A few weeks ago, the Ways and Means Committee held a hearing titled “The Role of Trade Policy in Maintaining American Innovation and Technology Leadership.” ACT | The App Association submitted testimony for the record, which you can read here. I want to pull back the curtain on why trade policy matters for small businesses more than most people realize.

Let me start with this: trade policy isn’t abstract. It shapes whether a small tech company in Columbus, Dallas, or San Diego can reach customers in Seoul, Paris, or São Paulo. It determines whether their intellectual property is protected—or stolen. And it influences whether innovation thrives or stalls.

The Digital Trade Policies Small Tech Can’t Live Without

If we want American innovation to lead globally, we need trade agreements that lock in a few foundational principles:

    1. Data flows across borders are vital.
      The global economy runs on data. When countries restrict how data moves across borders, they effectively shut out small American tech firms from global markets.
    2. No forced data localization.
      Requiring companies to build local infrastructure just to operate in a country is bad for our members. It’s expensive, inefficient, and often impossible for small businesses. It’s a trade barrier, plain and simple.
    3. No customs duties or discriminatory taxes on digital products.
      Taxing data as it crosses borders fragments the internet and blocks innovators from reaching customers.
    4. The ability to use strong encryption must be ensured.
      Mandating encryption “backdoors” doesn’t make users safer—it makes everyone more vulnerable. Trust is everything in tech. Break trust, and you break the business model.
    5. Intellectual property must be protected, including source code.
      App developers lose an estimated $46.3 billion annually to piracy. For a small tech business, IP theft isn’t a line item—it can be a death sentence. Notably, requiring companies to hand over proprietary source code as a condition of market entry is a nonstarter.
    6. Avoid misapplying competition and consumer protection laws to critical and emerging technology markets.
      Regulators harm innovation when they misapply consumer protection and competition laws to technology markets (e.g., digital platforms and AI). Misguided mandates undermine small businesses’ competitiveness, disrupt platforms that ease market entry and protect consumers, and create trade barriers.

And here’s where Congress needs to lean in: IP protection and the misuse of competition laws abroad deserve urgent scrutiny.

When “Fairness” Laws Aren’t Fair

We’re increasingly seeing foreign governments applying competition laws in ways that disproportionately target U.S. companies—and by extension, the small businesses that depend on them.

Take South Korea. Despite prior commitments, Korean regulators are advancing the so-called Online Platform Fairness Act, which functionally targets major U.S. platforms. Our members rely on these platforms to distribute products globally.

When regulators impose sweeping mandates and aggressive penalties under vague “fairness” standards, it creates uncertainty—and uncertainty kills small business growth.

We’ve also seen troubling enforcement actions against U.S. companies operating in Korea, including arbitrary fines and even threats of criminal charges. That kind of unpredictability shakes the confidence small innovators need to expand abroad.

The Chilling Effect of the EU’s Digital Markets Act

The European Union’s Digital Markets Act (DMA) is another cautionary tale that has created serious downstream consequences for small businesses:

  • Privacy and security risks by mandating open access to device ecosystems.
  • Delays in AI innovation, leaving EU developers behind global competitors.
  • Regressive fee structures that shift platform costs from the largest companies to smaller developers.
  • Even changes to how Wi-Fi credentials are handled—creating new privacy vulnerabilities.

We’ve heard directly from small European developers: these policies are putting them at a disadvantage. That should be a flashing red light for U.S. policymakers.

America’s Version: AICOA

The proposed American Innovation and Choice Online Act (AICOA) mirrors many elements of the DMA. While it may sound distinct, its “open access” mandates and restrictions on so-called “self-preferencing” could undermine the curated, secure ecosystems that small businesses rely on.

It could also effectively outlaw the progressive fee structures used by app stores today—structures where most small developers pay little to no commission, while the largest digital-only companies pay more. If that system is dismantled, the cost burden shifts downward to small developers.

A Hidden Threat: Abusive Patent Litigation

Another issue flying under the radar is third-party litigation funding (TPLF). Non-practicing entities (often backed by anonymous investors) file abusive patent lawsuits designed to extract settlements. Trade policy must address these distortions and protect legitimate innovation.

Standards, SEPs, and FRAND

Global tech standards—from Wi-Fi to 5G—depend on predictable licensing frameworks for standard-essential patents (SEPs) that are volunteered to be licensed on fair, reasonable, and non-discriminatory (FRAND) terms. When policymakers and courts allow injunction threats or above-FRAND royalty demands, small businesses get squeezed. They don’t have the legal budgets to fight prolonged battles. They need certainty. Trade agreements must reinforce strong FRAND commitments and prevent predatory IP tactics abroad.

Where We Go From Here

American small businesses need a trade policy that:

  • Protects intellectual property.
  • Keeps data flowing.
  • Prevents discriminatory foreign regulations.
  • Pushes back against harmful digital trade retreats.
  • And avoids importing flawed regulatory models like the DMA.

If we want the United States to remain a global tech leader, we must defend the ecosystem that fuels small innovators. That means smart trade policy. That means congressional oversight. And that means standing up for the entrepreneurs who are building the next generation of technology.