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Countries Table Proposals, Talks Continue on WTO E-Commerce Rules

· August 23, 2019

As world leaders convene in France this weekend to discuss the future of the global economy at the G7 Summit, it is helpful to check in on the ongoing work by nations to further address the needs of a 21st century trading environment.  As DisCo previously covered, over 70 World Trade Organization (WTO) members announced in January their intent to move forward with negotiations on trade-related aspects of electronic commerce.  Over the past months, these countries have met to outline areas for negotiation. Countries continue to join the initiative and many have submitted written proposals to direct these discussions.

Per the WTO document portal, over a dozen countries including the U.S., EU, China, Singapore, Japan, Ukraine, Korea, Canada, New Zealand, and Brazil have submitted text. 

Topics that are common across these submissions include source code protection, electronic contracts and e-payments, cybersecurity, consumer protection, market access for telecommunication services, cross-border data flows, the continuation of the moratorium on customs duties for electronic transmissions (hereinafter referred to as the “e-commerce moratorium”), and other trade facilitation measures.  Some proposals are more limited to specific topics (for instance New Zealand’s first submission relates to consumer protection and “misleading and deceptive conduct”). 

Decisions will have to be made regarding big issues such as the treatment of cross-border data flows.  The continuation of the e-commerce moratorium is also a critical element of these talks for the future of digital trade, which may be at risk as some WTO members push for its discontinuation (India and South Africa, notably absent from the e-commerce talks, have put forth communications criticizing its impact). China, who joined the talks at the last minute in January, also continues to push a restricted, fragmented vision of the Internet and the future of global e-commerce. 

Needless to say, there are a number of unresolved questions to settle before any text is sketched out for negotiations. However, the discussions appear to be productive and welcomed by world leaders.  For instance, on the sidelines of the G20 Summit in June, over 24 countries issued a statement endorsing the WTO initiative and encouraged countries to find consensus (more on outcome of the G20 here). 

This post serves to summarize selected proposals that have been made publically available, or whose contents have been reported on, as well as discuss a U.S. WTO white paper on the benefits of digital trade that could positively inform the ongoing talks. 

Quick Observations on Selected Proposals 

The United States. The U.S. proposal is not public via the WTO site, but has been made public through press reporting. The U.S. submission largely tracks the Digital Trade chapter in the U.S.-Mexico-Canada Agreement (USMCA). As such, it includes strong commitments for countries to enable cross-border data flows and strong prohibitions on data localization (among other provisions such as source code protection and cybersecurity measures). The submission also signals a commitment to the protection of personal information and also stressing the need for interoperability of privacy regimes. The text includes language on protections for intermediaries for third party-content, consistent with U.S. law.  Some have commented on how quick passage of the USMCA will strengthen the U.S. hand at the WTO talks.

The European Union (here). The EU proposal is comprehensive, addressing many of the same topics as the U.S. and others. As expected, the text on cross-border data flows and protection of personal data reflects the EU’s domestic, more restrictive approach to governing data flows. The EU’s proposed text on personal data protection is strong and makes clear that any commitment on data flows in this agreement should not take precedence over the protection of privacy, stating it as a fundamental right (Articles 2.7, 2.8). The proposal also present significant revisions to the WTO Reference Paper on Telecommunications services, which could lead to positive provisions on market access for ICT and telecommunications services. They are aligned with the U.S. on source code protection and prohibiting the imposition of customs duties of electronic transmissions.

China (here). China joined the talks at the last minute ahead of the launch in January. As DisCo noted previously, there are concerns with their inclusion in the process. The U.S. and China represent two ends of the spectrum on Internet freedom, and the Chinese vision for the future of cross-border trade online is concern insofar as it represents a closed, protectionist framework. A subsequent proposal expanded on their success of mobile payments. 

Singapore (here). Singapore, Japan, and Australia are leading the talks. The proposal is broad, putting forth language on trade facilitation, market access, cross-border data flows, source code, and cross-border data flows. They do suggest language that would limit the applicability of the moratorium on customs duties. 

