Trade in a digital world: data need to fly

While countries are updating their national rules to keep up with the fast changes brought by technology, they have been struggling to address these issues in trade deals. We cannot do trade agreements as we did in the past. The rules must be designed globally.   

The European Union (EU) has understood this very well and committed, in its ‘Trade for all’ strategy (October 2015), to leverage the principles of the European Digital Single Market at international level. Eighteen months later, the Commission delivered on its engagement and published its brand new horizontal digital trade chapter in the framework of the EU-Mexico free trade agreement (FTA).

One element is still missing, temporarily replaced by a placeholder: a provision on data flows. This is quite unfortunate as data flows are of course at the core of digital trade. Without them, there’s simply no trade in a digital world.

Discussions between EU Member States - based on a concept note coming from the European Commission for the EU-Japan FTA - are still ongoing in an effort to get the provisions right. Though the concept note was never made public, DIGITALEUROPE had access to its content and decided to strongly oppose it. While we are fully committed to the right of privacy of consumers and encourage European efforts on data protection, the concept note failed to find the right balance between business interests and general exceptions. In the current proposal, the principle of the free flow of data (resulting from the principle of the free flow of services formalised in the WTO General Agreement on Trade in Services in 1995) would become the exception, while the exception would be transformed into a principle.

By inserting a full carve-out without any conditions, we are offering our trade partners an open mandate to introduce protectionist measures and online censorship by abusing the privacy exception. Europe would be left with no legal remedy. With half  of  the  world  still needing  to  adopt  privacy  rules, the European Commission should promote similar transfer mechanisms to the rules allowing for international data transfers in the new European General Data Protection Regulation. 

We have recently seen 15 EU Member States encouraging Vice-President Timmermans, who heads the Commission Project team working on the concept note, ‘to urgently present a concrete and ambitious text proposal for an EU position on data flows’. Bringing back part of the conditions of the GATS Article 14 bis could do the trick.

If we fail to do so, it also means that on day 1 of BREXIT, just as planes won’t be able to fly from London, data will not be able to flow to Brussels if the UK fails to have an adequate regime recognised by the EU and to offer transfer mechanisms.

There is an economic rationale to ensure data can be transferred: 2014 data showed that excluding intra-EU trade, EU Member States exported 506.6 billion EUR and imported 372 billion EUR in digitally-enabled services, resulting in a surplus of approximatively 134 billion EUR for these services. Digitally-enabled services trade represented 56% of all services exports to non-EU countries and 52% of all services imports from non-EU countries[1].

The European Parliament (EP) is now working on a own-initiative report on digital trade where the Rapporteur MEP Marietje Schaake will also cover what the provisions on data flows should be. This will be the position of the EP for any trade agreement to be approved in the future.

The Commission Project team is expected to come up with a revised proposal soon as the political deal with Japan on the FTA is imminent.

With the Trans Pacific Partnership still in limbo, and the United States busy renegotiating NAFTA, the EU – which is still the leader in exports of digitally deliverable services – has a fantastic opportunity to pave the way for the global rulebook on the digital economy. If we don’t do it, who will?