Regulating at a glacial pace: barriers to progress written into our trade regimes


We’re at a climate tipping point, yet international trade rules remain a persistent barrier to climate action. Momentum is also quickly building toward a digital tipping point: one where Big Tech surveillance is too far out of control to reign in, and where human rights and democracy only exist at the whim of tech corporations. Recurrent trade pressures could impact the willingness of the EU and the US to take action to better protect consumers in the digital market, or even to act to fight against climate change. So how did we get here, and what role do the new US–EU cooperation venues have to play?


Mistaking our allies for enemies

We’re at a climate tipping point, yet international trade rules remain a persistent barrier to the climate action our world desperately needs. Ever since President Biden signed the landmark legislation, the Inflation Reduction Act (IRA) in August 2022, the European Union and Member States (among others) have been accusing the US of violating the WTO principle of non-discrimination — a World Trade Organization rule that stipulates that one’s own and foreign products should be treated alike. The same concerns have been circulating regarding the CBAM, the carbon border adjustment mechanism touted by the EU that is set to put a price on carbon emissions by placing tariffs on carbon-intensive products imported into the European Union.

This is only the tip of the iceberg: as the climate threat worsens, we will (hopefully) see more countries enact bold climate programs — including some at odds with outdated trade rules that require policies be enacted in the ‘least trade restrictive manner’ possible.

It doesn’t stop at climate — we can all see that momentum is building quickly to a digital tipping point: one where Big Tech surveillance is too far out of control to reign in, and where human rights and democracy only exist at the whim of tech corporations.

If we are to predict the future by judging the past, the trends are clear: recurrent trade pressures could impact the willingness of the EU and the US to take action to better protect consumers in the digital market or act to fight against climate change.

That’s why in March of 2023, the Transatlantic Consumer Dialogue (TACD) wrote to United States Trade Representative (USTR) Katherine Tai and European Commission Executive Vice President Valdis Dombrovskis telling them straight: It’s time to stop using trade rules to chill regulatory action.

The basis of corporate influence

These threats and attacks have been on the rise for years, but why do they exist in the first place? It’s fairly simple: the past few decades of trade rules have been designed and defined by corporations that have a vested interest in slowing regulations that may impact their profit margin.

This influence has created the space for big corporations to use trade rules to chill regulatory action, meaning just the mere threat of an attack is sufficient to halt progress. Trade rules have been unfairly manipulated to chill regulatory action across the board to benefit the fossil fuel industry, facilitate human rights abuse and extractivism, and exacerbate inequality.

These attacks can be initiated by states at the WTO or by corporations through investment treaties, but in both scenarios, the challenges are almost always driven by corporate actors. For example, in the 1990s, the US State Department intervened on behalf of Gerber Foods by sending a letter to the Guatemalan president threatening a WTO case over implementation of the so-called Nestle’s Code. Guatemala was forced to weaken public health measures designed to reduce infant mortality rather than take the costly gamble of litigating a WTO dispute.

And for disturbing examples of the chilling effect borne of corporate-initiated disputes, one need not look further than the cosy, extremely fruitful parallel efforts of Big Oil and Big Tobacco over 60 years of using trade threats to delay regulatory action worldwide. Both industries have used the same playbook since it became clear they faced extinction by way of regulation for the public good, and have since lobbied heavily for the inclusion of the Investor State Dispute Settlement mechanism in trade treaties.

Corporate capture of 21st century trade

Since the dawn of the Information Age, technology companies have understood the power they would wield — a power far greater than our legislators could have predicted. The Internet pushed globalisation into hyperspeed and the global economy into the hands of Big Tech through the rise of ‘digital trade’. And when the (privileged) world was suddenly forced by the COVID-19 lockdowns to move almost all interactions to the virtual space, Big Tech’s grip on power only grew stronger.

The tech industry’s fabrication of the concept of ‘digital trade’ demonstrates how '[the United States Trade Representative] has effectively internalised technology industry interests into their own mission’, according to Wendy Li, a PhD candidate in sociology at the University of Wisconsin, who worked as a special assistant in the US trade representative’s office from 2015 to 2017. This internalisation is in large part thanks to Big Tech’s regulatory capture efforts over the decades and the constantly revolving door between Big Tech corporations and both the Office of the US Trade Representative and the Department of Commerce.

