmodernizetradeagreementstoaddressnewthreatstoopenmarkets,innovationandgrowth.
Modernizingtradeagreementsinthe21stcenturywillrequireafocusonanewtypeoftrade–ondigitaltrade–ontheabilityofbusinessesandindividualstodeliverproductsandservicesonlineandtomanagetheirglobalbusinessoperationsbymovingdatafreelyaroundtheworld.
IBMisencouragedbyrecentcommentsbyCommerceSecretaryRossandU.
S.
TradeRepresentativeLighthizerunderscoringtheopportunityfordigitaltradeinamodernizedNAFTA.
Wefullysupporttheadministration'srecognitionoftheimportanceofdigitaltradeforcreatingjobsandeconomicgrowthopportunitiesintheUnitedStates.
1UnitedNations,InternationalTelecommunicationsUnion.
TimeseriesofInternationalICTData:http://www.
itu.
int/en/ITU-D/Statistics/Pages/stat/default.
aspx2McKinseyGlobalInstitute:"DigitalGlobalization:TheNewEraofGlobalFlows.
"March2016.
Page2of4Digitaltradeisnotjustapriorityforthetechsector.
Allbusinessesthatoperategloballyacrossallindustries–frombanks,toairlines,tomanufacturers–relyonthefreeflowofdata.
Theabilitytousetheinternettoreachcustomersinmarketsaroundtheworldisespeciallyimportantforsmall-andmedium-sizedenterprisesthatwouldotherwisemissoutontheseopportunities.
Digitaltradeenablesstart-upsandsmallbusinesses,includingtheIBMecosystempartnersaroundtheworldwhoareusingtheIBMCloudtoembedWatson'scognitivecomputingcapabilitiesintheirproducts.
InordertoensurethatU.
S.
companiesofallsizescancompeteinthisnewera,weencouragetheadministrationtoincludestrongdigitaltradeprovisionsinamodernizedNAFTA.
Thiswillensurethatdatacanflowfreelyaroundtheworldwithoutburdensomerequirementsthatlimitopportunityandstifleinnovation.
Itwouldprohibitgovernmentsfromenactingarbitraryrequirementsforstoringdatalocally,whichcanbeparticularlyburdensomeforsmallbusinesses.
Italsocouldenablebroadercooperationoncriticalprioritieslikecybersecurity,andestablishstrongprotectionsforsoftwaresourcecodeandothervaluableintellectualproperty.
StrongdigitaltradeprovisionsinamodernizedNAFTAwillalsosetanew,highstandardforfuturetradeagreements.
Digitaltradealsosupportsgoodnewjobs.
AtIBM,muchofouremploymentandrevenuegrowthintheUnitedStatesisinnewareasbasedondata-driveninnovation,suchasartificialintelligence,cognitivecomputingandcloud-basedsolutions.
WehavethousandsofjobopeningsthroughouttheU.
Sintheareasofcloudcomputing,cyber-security,mobiletechnologies,andmanyothers.
ThesejobsdependontheabilityofIBMtocollect,transfer,processandstoredataacrossborderstoserveourclientsaroundtheworld.
Giventheenormousopportunitiesenabledbydigitaltrade,IBMencouragestheadministrationtousetheE-CommerceChapteroftheTrans-PacificPartnership(TPP)asastartingpointfornegotiatingdigitaltradeprovisionsforNAFTA.
WhiletheU.
S.
isnolongerapartytoTPP,thelanguageinthischapterhasalreadybeenapprovedbytheUnitedStates,CanadaandMexico,andprovidesspecificmeasuresthatwouldenhancetheabilityofAmericancompaniesfromacrosssectorstocompeteinthe21stcenturyeconomy.
TheBenefitsofNAFTAAstheadministrationbeginstheprocessformodernizingNAFTA,itisimportanttoreflectonthemanypositiveaspectsoftheagreement–andhowithasenabledoureconomytogrowacrossindustries–frommanufacturing,toagriculture,toservices.
