Federalism and Digital Trade

Abstract

Policy actions at the subnational level can affect digital trade. For instance, privacy or data protection laws adopted by Canadian provinces or states in the United States could limit digital trade in some cases. Another possibility is the imposition of data localization requirements in public procurement undertaken by subnational governments. Hence, federalism and multilevel governance matters for digital trade. Yet, this is an area of research that has been neglected so far by scholars of digital trade. This chapter is a first attempt to understand how federalism affects international digital trade. It does so by examining the relationship between federalism and digital trade in Canada and the United States, focusing on policies adopted by subnational governments that affect digital trade. It then analyses how digital trade provisions in the United States-Mexico-Canada Agreement (USMCA) – as it applies to both Canada and the US – impose constraints on subnational governments’ ability to adopt policy measures that could impede cross-border digital trade.

Keywords: Canada, Digital Trade, Federalism, Trade Agreements, United States

JEL Classification: F13, F15