New USMCA Trade Deal Helps Resolve Tech Issues for Many Companies

The new USMCA trade deal addresses some key technology issues that involve data being shared across borders. Read this blog for full details of the new agreement.  

The United States-Mexico-Canada Agreement (USMCA) just signed a new deal that provides certainty regarding crucial technology issues. The new agreement covers liability protection, free flow of data across borders, and some critical digital guidelines.

One key finding from the new deal is that USMCA prevents Mexico, Canada, and the U.S. from imposing data-localization requirements, which can halt cross-border data flows from local data centers. This affects many industries and businesses, but e-commerce is especially impacted given that customer, and commercial data is needed to manage orders.

USMCA Technology In Baltimore

Key Requirements

Jason Oxman, chief executive of the Information Technology Industry Council, a Washington-based advocacy group, said that the new trade deal includes a requirement that the U.S., Canada, and Mexico all must refrain from imposing tariffs on local data centers or taxing the transfers made through those centers.

“The advantage of an agreement like this is it lowers costs for the movement of data across borders. And it provides certainty that those costs won’t be increased by the imposition of tax on the kind of digital services that a CIO needs to buy,” Oxman added.

Victoria Espinel, president and CEO of the software-industry trade group BSA mentioned that the new agreement is a big step in the right direction for CIOs. She said that this deal is entirely different than NAFTA, but this is partially due to the fact that the internet, cloud technology, and artificial intelligence weren’t very well-known or even invented yet in the early 1990s.

“The major technological innovations over the past couple of decades that shape our lives and have such a significant impact on…the jobs that CIOs do—they didn’t exist when Nafta was negotiated,” Victoria continued.

Vital Improvements Since NAFTA

With the current technological landscape and the many advanced software options of today, this new deal came at a time where many changes are surrounding the business and technology industries.

Although data was still a very large asset back when Nafta was in effect, there were still many issues surrounding the free flow of data across borders. This new agreement works to formalize the free flow of data and exchange of digital services that were flowing across borders during that time.

“USMCA officially ratifies what has already been done in the past,” said John-David Lovelock, chief forecaster at research and advisory firm Gartner Inc.

Liability Protection

Liability concerns were also accounted for in this new deal.

The agreement offered liability protections for companies that host content. These companies include social media businesses and cloud service providers. The new deal states that platform providers in the three countries won’t be held liable for the content posted on their sites by third-party users. However, there are some exceptions to the rule, such as sex-trafficking content.

“Of course, it doesn’t mean that any country can’t change the law going forward, but it was negotiated into the agreement nonetheless,” Jason Oxman said.

Source Code Requirements

Another change that was brought forward by this agreement deals with source code.

Under the new agreement, governments are now restricted from forcing companies to disclose their underlying source code, which can be algorithms that power artificial intelligence systems, for example. This provision helps to encourage business predictability and works to avoid instances where organizations are forced to unveil trading plans and secrets.

Ms. Espinel of BSA added, “For any company that’s creating software—and as you know that’s not just software companies—knowing that governments won’t be able to force them to disclose the source code for their software is a real benefit.”

With software advancing rapidly, this agreement comes at a significant time. Software development is a very complex process; therefore, disclosing the source code can be detrimental to any business. That being said, this new deal provides a higher level of protection for these companies that develop software.

Summary

As a review, here are the key findings from the new deal:

  • The U.S., Canada, and Mexico all must refrain from imposing tariffs on local data centers.
  • They also must refrain from taxing the transfers made through those centers.
  • The deal formalizes the free flow of data and the exchange of digital services requirements.
  • The agreement provides liability protection for cloud providers and social media companies.
  • Governments are now restricted from forcing companies to disclose their underlying source code.

Today, data is a massive asset in the business and technology world. With software and technology rapidly advancing, information is used to drive critical decisions made by companies all over the globe.

As we learn more about the power of data, we can bring forth new laws and agreements that provide crucial benefits for businesses everywhere.