TheseareafewofthehighlightswhatNAFTAhasenabledforoureconomy:Tradebetweenourcountriessupports14millionjobsintheUnitedStates.
3CanadiansandMexicanspurchased$445billionofU.
S.
manufacturedgoodsin2016,generating$37,000inexportrevenueforeveryAmericanfactoryworker.
4UnderNAFTA,U.
S.
agriculturalexportstoCanadaandMexicohavequadrupledfrom$8.
9billionin1993to$38billionin2015.
5U.
S.
farmsandranchessupplynearly60%ofCanadianagriculturalimports.
63U.
S.
ChamberofCommerce:"TheFactsonNAFTA:AssessingTwoDecadesofGainsinTrade,Growth,andJobs.
"March8,2017.
4U.
S.
CEOLettertoPresidentTrumpregardingNAFTAModernization–datedMay25,2017.
(paywalllink:https://insidetrade.
com/sites/insidetrade.
com/files/documents/may2017/05252017%20CEO%20Letter%20to%20President%20Trump%20on%20NAFTA%20Modernization.
pdf).
5Ibid6U.
S.
ChamberofCommerce:"TheFactsonNAFTA:AssessingTwoDecadesofGainsinTrade,Growth,andJobs.
"March8,2017.
Page3of4TheU.
S.
servicessectorenjoysasignificanttradesurpluswithbothCanada($27b)andMexico($9.
6b).
7Thisisalsothecasewhenlookingattheinformationandcommunicationstechnology(ICT)industry.
In2015,theU.
S.
hadanICTservicestradesurplusof$635mwithCanada,andasurplusof$826mwithMexico8From1999to2015,theUnitedStatesquadrupleditsbilateralservicestradesurpluswithCanadaanddoubledthatwithMexico.
9InordertoexpandonthissuccessinamodernizedNAFTA,weencouragetheadministrationtoconductnegotiationstrilaterally.
DoingsowillensurethatU.
S.
businessesandconsumersareabletosucceedinbothmarkets.
TradePromotionAuthorityIBMisencouragedbytheadministration'scommitmenttopursuethenegotiatingobjectivesestablishedbyCongressinthe2015TradePrioritiesandAccountabilityAct(TPA)asitseekstomodernizeNAFTA.
TPAprovidesanimportantframeworkforensuringthatanytradenegotiation,andthedeliberationsthatleadtotheirlaunch,areconductedwithanappropriatelevelofengagementwithCongress.
TPAalsoprovidesusefulandspecificnegotiatingobjectivesonarangeofissuesinordertoensurethattheverybesttermsarepursuedintheinterestsoftheAmericaneconomy.
Regardingdigitaltrade,TPA'sprovisionsseekto:Ensurethatcurrentobligations,rules,disciplines,andcommitmentsundertheWTOandbilateralandregionaltradeagreementsapplytodigitaltradeingoodsandservicesandtocrossborderdataflows.
Ensurethatelectronicallydeliveredgoodsandservicesreceivenolessfavorabletreatmentundertraderulesandcommitmentsthanlikeproductsdeliveredinphysicalform.
Ensurethatgovernmentsrefrainfromimplementingtrade-relatedmeasuresthatimpededigitaltradeingoodsandservices,restrictcross-borderdataflows,orrequirelocaldatastorageorprocessingofdata.
Wherelegitimatepolicyobjectivesrequiredomesticregulationsthataffectdigitaltradeingoodsandservicesorcross-borderdataflows–obtaincommitmentsthatanysuchregulationsaretheleastrestrictiveontrade,non-discriminatory,andtransparent,andpromotedanopenmarketenvironment.
IBMstronglysupportedtheinclusionofthesenegotiatingobjectivesinTPA,andwecontinuetobelievethattheseareimportantnegotiatingobjectivesastheUnitedStatesseekstomodernizeNAFTA.
