The Big Story: Indo-Pacific framework could advance digital trade priorities for startups
Early this week during his visit to Japan, President Biden announced the launch of the Indo-Pacific Economic Framework for Prosperity (IPEF) with 12 countries in the region. The framework—first outlined last year and including Australia, Brunei, India, Indonesia, Japan, Malaysia, New Zealand, the Philippines, Singapore, South Korea, Thailand, and Vietnam—is the administration’s primary trade engagement in the region and promises to touch on digital trade issues important to startups, like data flows and regulation of emerging technologies.
The framework is not a traditional trade agreement and does not contain tariff reductions or market access provisions typically found in such agreements. It will consist of four pillars—trade, supply chains, clean energy, and anti-corruption—but some countries may not participate in all four pillars. Participants will negotiate over the details of the arrangement in the coming 18-24 months. U.S. Trade Representative Katherine Tai will be responsible for the trade pillar, while Commerce Secretary Raimondo will handle the remaining three.
The economic framework is a positive first step toward deepening U.S. engagement and further opening opportunities for startups in the region. The development is especially important in light of non-U.S. trade agreements there—including the Comprehensive and Progressive Agreement for Trans-Pacific Partnership successor to the Trans-Pacific Partnership that the former administration withdrew from shortly after taking office, the Digital Economy Partnership Agreement that is focused on promoting seamless digital trade, and the China-led Regional Comprehensive Economic Partnership. Engine and others have long called for U.S. leadership in the Indo-Pacific to lower barriers and help American startups compete there.
Even though the IPEF is not a traditional approach, engagement will help to advance startup interests in the region. To shore up the competitiveness of U.S. startups, negotiators should seek to include key priorities in IPEF, like enabling cross-border flows of data to allow U.S. startups to reach more users around the world, and aligning on tech regulation so startups don’t face compliance barriers that keep them out of lucrative markets.
Policy Roundup:
Florida social media law found unconstitutional. This week, the 11th Circuit Court of Appeals ruled that a controversial Florida social media law passed last year that would open up Internet companies to lawsuits over their content moderation decisions is unconstitutional. The ruling is in response to a challenge from trade associations representing Internet companies, which argued that the law violated the Internet companies First Amendment rights to host—and not host—speech. “When platforms choose to remove users or posts, deprioritize content in viewers' feeds or search results, or sanction breaches of their community standards, they engage in First-Amendment-protected activity," the ruling said.
Global digital tax deal continues to face setbacks. OECD Secretary-General Mathias Cormann announced this week that approval and implementation of the long-awaited digital tax deal would likely be delayed to 2024, as holdouts, like Poland, continue to oppose the deal and countries have yet to independently adopt the framework. Though OECD members have repeatedly indicated support for the plan, this statement is indicative of the challenges the framework has faced—and continue to face—increasing the chances that foreign governments reimplement digital services taxes, which could have a trickle down effect on the innovation ecosystem. While the Biden administration is supportive of the plan, the framework faces an uphill battle with Republicans in Congress, who believe the plan could hurt U.S. companies.
Underrepresented founders continue to suffer from lack of equity in entrepreneurial ecosystem. This week marks two years since the murder of George Floyd and a resurgance of national calls for anti-discrimination policies across the board—in particular, racial equity in economic opportunity. But as Marc Morial and Jon Cowan wrote in a recent op-ed, economic and entrepreneurial opportunity cannot be addressed without targeting the “structural inequities that hold people of color back from starting, owning, and scaling businesses.” Within the startup ecosystem, underrepresented founders, including women founders and founders of color, are disproportionately impacted by several obstacles, including limited access to support and services like mentorship, networking, and STEM education opportunities, and limited access to capital—a problem compounded by a lack of representation in the investor community.
California bill would allow lawsuits over kids’ tech “addiction.” On Monday, the California Assembly passed a new measure that would allow parents to sue large social media companies for creating products that cause “addiction”—defined as physical, mental, emotional, developmental, or material harm and an inability to stop or reduce social media usage—in users under the age of 18. Critics of the bill have warned policymakers that if the bill passes, social media companies would have to verify the age of their users and remove users under the age of 18 or cease operations in California.
American Rescue Plan report showcases increase in diverse entrepreneurship. This week, the Biden administration released its interim American Rescue Plan Equity Report, showcasing economic recovery data and progress that powered a surge of employment and innovation. The report revealed that in 2021, a record number of Americans—a 20 percent increase on previous year findings—applied to start 5.4 million new businesses, and in particular, there were high rates of new business formation among innovators of color and immigrants.
Startup Roundup:
#StartupsEverywhere: San Ramon, California. Raydiant Oximetry, Inc. has developed a low-cost, non-invasive biomedical device to monitor oxygen levels in fetal blood and improve outcomes of both mothers and their children during childbirth. Neil P. Ray, Founder and CEO, opened up about his medical professional background, how Small Business Innovation Research (SBIR) funding has impacted his company, and how policymakers can better support innovation that addresses the country’s critical needs.
