What is being done by multilaterals and in free trade agreements to reduce the increase?
As technology promoting digital trade progressed, a regulatory sandbox was called for loudly by industry so industry could trial ideas without an overly heavy regulatory burden but now the biggest policy measure that impedes digital trade is data localisation. Some governments see data localisation as a way to keep their national businesses strong as companies that would see the benefit of a cloud are commonly foreign, trading across borders.
Some governments are requiring that foreign or multinational firms not use a cloud to house their data, which, as a result would require them to build local server infrastructure. Governments state that this is because they are concerned about privacy and security of their citizens.
In China, foreign companies need a Chinese partner to obtain a licence to use cloud services. Last year the Reserve Bank of India issued a directive that data from electronic payment systems needed to be stored locally. This limits data flows and impacts business.
To try to prevent this rush of regulation the APEC Cross Border Privacy Rules system (endorsed by APEC leaders in 2011) was created to address privacy concerns. The system includes voluntary principles for industry that can guide data protection practices and procedures. It also includes pre-packaged legal and privacy documents and a process for certification. In APEC style or voluntary participation, it prioritises harmonization and has been designed to interoperate with existing European frameworks.
There are other strategies and regulatory measures that governments can take to guide companies to protect the data of their customers. This includes binding corporate rules, contractual clauses and requirements on obtaining consent from customers.
There is also progress happening in digital trade in the World Trade Organisation (WTO). In December 2017, during the WTO 11th Ministerial Conference (MC11), 70 WTO members signed a Joint Statement on e-commerce. This development sets the foundation for a future negotiation round on e-commerce to update international trade rules to keep pace with technological change. It was also agreed during the meeting to extend the moratorium on customs duties on electronic transmissions for another 2 years.
Australia uses clauses in free trade agreements (FTAs) to overcome data localisation regulations by our trading partners as seen in our newest FTA, the Indonesia-Australia Comprehensive Economic Partnership Agreement (IA-CEPA), signed on 4 March 2019. Under IA-CEPA, Indonesia will not be able to make its laws more restrictive on the local storage of data.
The resuscitated Trans-Pacific Partnership (TPP), now called the Comprehensive and Progressive Agreement for TPP (CPTTP) entered into force on 30 December 2018 for Australia, Canada, Japan, Mexico, New Zealand and Singapore. In January 2019 Vietnam also signed on. This altered agreement went ahead without original negotiators: the USA, Chile, Peru, Brunei Darussalam and Malaysia. CPTPP delivered breakthroughs for participating economies to promote the free flow of data across borders for service suppliers and investors as part of business activities. CPTPP countries have committed not to impose ‘localisation requirements’ that would force businesses to build data storage centres or use local computing facilities in CPTPP markets.