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There's only one way NAFTA can work for the 21st century

  • The Trump administration pulled the trigger on NAFTA renegotiations.
  • The digital economy should take center stage in NAFTA discussions.
  • Trade deals need provisions to protect the free flow of data across borders.
President Donald Trump and Canadian Prime Minister Justin Trudeau walk down the West Wing Colonnade between meetings at the White House in Washington, DC, February 13, 2017.
Saul Loeb | AFP | Getty Images
President Donald Trump and Canadian Prime Minister Justin Trudeau walk down the West Wing Colonnade between meetings at the White House in Washington, DC, February 13, 2017.

President Trump, who threatened to kill NAFTA on the campaign trail, instead recently pulled the trigger on renegotiating the trade pact. That could have massive ramifications for how the U.S. and its neighbors Canada and Mexico conduct business in the future. The move presents a golden opportunity to create the first truly modern trade agenda.

Here's what should take center stage when negotiations begin this summer: The digital economy.

A new NAFTA can set a global precedent that takes into account how much our world has changed in the last 25 years and the outsize role data now plays in business and cross-border trade.

When the North American Free Trade Agreement was concluded in 1994, floppy disks reigned supreme and the Internet was in its infancy. Today, the digital economy (driven by data, software, artificial intelligence, and analytics) spurs growth and jobs in every sector, especially in manufacturing, banking, hospitality, healthcare and education.

Despite this enormous economic impact and increasing global competition, there is no trade agreement in place that has clear, strong, and enforceable rules on data. The decision to modernize NAFTA is the perfect opportunity to create rules that ensure the digital economy can thrive and grow across North America – rules that can be used in all trade agreements to come.

So what would these rules look like?

"Trade agreements need provisions that protect the free flow of data. The software we rely on depends on the rapid and seamless movement of data across borders."

Trade agreements need provisions that protect the free flow of data. The software we rely on depends on the rapid and seamless movement of data across borders. Making cross-border trade easier for services like cloud computing and data analytics would have broad economic benefits in every country.

Data has transformed commerce for businesses of all sizes, from small entrepreneurial companies to large American manufacturers. When data can move freely, start-ups and small companies across the continent – essential for job growth – can access powerful data processing and analytical tools without having to invest in expensive in-house computer infrastructure.

Another welcome rule would stop data localization requirements. Some countries around the world are either considering or already have put into place laws and policies that restrict data flows and instead lock data within their individual borders.

One practical way this manifests itself is by requiring companies to build data centers within a country's borders if they want to operate in that country. Those barriers are too often rationalized on privacy or security grounds. NAFTA and other modern trade agreements should require close scrutiny of these rationales to ensure that they are narrowly drawn and not veiled ways to block companies from serving global markets.

No digital trade framework would be complete without protections for the development of emerging technologies, which allow companies to expand and create new jobs. Technology is changing the way we do business every day, from electronic authentications, to artificial intelligence, to "smart" contracts.

New software should be able to break into global markets without facing an uphill regulatory battle. Companies shouldn't have to give up their proprietary source codes to foreign governments in order to do business—and right now, there is no enforceable rule in place that prevents this from happening. NAFTA can pave the way.

It's time for NAFTA to meet the digital age.

Commentary by Victoria A. Espinel, president and CEO of BSA | The Software Alliance. Previously, she was an adviser to President Barack Obama on intellectual property and a chief trade negotiator under President George W. Bush.

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