A digital America is key to effective management of supply chains, enhancing innovation, and increasing Mexico’s GDP

The U.S., Mexico, and Canada should take advantage of the USMCA to develop the world’s most integrated digital economy that maximizes opportunities for cross-border data flows and digital trade, while still preserving privacy and ensuring cybersecurity.31 Various types of data provide increasingly important information for businesses and government, from developing digital technologies such as AI, driving business insights, effectively managing supply chains, and enhancing innovation and delivery of government services. Cross-border data flows are also transforming international trade21 through e-commerce, digital services delivery, and data use in manufacturing.32 E-commerce is a major industry, totaling $14.5 billion in Mexico and $25.4 billion in Canada. It also provides a pathway for SMEs to engage in international trade.33 For instance, 100 percent of Mexican small businesses using eBay are exporters, compared to 8 percent of traditional offline Mexican SMEs.34 Moreover, the broader use of digital technologies has the potential to boost Mexico’s GDP by 7 to 15 percent by 2025.35 For example, data collected from sensors is being used to improve logistics, and AI-enabled translation services have reduced language barriers to trade.36 Furthermore, global data flows are enabling so-called “Supply Chain 4.0” that includes integrated information flows that can enhance productivity and expand employment opportunities.37 This includes creating new opportunities for SMEs to participate in supply chains by taking on tasks or offering services. The USMCA contains the world’s most comprehensive chapter on digital trade. They cover commitments to supporting cross-border data flows, avoiding data localization, and prohibiting requirements on source code as a condition of market access. These measures provide certainty to businesses that rely on data.38 USMCA can also strengthen e-commerce as a driver of trade by including requirements for raising De Minimis duties and improving customs facilitation and express delivery.39 However, as digital trade opportunities grow, governments are enacting restrictions on cross-border data flows. The U.S., Canada, and Mexico remain relatively liberal in their approach, at least compared to some countries in Southeast Asia, China, and the EU.