data localization

Comparing Digital Rules in Trade Agreements

Comparing Digital Rules in Trade Agreements

Parties signing free trade agreements (FTAs) have begun adding new rules to regulate and harmonize provisions of importance to companies trying to operate across multiple jurisdictions.  The latest Issue Paper, from the Asia Business Trade Association, highlights the similarities and differences between this set of cutting-edge agreements in some of the keys areas of interest to digital trade.  Table 1 identifies sixteen key digital provisions across seven FTAs. All seven FTAs, described more fully below, have only two provisions in common.  All contain provisions to include the elimination of customs duties on digital products or electronic transactions, and cooperation elements.  The remaining 14 elements, however, show variation across the FTAs under examination. The United States/Canada/Mexico (USMCA) and Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), show the most advanced provisions under review in this paper.  Both agreements, as an example, include safeguards to protect developers’ rights over their software source code against the demands of disclosure. In addition, the USMCA incorporates source code-related algorithms into the subject of protection, which makes this FTA distinct from previous agreements. This amendment should facilitate implementation by providing greater clarification on source code.

Taking Data Seriously

These individual pressures have to be balanced with the needs of companies.  To effectively scale, firms are increasingly interested in building infrastructure that does not always match geographic boundaries of countries.  Citizen data and information of all sorts can be moved across borders and firms generally desire more movement rather than less.  Businesses have strong reputational reasons for wanting to protect customer information.  Governments, of course, are deeply concerned about protecting the rights of their own citizens and the security of their countries.  Officials have to balance the sometimes competing demands of business and consumer privacy or business and national security issues.  Toss into this volatile mix rapidly changing technology and a legal structure that moves on a much slower timescale and it becomes clear why rules on managing data flows in Asia has started to fragment. 

The Power of Digital Services for Consumers

The imposition of restrictions on the movement of information, particularly financial data or personal data, also risks changing the landscape.  I could not have booked my hotels or paid for my car rental, if I had been unable to move my own data across borders.  Yet governments are increasingly interested in stopping exactly these types of transactions.  Not simply to keep me from traveling, of course, but a collateral impact of many poorly thought-through policies will be to hamper the freedom of consumers to operate globally and for firms to attract customers from anywhere.  Even restrictions on the location of data servers could impact my ability to book hotels in Greece.  It could easily drive up the costs of delivering services and make it too costly for some smaller firms, like tiny hotels in Arachova, to advertise on some sites.