TWN Info Service on WTO and Trade Issues (Jul19/05)
2 July 2019
Third World Network

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

Published in SUNS #8932 dated 25 June 2019

Geneva, 24 Jun (D. Ravi Kanth) – The United States and its allies in the former Trans-Pacific Partnership (TPP) agreement dominated the discussions in plurilateral talks on digital trade last week, reinforcing the fears that the proposed plurilateral deal would largely contain the TPP commitments, trade envoys told the SUNS.

[Though the plurilateral talks and proposed e-com rules, envisaging such matters as making the moratorium against levy of customs duties permanent, would need the consensus of the entire WTO membership, and may involve amendments to the GATT and GATS, the sponsors and participants in such pluri-talks, as well as the WTO DG who is supporting it, have remained coy on how they could achieve this. SUNS]

India and South Africa among others had cautioned, at the retreat of trade envoys from developing countries on 19 June, against the proposed plurilateral deal on digital trade by the JSI members, saying it would strike at the very root of the commitments of the GATT (General Agreement on Tariffs and Trade) and GATS (General Agreement on Trade in Services), and would bring the TPP rules into the WTO.

The fears expressed by India and South Africa are almost vindicated by the tone and tenor of the discussions of JSI participants on 18-20 June, said a JSI participant, who asked not to be quoted.

On several issues during last week’s JSI (Joint Statements Initiative) discussions, the US and the former TPP members – Japan, New Zealand, Canada, Singapore, Mexico, and Chile – dominated the proceedings on 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 during the meetings seeking several safeguards on data flows while indicating red lines on data localization and storing of data in servers outside China.

Even the European Union differed with the US on issues concerning data privacy and protection.

The EU said these two issues – data privacy and protection – would constitute a human right, which must weigh over 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, who are not among the signatories to the original telecom reference paper in 1996.

On the first day of the JSI discussions on 18 June, members largely discussed the moratorium on not 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 for not levying customs duties would remain permanent.

The US, Canada, Singapore, Japan, New Zealand, and Brazil among others had proposed the permanent moratorium for not levying customs duties on electronic transmissions.

China, however, called for a two-year extension of the moratorium until end-2021, as opposed to the permanent moratorium.

China maintained that there are still several unresolved issues that ought to be addressed before deciding on the permanent moratorium, another JSI participant said.

Several participants who are not signatories to the JSI such as Ecuador, Malaysia and Senegal spoke at the meeting in support of China’s proposal for a two-year extension for the existing moratorium, a JSI participant said.

As regards data flows, which was discussed at the JSI group meeting on 18 June, 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 its proposal issued on 26 April.

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

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

China said it recognizes the importance of data flows for commercial and other trade-related activities, but underscored the need for having 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 its Global Data Protection Regulation (GDPR) that would provide data protection and privacy for all the citizens in the 27 EU member countries.

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

In its proposal on “protection of personal data and privacy” 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 on data localization. On this, the US and other members of the former TPP group, and the EU want to eliminate all the prohibitions for storing the data.

The US proposal has insisted 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 also 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.

Several other members such as Japan, Singapore, and Canada among others called for elimination of restrictions on cross-border data flows.

China, however, maintained that it has a number of concerns about location of computing facilities and the need for data localization.

China called for more discussions on the issue, saying that given the divergent positions among members, more exploratory discussions are needed on data flow, 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 stay within its country.

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

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, the participant added.

On cyber security concerning the cooperation among members, the US proposed a risk-based approach. China suggested sovereign internet, which is not acceptable to the US.

During the discussions at the JSI group meeting on 20 June, the EU demanded the participants to agree to a revised Telecom Reference paper.

The EU had 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 that the exceptions will 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 Telecom Reference paper.

In short, the discussions for creating new rules in the JSI plurilateral deal, almost on the lines of what was prescribed in the TPP agreement, would severely undermine commitments under the GATT and GATS.