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THIRD WORLD ECONOMICS

Concerns over US push to bring TPP rules into digital trade deal

Proposed new rules on digital trade being discussed in ongoing plurilateral talks could mainly mirror the norms under the stillborn Trans-Pacific Partnership trade pact.

by D. Ravi Kanth

GENEVA: The United States and its allies in the former Trans-Pacific Partnership (TPP) agreement dominated the discussions in plurilateral talks on digital trade on 18-20 June, reinforcing fears that the proposed plurilateral deal would largely contain the TPP commitments, trade envoys told the South-North Development Monitor (SUNS).

[Although any rules on digital trade resulting from the plurilateral talks would need the consensus of the entire WTO membership, and may involve amendments to the WTO’s General Agreement on Tariffs and Trade (GATT) and General Agreement on Trade in Services (GATS), the sponsors and participants of the talks, as well as the WTO Director-General who is supporting the talks, have remained coy on how they could achieve this. – SUNS]

India and South Africa among others have cautioned against the proposed plurilateral deal on digital trade, saying it would strike at the very root of GATT and GATS commitments, and would effectively bring the TPP rules into the WTO.

The fears expressed by India and South Africa would have been heightened by the tone and tenor of the 18-20 June plurilateral discussions, said a participant who asked not to be quoted.

During the so-called Joint Statement Initiative (JSI) discussions, the US and several other former TPP members – Japan, New Zealand, Canada, Singapore, Mexico and Chile – dominated the proceedings with regard to the issues of data flows, data localization, and the need to keep the Internet free of sovereign restrictions.

China, according to one JSI member, proved to be the odd participant out during the meetings, seeking several safeguards on data flows while indicating red lines on data localization and storing of data in servers outside China.

The European Union also differed with the US on issues concerning data privacy and protection. The EU said these two issues would constitute a human right, which must trump commercial considerations, said a JSI participant from a South American country.

The EU’s demand for a revised Telecom Reference Paper during the discussions also provoked sharp questions from JSI participants such as Brazil which were not among the signatories to the original paper in 1996.

Moratorium

On the first day of the JSI discussions on 18 June, members largely discussed the moratorium on imposing customs duties on electronic transmissions and whether it should be made permanent.

Despite the lack of clarity on issues concerning content and classification of e-commerce transmissions, the JSI members largely concurred that the moratorium should become permanent.

China, however, called for a two-year extension of the moratorium until end-2021, as opposed to making it permanent. China maintained that there are still several unresolved issues that ought to be addressed before deciding on a permanent moratorium, a JSI participant said.

China’s proposal for a two-year extension of the existing moratorium was supported by several countries at the meeting which are not signatories to the JSI such as Ecuador, Malaysia and Senegal, a JSI participant said.

As regards data flows, the US, New Zealand and other proponents called for the removal of all the existing restrictions on data flows, including on personal information.

“No party shall prohibit or restrict the cross-border transfer of information, including personal information by electronic means, if this activity is for the conduct of the business of a covered person,” the US has said in a proposal issued on 26 April.

The US also proposed a necessity test for data flows that would require any member/party “adopting or maintaining a [restrictive] measure” to show that it is “necessary to achieve a legitimate public policy objective.”

Brazil spoke about its new law on data flows with legitimate policy safeguards that would come into effect next year.

China said it recognized the importance of data flows for commercial and other trade-related activities, but underscored the need for appropriate safeguards for achieving legitimate public policy considerations, said a JSI participant from a developed country who asked not to be quoted.

On issues concerning privacy and protection, the US questioned the EU about the latter’s Global Data Protection Regulation (GDPR) that would provide data protection and privacy for all citizens of the 27 EU member countries.

The protection of personal data and other safeguards are a human right and outweigh commercial considerations, the EU said during the discussions.

In a proposal circulated on 26 April, the EU had said that “the protection of personal data and privacy is a fundamental right” and “members may adopt and maintain the safeguards they deem appropriate to ensure the protection of personal data and privacy, including through the adoption and application of rules for the cross-border transfer of personal data.”

Another difficult issue that brought differences into the open was data localization. On this, the US and other members of the former TPP group, and the EU want to eliminate all requirements for storing data locally.

The US proposal insists that “no party shall require a covered person to use or locate computing facilities in that Party’s territory as a condition for conducting business in that territory”.

The EU has demanded that “cross-border data flows shall not be restricted by: (a) requiring the use of computing facilities or network elements in the Member’s territory for processing, (b) requiring the localization by imposing the use of computing facilities or network elements, and (c) prohibiting storage or processing in the territory of other members”.

China, however, maintained that it has a number of concerns about location of computing facilities. It said that, given the divergent positions among members, more exploratory discussions are needed on data flows, data storage and digital treatment of products.

The US position on location of financial computing facilities for covered financial service suppliers also raised sharp differences among the JSI participants.

Canada said that it would require data localization for financial services, maintaining that location of financial computing facilities ought to be within the country.

Several members also called for data localization in regard to areas such as health.

The US and Canada also differed on the issue of liability conditions for electronic platforms. The US has maintained that electronic platforms cannot be subjected to liability regulations, while Canada said its local courts have the final say in deciding the liability.

On cybersecurity cooperation among members, the US proposed a risk-based approach. China suggested sovereign Internet, which was not acceptable to the US.

During the discussions on 20 June, the EU called for the participants to agree to a revised Telecom Reference Paper.

The EU has proposed that “the telecommunications regulatory authority shall be separate from, and not accountable to any supplier of public telecommunications transport networks or services.”

When asked whether the exceptions in the 1996 Telecom Reference Paper would continue in the revised Telecom Reference Paper, the EU said the exceptions would not flow into the revised paper.

Several JSI participants, particularly Brazil, told the EU that they are not signatories to the original Telecom Reference Paper, nor are they ready to accept the revised paper.

In short, the discussions for creating new plurilateral digital trade rules almost along the lines of what was prescribed in the TPP agreement, would severely undermine commitments under the GATT and GATS. (SUNS8932)       

Third World Economics, Issue No. 683, 16-28 February 2019, pp9-10


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