Big Tech has captured the US policy agenda on ‘digital trade’ so effectively that negotiations over digital chapters coming out of USTR reflect not the new, worker-centred approach to trade touted by the Biden administration, but belong in the neoliberal free-trade era that has wrought so much harm. The corporate capture of digital trade rules is laid out in painful detail in Senator Elizabeth Warren’s recent bombshell report: Big Tech’s Big Con: Rigging Digital Trade Rules to Block Antitrust Regulation.

The report describes in depth how Big Tech is working to undermine the Biden trade and competition agenda, pushing trade negotiators to pre-empt domestic and international regulatory efforts, such as the EU’s promising Digital Services Act (DSA) and Digital Markets Act (DMA). The report contains email communications between high-level US trade officials and Big Tech firms, obtained under the Freedom of Information Act.

Delivered as a set, the DSA and DMA are landmark legislation with two main purposes: 1) to create a safer digital space in which the fundamental rights of all users of digital services are protected; and 2) to establish a level playing field to foster innovation, growth and competitiveness, in the European Single Market and globally. The DSA and DMA contain an unprecedented set of tools for lawmakers to monitor digital platforms and hold them accountable to consumers. In an increasingly online world, that sounds like a worthwhile effort to most.

But corporations (mostly US Big Tech companies) are arguing that they’re ‘barriers to trade’, and are constant targets in USTR’s annual ‘National Trade Estimates’ report on ‘barriers to trade’, a bulletin of policies in other countries that US business interests don’t like. The prospect of not being allowed to run unchecked is clearly troubling for the industry.

New cooperation venues and corporate efforts to retain power

A new US–EU cooperation agenda is being developed to exchange information and best practices on issues such as consumer protection, digital marketplaces and privacy, competition, and energy. Corporations are seeing the threat to their influence and are going back to their playbooks, looking to commandeer these exciting new venues to undermine regulatory cooperation at the expense of consumers.

In March 2023, two US senators wrote to President Biden and USTR Tai to voice Big Tech’s complaint that the EU’s digital agenda ‘discriminates against U.S. companies and U.S. workers’, calling it imperative that USTR ‘press the EU to ensure the discriminatory aspects of these digital proposals are removed as the United States continues to engage with the EU’.

The day before that letter was sent, US big tech companies wrote a similar missive to US National Security Advisor Jake Sullivan and Director of the US National Economic Council Lael Brainerd, asking the US government to take action against EU efforts to regulate the digital economy.

Both letters assume that what is best for America’s largest tech companies is also what’s best for Americans. The letters also highlight the amorphous US–EU Trade and Technology Council (TTC) as a logical venue to accommodate the whims of the Big Tech firms. The mandate of the TTC is broad, and the potential outcomes are undefined, but after years of tensions, a new cooperation agenda between the EU and the US is both refreshing and greatly needed. Voluntary cooperation between governments and regulators can be beneficial for consumers, as long as it aims to enhance their welfare and not push consumer protections to the lowest common denominator, as Big Tech lobbyists would prefer.

Conclusion: So what next?

As a coalition of over 75 leading European and US-based organisations representing the consumer interest, the Transatlantic Consumer Dialogue has a strong role to play bringing in experts across fields to help highlight the crisis of trade rules’ chilling effect on regulatory action.

In order to flip the script on trade and channel these new venues such as the TTC towards positive progress, the consumer perspective must be heard over the cacophony of sabre rattling from corporate powers. When harmful provisions of secretive trade pacts are dragged into the light of day, we see change — change that we hope begins to take shape at the upcoming TTC Ministerial in Luleå, Sweden on 30–31 May. Luleå was selected as the host city, theoretically, because it is a hub for implementing the green and digital transitions. Whether or not the TTC is able to live up to that standard remains to be seen.

Despite the swarms of lobbyists vying for power, lawmakers and regulators are waking up to the dangers of corporate trade to consumers. The trade negotiations that President Biden has launched thus far explicitly omit the old trade-pact provisions that protect lengthy pharmaceutical monopolies, delaying access to cheaper generics. And they do not include the destructive investor rights, discussed previously, that allow corporations to sue governments for policies that they don’t like. Progress is unfolding, and we can do the same for the next frontier of this power struggle and release climate action and digital democracy from the restraints of outdated trade rules.