Japan. Their submission has not been made public, but Inside U.S. Trade has reported on its contents.  It reportedly tracks Singapore’s proposal on cross-border data flows.  It allows for an exception for a legitimate public policy objective that is not a disguised restriction on trade on the condition that the measure should restrict as little as possible to serve its public policy purpose, consistent with WTO rules. Text also states that any ban on data localization “shall not apply to information held or processed by or on behalf of a Member, or measures related to such information, including measures related to its collection.”  It is likely consistent with Japan’s push at the G20 under their presidency on the concept of “data free flow with trust”.

Brazil (here). Brazil submitted a revised submission in July. Their submission proposed general principles for WTO members, as well are principles for “Access and Use of the Internet for Digital Trade.” The proposal also encourages regulatory cooperation on a number of digital trade areas including cross-border data flows, intermediary portections, and cybersecurity. The revised submission also includes text on competition regarding platform-based business models, and includes quite expansive exceptions to commitments made in any agreement.

U.S. Submission Aims to Solve the Cross-Border Data Puzzle 

A communication put forth by the U.S. may help present a path forward for the talks, particularly on finding common ground regarding a governing framework for enabling cross-border data flows. The U.S. submitted a white paper on “The Economic Benefits of Cross-Border Data Flows” in the context of a separate WTO mandate under the Work Programme on Electronic Commerce.  The paper’s goal is “to contribute to Members’ understanding of what data is and how it supports economic activity and trade.” 

The U.S. paper stresses that, in the current environment where countries have different approaches to protecting privacy in the digital age, there needs to be a mechanism that removes trade restrictions while ensuring that companies can comply with different regimes.  Absent this mechanism, fragmentation of Internet services will continue. The paper notes that this “can lead to increased compliance difficulties and costs”, which can be “significant, since firms increasingly rely on data transfers in support of their business activity and, in many instances, such data transfers relate to personally identifiable data subjects.” 

To address this trade challenge, the U.S. paper cites existing interoperability regimes such as the U.S-EU Privacy Shield and the APEC Cross-border Privacy Rules system. They suggest that working to “ensure that such mechanisms have a recognized status under trade rules – similar to the status of standards and mutual recognition arrangements” could advance the discussion on facilitating cross-border data flows. They also encourages countries to “examine the mechanisms being developed that address privacy issues in a manner that is least trade restrictive, allowing trade to flourish while preserving legitimate public policy objectives.” 

With an interoperable framework that lowers trade barriers and facilitate free flow of data, firms of all sizes, regardless of their location, can join global commerce streams that are facilitated by Internet and digital services. As the paper notes, “access to free or competitively priced online business services contributes to their competitiveness, helping SMEs overcome traditional barriers to engaging in international trade.” 

Attempts to control data are also often motivated not only by privacy protection, but also as a means to encourage development. However, often the discussion around data can be based on inaccurate assumptions about the nature of data itself. The U.S paper challenges this, pointing out the flaws of the often-invoked “data is the new oil” characterization. 

Paragraph 11 states: 

Although an essential input into the economy, data is not scarce and therefore cannot be exhausted or easily monopolised. Moreover, the consumption of data by one person (or company) does not prevent its consumption by others: data can be replicated and transferred at virtually no cost. Attempting to ring-fence data within a specific territory, as if it were a scarce resource to be conserved, can be particularly self-defeating: the value of data is often only realized when it is integrated into broader, interactive systems using data sets that span different populations and territories. 

As the WTO talks continue, the U.S. white paper is a useful reference point that touches on a number of the issues motivating WTO member submissions. 

What’s Next for the Negotiations 

The statement issued prior to the G20 statement endorsing the talks also set a timeline for the WTO to “resolve to make further efforts to achieve substantial progress in the negotiations by the 12th WTO Ministerial Conference in June 2020.” This may appear as an ambitious timeline, but with the growing consensus on the need for multilateral rules, stakeholders can hope that these talks lead to positive outcomes in the near future.

Digital Trade

Companies rely on clear, predictable rules that facilitate digital trade to export their products and services around the world. These rules include balancing the competing interests between encouraging investment and enabling information access; promoting the free flow of information online; and maintaining balanced intermediary liability regimes.