Some policymakers have raised concerns when the U.S., led by United States Trade Representative’s (USTR) Ambassador Katherine Tai, made the decision to back out of negotiations on digital trade at the World Trade Organization. Concerns grew stronger as reports noted that the decision was likely influenced by Federal Trade Commission Chair Lina Khan, in yet another show of her overzealous approach to tech regulation.

With an economy that is increasingly reliant on digital tools, taking the U.S. away from the negotiating table for digital trade rules will create irreparable long-term damage to the U.S. economy. The decision contravenes historic foreign policy principles of always positioning the United States as a rule-setter in international trade negotiations, not a rule-taker.

A further look into WTO data sheds light that in the last 20 years, the exports of digitally delivered goods and services have outpaced other exports and the gap continues to widen. In other words, the world’s economy is already very reliant on digital trade and will likely be even more reliant on it in the future. That means that the rules that govern the terms and conditions in which digital trade is conducted will shape the viability of a country’s economy.

The USTR’s decision, apparently influenced by antitrust regulators at the FTC, would ensure that the U.S. has no say in the shaping of these rules. Normally, these talks would have been an opportunity to ensure that the interests of the country are reflected in global trade rules. However, the Biden administration has relinquished this chance. Now the long-term health of the American economy will be at the mercy of whatever is decided in a forum in which the U.S. will no longer have a voice. This will hand a victory to potential economic adversaries like China and give an opening to European countries to continue to advance regulation targeting American businesses.

Unfortunately, this decision is merely a symptom of a larger and ongoing trend of negligence when engaging in trade diplomacy that spans multiple administrations. This negligence has been the most notorious in the technology sector, where the U.S. has been a clear leader, while other countries have resorted to hostile regulation to try and close that breach. For example, by passing the European General Data Protection Regulation (GDPR), the European Union was able to subject American companies to significant compliance costs and expose them to legal risk under the threat of onerous fines.

The U.S. should have fought back against the passage of this law and posterior regulations, like the Digital Markets Act or the Digital Services Act. The U.S. should also make efforts to prevent other countries from following suit and roll back where it has already been enacted.

Unfortunately, this was not the case. GDPR-like regulations have either been passed or been filed in various Latin American countries. The lack of a conscious effort by American officials to defend the importance of a pro-innovation, light-touch regulatory approach has caused the rise of a narrative that the United States is “doing nothing” in regard to tech. Increasingly, the nations of the world have come to believe Europe’s proactive approach is the one they should emulate. This will likely translate in a global market that will be increasingly hostile to American companies, limiting its potential for future growth.

The consequences of this ill-advised decision might not be seen today, but it is highly likely that problems will arise in the long term. With novel technologies like artificial intelligence or the metaverse poised to become more relevant for the future economy, it is safe to assume that digital trade will be even more important in the future than it is today. Strategically speaking, the United States’ seat in the WTO negotiations on digital trade was an invaluable asset. Inexplicably, this administration decided to throw it away.

Juan Londoño is a senior policy analyst at the Taxpayers Protection Alliance