[A2k] FT- Digital trade: Data?protectionism

Alberto Cerda alberto at derechosdigitales.org
Tue Aug 5 13:06:07 PDT 2014

Thanks for sharing this "piece of art", Thiru.
After reading it, I realize a new meaning for bias.
Although, the arguments seem strong in favor of incorporating a clause for
"free flow of informational goods and services", this article makes several
misleading statements and suggestions. Let me just comment on three of them.
It suggests that this "free flow of information" language has been
introduced to control damages from the Snowden case and to prevent that
some sort of new Axis powers (Brazil, China, and Russia) from adopting laws
that may diminish that flow. But timings do no make sense, since that
language has become binding since 2007 U.S. trade negotiations, not after
Snowden or those countries even suggest such laws. Unless, the USTR is an
oracle and was already anticipating these issues seven years ago.
Noticeable, the text suggests that this is a problem with certain
countries, but it did omit that this language is being pushed by the USTR
to undermine personal data protection laws in place in Australia, Canada,
and to certain extend in the European Union. Of course, the argument seems
more appealing when framing its objectors as the new Axis rather than other
democratic countries that provide better protection for people's privacy
than the U.S.
Part of the article tries to neutralize consumers' concerns, by
highlighting how preventing free flow of information may damages them and
keep them apart from the benefits of e-commerce. But, noticeable, the free
flow of information language does not have for primary purpose serving
consumers but companies that process personal data of their customers. That
clause does not have for purpose preventing that consumers agree to provide
their personal data in exchange for certain goods and services, instead,
the free flow of information language has for purpose allowing companies to
agree in transferring their customer's personal data to overseas (without
asking their customers).
The article is plenty of misrepresentations and misleading ideas and
suggestions, but, I think, these are three of them that should call our