7U.
S.
DepartmentofCommerce,BureauofEconomicAnalysis.
InternationalData:U.
S.
TradeinServices.
Releasedate:December19,20178U.
S.
DepartmentofCommerce,BureauofEconomicAnalysis.
InternationalData:U.
S.
TradeinICTandPotentiallyICT-EnabledServices,byCountryorAffiliation.
Releasedate:December19,2016.
Note:dataonlyincludesICTservices.
9U.
S.
DepartmentofCommerce,BureauofEconomicAnalysis.
InternationalData:U.
S.
TradeinServices,byTypeofServiceandbyCountryorAffiliation.
Releasedate:December19,2016.
Page4of4SpecificNegotiatingObjectivesforModernizingNAFTAWhileIBMsupportsthenegotiationofacomprehensivetradeagreementthatcoversthefullrangeoftradeissuescoveredinNAFTAandotherU.
S.
agreements,wewouldliketohighlighthereasubsetofthoseissuesthatareparticularlyimportanttoIBM.
DigitalTradeObjectivesoEnsuretheabilitytotransferdataacrossborderstoconductandmanagebusiness.
oProhibitpartiesfromrequiringlocalstorageorprocessingofdataasaconditionofdoingbusinessinthecountry.
oEnsurethatcompaniesdonothavetosharesourcecode,tradesecretsorotherintellectualpropertyasaconditionofmarketaccess.
oProhibitgovernmentsfromimposingcustomsdutiesonelectronictransmissions,includingcontenttransmittedelectronically.
oEnsurethatU.
S.
-origindigitalproducts,includingsoftware,receivenon-discriminatorytreatmentrelativetodomestic-origindigitalproductsinthepartnercountries.
oEnsurethatcompaniesarenotrequiredtopurchaseanduselocaltechnologyinsteadoftechnologyoftheirownchoosing.
oProtecttheuseofencryptiontomeetconsumerandbusinessdemandforproductfeaturesthatprotectsecurityandprivacywhileallowinglawenforcementaccesstocommunicationsconsistentwithapplicablelaw.
OtherObjectivesoMaintainfullmarketaccessandnationaltreatmentcommitmentsforITservicesandexpandliberalizationinasmanysectorsaspossible,includingmajorIBM-clientsectorssuchasfinancialandtelecommunicationsservices.
oEnsurethatrelevantchapterscoveringintellectualproperty,tradefacilitation,andregulatorycooperationareadopted,includinganyadditionsorimprovementsdevelopedsinceNAFTA.
oEnsurethatGovernmentProcurementismaintainedasanimportantchapterinanupdatedNAFTA.
oEnsurethatrobustmarketaccesscommitmentscoverbothexistingservicesandnewservicesthatmayemergeinthefuture.
Innovativenewservicesshouldbeprotectedagainstfuturediscrimination,andtradeagreementsshouldnotbecomeobsoleteasmarketsevolveandtechnologyadvances.
TheUnitedStatesmustnotacceptbroadcarve-outsfor"new"services;anynegotiatedexceptionsmustbespecificandnarrowlydefined.
oAmodernizedNAFTAshouldpreservetheabilityofU.
S.
companiestoleadtheworldindevelopingsoftware-enableddataanalyticssolutionsthatarepoweringinnovationsinartificialintelligence.
AmodernizedNAFTAshouldensurethatcopyrightlawsaresufficientlyflexibletopermitcommercialtextanddataminingofalllawfullyaccessiblecontent.
oProhibitrequirementsthatcompaniestransfer,shareordisclosealgorithmsorotherintellectualpropertythatformthebasisforartificialintelligencesystems.
ConclusionIBMappreciatesthisopportunitytoshareitsviewsonthegoalsforNAFTAmodernization,andwelookforwardtoworkingwiththeadministrationandCongressastheUnitedStatesmovesforwardwithnegotiationstorealizethesegoals.