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Why a New NAFTA Needs Strong Digital Protections


Nearly 25 years ago, the U.S., along with its northern and southern neighbors, entered into a trade agreement that was a first of its kind. The North American Free Trade Agreement (NAFTA), legally bound the U.S., Canada and Mexico to agreed-upon rules of economic engagement — for example, tariff-free trade in goods, recognition of each other’s professional certifications in certain employment categories, criteria on input percentages for duty free trade, and establishment of proceeding for disagreement between the parties.

Even at the time, the potential benefits that NAFTA could offer were hotly debated. As Ross Perot predicted, “a giant sucking sound” would be heard as jobs disappeared from the U.S. favoring cheap Mexican costs, and labor, and environmental standards crumbled. In hindsight, we saw that between 1994 and 2000, the American economy added two million jobs.

While labor shifts did occur, NAFTA set rules of engagement that gave companies predictability, and enabled massive growth in the three economies in the 24 years that followed. Higher paying, innovative jobs across the U.S. take advantage of the tariff-free trade between the three countries and thousands of jobs moved in to North America from parties outside our trade zone.

But for all the benefits since 1993, NAFTA 1.0 precipitated a major cornerstone for communication, co-operation and prosperity — the internet, which supported international creativity, collaboration, innovation and commerce.

Efforts to renegotiate and modernize NAFTA are underway, and in this effort is great opportunity for the commitment and advancement of digital technology and the internet — the critical underpinning of the 21st-century economy. In an updated NAFTA, there are several key considerations negotiators should pursue.

Reducing Barriers to Digital Trade

The original NAFTA makes no mention of digital trade, which given that the U.S. exports $400 billion in technology services, seems like an oversight. Except it wasn’t: The first digital purchase wasn’t made until 1994, after NAFTA went into effect.

Creating a supportive environment for trade involves prohibiting customs duties on digital content and preventing forced data localization. This allows information to flow freely between borders and lets Canadian and U.S. businesses seize the opportunities from cloud computing, which relies on distributed computing resources.

A balanced approach to digital protections supports job creation and innovation.

It also means establishing predictable liability protections, so that online platforms can facilitate communications without being made to censor or be an artificial gatekeeper. We saw this play out in domestic U.S. politics with the 2012 SOPA/PIPA protests, when millions of people stood against anti-piracy laws that had the potential to shut down many popular websites.

Renegotiating NAFTA presents an opportunity to craft effective liability and Safe Harbor measures on an international level to hold users accountable and allow companies that host digital content to invest in new jobs instead of legal fees.

We should also resist the trend, emerging in Europe, of requiring internet companies to take worldwide actions that harm consumers and innovation based on requirements of a single country or jurisdiction.

Protecting Rights

Fair use, the first-sale doctrine and other copyright limitations and exceptions provide a framework that give innovators the freedom to create new ideas and technologies, while also protecting their rights to their own creative content.

The U.S., Canada and Mexico operate under differing copyright frameworks. For example, unlike the “fair dealing” doctrine in Canada and “fair use” in the U.S., Mexico lacks any such doctrine to protect creative, personal, transformative or otherwise benign uses of protected content. The country also has unusually lengthy copyright-term provisions, keeping important cultural contributions of its citizens out of the public domain.

Moreover, Mexico lacks a “Safe Harbor” provision that protects internet companies willing to take action when properly notified of infringing content, and also lacks corresponding protections from non-IP liability. Similarly, a recent Canadian court decision requiring a U.S. company that was not charged with any copyright violation to delist specific search results on a worldwide basis is Troubling. (It’s being challenged in a U.S. court.) As evidenced by the differing rules on copyright between Canada and Mexico, technical barriers to trade can have a significant impact on new technologies.

If pursued, these policy initiatives will shape the economy of the future, unlocking new opportunities for innovation and creativity. If we don’t address topics in a trade negotiation between three of the world’s largest economies, we send a signal to the rest of world that we don’t care.

U.S. innovation, job creation and economic growth depend upon a strong and balanced approach to copyright. Although the Trump Administration decided to withdraw from the Trans-Pacific Partnership (TPP,) the copyright provisions negotiated with Canada, Mexico and other countries in that agreement provides a solid framework for addressing copyright in NAFTA.

Finding balance in copyright is essential, for U.S. companies’ products and services depend on advancing the interests of both rights holders and innovative content creators, while ensuring the free and open internet already enshrined in U.S. law. E-commerce platforms, cloud services, cybersecurity testing services, streaming services, text and data mining tools, machine learning, a vibrant entertainment industry and other innovations are possible because the U.S. has a strong and balanced copyright framework — one that both protects new artistic creation and enables innovation. These technologies drive U.S. exports and support American jobs from agriculture to manufactured goods, and lower market entry barriers for small businesses to reach global markets.

A balanced approach to copyright protections is good for businesses and supports American jobs. Industries that rely on balanced copyright employ 18 million U.S. workers and facilitate the export of $368 billion in goods and services annually according to the Computer & Communications Industry Association, Fair Use in the U.S. Economy: 2017. This figure could increase if NAFTA secures the right protections for all parties.

As negotiators continue their efforts to modernize NAFTA, provisions agreed to in the TPP on the digital economy, internet, and a balanced approach to copyright should lay the groundwork for success in a continued, updated, NAFTA 2.0.

Sage Chandler

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