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understanding and shaping digital trade rules

understanding and shaping digital trade rules. PD, Dr.iur . Mira Burri EFTA Geneva 22 november 2018. talking points. setting the scene: underscoring the importance of data and data crossing borders understanding the existing global trade framework for digital trade

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understanding and shaping digital trade rules

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  1. understandingandshaping digital traderules PD, Dr.iur. Mira BurriEFTA Geneva22 november 2018

  2. talking points • setting the scene: underscoring the importance of data and data crossing borders • understanding the existing global trade framework for digital trade • understanding the dynamics of the current global trade framework; digital trade rule-making in FTAs • focus: CPTTP as the most advanced model so far • thinking ahead: what rules are essential? how can we reconcile conflicting interest, such as free data flows and privacy protection? what are the steps to get us there?

  3. like other factors of production, such as natural resources and human capital, it is increasingly the case that much of modern economic activity, innovation and growth cannot occur without data • the transformative potential is great and refers not only to new ‘digital native’ areas, such as search or social networking, but also to ‘brick-and-mortar’, physical businesses

  4. effects on trade • digitization drives growth: global flows of goods, foreign direct investment and data have increased current global GDP by 10% compared to what would have occurred in a world without any flows; this value was equivalent to USD 7.8 trillion in 2014 alone; data flows account for USD 2.8 trillion of this effect • growing share of digital trade: approximately 12% of the global goods trade is conducted via international electronic commerce; some 50% of the world’s traded services are already digitised • digitization is making global flows more inclusive; yet, ’winner-takes-all’ scenarios also apply

  5. key words in trade policy jargon • global value chains (GVCs) • servicification • cross-border data flows • data must cross borders: • cross-border data flows now generate more economic value than traditional flows of traded goods • 61% (USD 383.7 billion) of US service exports and 53% of US imports were digitally delivered in 2012; in absolute terms, the amount of digitally delivered exports and imports is even larger in the EU, which digitally delivered USD 465 billion in exports and spent USD 297 billion on imports in 2012 (WEF 2016)

  6. new digital trade barriers • localization measures • data privacy and protection measures • intellectual property related measures • censorship • cybersecurity • the rise of new digital protectionism ?

  7. trade policy responses to the digital transformation

  8. contentlayer(humanlymeaningfulmessages, communication) logicallayer(standards, protocols, software) physicallayer(networks, hardware, all devicesconnected) trade law matters for all layers of the internet

  9. the law of the World Trade Organization (WTO) • a set of comprehensive rules on trade in goods, services, and IP protection • far-reaching non-discrimination principles binding on all 164 members • high level of legalization: • possibility to go to ‘court’ • possibility for legal adaptation through case-law • possibility for reconciliation of trade and non-trade concerns • many rules specific for digital trade: e.g. computer and relates services

  10. WTO: too slow, too ‘offline’ • failed rules adaptation • 1998 WTO E-Commerce Programme: great forward thinking  no action • no agreement even on basic issues, let alone on complex matters, such as classification: goods vs. services; telecom vs. audiovisual vs. computer-related services • some but insufficient compensation through case-law

  11. venue-shopping: FTAs

  12. Free Trade Agreements (FTAs) • the US Digital Agenda: 11 US FTAs since 2002 • spillovers of templates in non-US FTAS • 3 FTA chapters to follow: • dedicated e-commerce chapters • services chapters • IP chapters • addressing digital governance is a cross-sector issue • WTO+ ; but not only • data flows as the new negotiation topic

  13. evolution of digital trade provisions in FTAs by september 2018, 291 FTAS: 98 FTAs with e-commerce/digital trade provisions 73 FTAs with e-commerce/digital trade chapters 13 FTAs with general data flows provisions 64 FTAs with specific data flows provisions on financial services 61 FTAs with specific data flows provisions on telecommunications 9 FTAs with provisions on data localization

  14. digital trade provisions in FTAs

  15. digital trade provisions in FTAs

  16. Comprehensive and Progressive Agreement for Transpacific Partnership (CPTPP) • the CPTPP chapter on e-commerce is the most comprehensive so far • identical with the TPP e-commerce chapter and in essence US-driven • substance: • ban on customs duties on electronic transmissions, including content transmitted electronically • non-discriminatory treatment of digital products • a legal framework governing electronic transactions consistent with the principles of the UNCITRAL Model Law on Electronic Commerce 1996 or the UN Convention on the Use of Electronic Communications in International Contracts 2005 • electronic authentication and electronic signatures • online consumer protection • paperless trading • spam • source code • net neutrality • cooperation, including on cybersecurity

  17. Comprehensive and Progressive Agreement for Transpacific Partnership (CPTPP) • specific provisions on data flows: • explicit ban on data protectionism: ‘Each Party shall allow the cross-border transfer of information by electronic means, including personal information, when this activity is for the conduct of the business of a covered person’ • localization measures prohibited • restrictions are permitted only for legitimate purposes if they do not amount to ‘arbitrary or unjustifiable discrimination or a disguised restriction on trade’ • policyspaceofdomesticdataprotectionregimes

  18. USMCA (2018) • United States Mexico Canada Agreement (update of NAFTA) follows and expands the CPTPP model • chapter on ‘Digital Trade’ • new elements: e.g. open government data; commitment to some data protection principles • some certainty that the US will continue this template

  19. USMCA (2018): art. 19.8: Personal Information Protection • Parties recognize the economic and social benefits of protecting the personal information of users of digital trade and the contribution that this makes to enhancing consumer confidence in digital trade. • Each Party shall adopt or maintain a legal framework that provides for the protection of the personal information of the users of digital trade. In the development of its legal framework for the protection of personal information, each Party should take into account principles and guidelines of relevant international bodies, such as the APEC Privacy Framework and the OECD Recommendation of the Council concerning Guidelines governing the Protection of Privacy and Transborder Flows of Personal Data (2013). • A Party may comply with this obligation by adopting or maintaining measures such as a comprehensive privacy, personal information or personal data protection laws, sector-specific laws covering privacy, or laws that provide for the enforcement of voluntary undertakings by enterprises relating to privacy.

  20. highlighting trends (1) • emergence of a specific trade regime tailored to digital products and services • digital trade not so much about market access but about interfacing domestic regimes, so as to provide interoperability and some certainty • beyond-the-border regulation of the digital economy • value of international trade law (if not through the WTO) increased for data flows • still, regulatory framework patchy and not terribly innovative (EU has been cautious; some countries like EFTA have not developed digital trade strategies in their FTAs)

  21. highlighting trends (2) • experience gathered on multiple digital trade issues • agreement on ‘soft’ e-commerce issues, such as paperless trading, electronic contracts, custom duties moratorium • disagreement on data flows vs. the protection of privacy and national security

  22. moving forward …

  23. elements of a future-oriented approach • strong advantages for the multilateral forum of the WTO • form: Reference Paper or Data Economy Agreement (as a plurilateral deal); sequencing and graduation of obligations as a way to achieve political feasibility • contents: • agreement on electronic contracts; electronic authentication and trust services; consumer protection; spam; custom duties moratorium • limitations on localization measures; free flow of data but room for domestic privacy rules • need to find reconciliation mechanisms in the sense of art. XIV GATS and art. XX GATT

  24. thank you for your attention ! • mira.burri@unilu.ch

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