Alberto Cerda Silva
ONG Derechos Digitales

Skype: alberto.cerda
Linkedin: alberto-cerda-silva
Twitter: @albertocerda

Date: Tue, 5 Aug 2014 08:31:49 +0200
> From: Thiru Balasubramaniam <thiru at keionline.org>
> To: a2k at lists.keionline.org
> Subject: [A2k] FT- Digital trade: Data?protectionism
> Message-ID:
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> seKwjYZT2GQQ01vn6dFiCu_LfQD23dL0_90OTDjd4nWDMg at mail.gmail.com>
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> http://www.ft.com/intl/cms/s/0/93acdbf4-0e9b-11e4-ae0e-00144feabdc0.html#axzz39Un740cU
> August 4, 2014 7:35 pm
> Digital trade: Data protectionism
> By Shawn Donnan
> Negotiators are struggling to create rules to govern cross-border commerce
> in data
> Mary Huang has a tantalising vision for the fashion industry: her shoe
> designs are turned out by 3D printers rather than developing-world workers
> and boxed by robots.
> For Ms Huang, fulfilling international orders should entail sending digital
> production files to automated banks of 3D printers in shops in Tokyo or
> London, thereby avoiding import duties and the rag trade?s moral quandaries
> about outsourcing production to distant sweat shops.
> ?That is not that far away,? says Ms Huang, a young design graduate whose
> Continuum Fashion company began selling 3D-printed shoes online from its
> Brooklyn office this year. ?That is achievable in a couple of years. So why
> aren?t we doing it? It?s incredibly efficient for business.?
> Global data flows are soaring and ?digital trade? is becoming an important
> part of the global economy. If the standardised shipping container and the
> internet each contributed to what has been an era of ?hyperglobalisation?,
> it does not take much imagination to see the 3D printer reshaping not just
> manufacturing but also globalisation.
> But, even as it grows rapidly, digital trade is facing new barriers.
> Negotiators are scrambling to draft rules to prevent what could amount to a
> wave of protectionism. Without credible trade rules, some argue,
> governments eager to protect their own industries or their citizens?
> privacy could ban Ms Huang?s digital production files, and those of other
> companies, from crossing their borders.
> Ms Huang?s frustration is not exclusive to small operations. Eric Spiegel
> <http://www.ft.com/cms/s/0/cbc12588-79df-11e2-9dad-00144feabdc0.html>, the
> head of Siemens? US arm, laid out a vision not that far removed from Ms
> Huang?s when he spoke at a breakfast in Washington hosted by the McKinsey
> Global Institute, the consultancy?s think-tank. The German engineering
> company, he said, would soon begin delivering spare parts to customers via
> email and 3D printers, also avoiding physical borders and the usual
> logistical complexities of global trade.
> But the advances in business are also coming up against fundamental debates
> about privacy.
> The Edward Snowden
> <http://www.ft.com/intl/topics/people/Edward_Snowden> revelations
> of US online snooping have sparked a worldwide debate about privacy and the
> internet. Receiving less attention is the way international trade
> negotiations are trying to deal with what limits, if any, ought to be set
> on the flow of data around the globe and how to prepare for a digital
> future that is already a reality in some sectors.
> The negotiation of a 12-country Transpacific trade partnership
> <
> http://www.ft.com/intl/cms/s/0/c1254a20-8ff3-11e3-aee9-00144feab7de.html?siteedition=intl
> >
> (TPP)
> has sparked debate in Australia and New Zealand over whether companies
> ought to be allowed to store personal banking and medical data in foreign
> countries, or if such sensitive information should even be allowed to cross
> borders freely.
> The debate is echoed in EU-US trade talks and in Geneva, where diplomats
> from two dozen countries are trying to update the two-decade-old rules
> governing the global trade in services.
> Anupam Chander, a cyber law expert at the University of California, Davis,
> and the author of *The Electronic Silk Road*
> <http://www.ft.com/intl/cms/s/0/aea93236-1b03-11e3-a605-00144feab7de.html
> >,
> argues that ensuring the free flow of data has become one of the biggest
> issues confronting business, trade negotiators and consumers who often do
> not realise how dependent they have become on such free movement.
> When a fire damaged a Samsung data centre in South Korea in May, he points
> out, users of ?smart? televisions in the US were surprised to see them
> switch off as a result. ?The ?smarts? of these TVs were actually sitting in
> an office building in Korea,? he says.
> Innovation in some sectors is outstripping the trade rules designed to
> govern them. We still tend to define trade as either in goods or services.
> Yet in today?s world much of what makes a product such as a car valuable is
> the data-rich services embedded in it, whether it is the immediately
> apparent, such as satellite navigation, or the communication systems that
> allow manufacturers to track performance in real time.
> ?The distinction between a good and a service vanishes with a smart watch?
> and all the apps that it contains, Mr Chander says. And yet, he adds, ?the
> global trade infrastructure doesn?t have the conceptual framework to deal
> with that?.
> It is also clear that, as the debate set off by the Snowden revelations has
> shown, not everyone is comfortable with the consequences of the new digital
> world.
> In a July ?joint statement of principles? over the EU-US trade talks, the
> biggest trade unions in the US and EU called for any transatlantic trade
> deal to enshrine the right to online privacy. They also demanded a ban on
> free data flows across borders ?if national privacy laws cannot be enforced
> for data located outside national borders?.
> Russia?s parliament recently passed a bill requiring technology companies
> such as Google  <
> http://markets.ft.com/tearsheets/performance.asp?s=us:GOOG>to
> keep their Russian users? data within the country. Brazil last year
> proposed doing the same but subsequently backed down. And at least two
> provinces in Canada require public contractors to keep personal data in the
> country.
> The US, as it tries to repair the damage caused by the Snowden leaks, is
> using existing talks in an attempt to prevent other countries from adopting
> similar measures to block the free trade in data.
> Robert Holleyman, President Barack Obama?s nominee to be the deputy US
> trade representative overseeing trade relations in Asia, the TPP talks and
> the negotiations on services, spent 13 years as the head of the Business
> Software Alliance, which represents technology heavyweights such as Apple
> <http://markets.ft.com/tearsheets/performance.asp?s=us:AAPL>, Intel
> <http://markets.ft.com/tearsheets/performance.asp?s=us:INTC>and Microsoft
> <http://markets.ft.com/tearsheets/performance.asp?s=us:MSFT>.
> Mr Holleyman told the Senate finance committee in July that one of his top
> priorities, alongside mounting a robust response to China?s ever-growing
> presence in global trade, would be ensuring that the US was at the
> ?forefront? in establishing the rules of digital trade. He would, he told
> the committee, fight for rules to guarantee the free flow of data across
> borders and stop discrimination against goods and services traded online
> rather than physically.
> The push is driven in large part by fears in the US tech industry that
> existing agreements such as the 1990s- era General Agreement on Trade in
> Services, written in a pre-internet world, can do little to stop digital
> trade barriers from popping up.
> Victoria Espinel, a former White House intellectual property adviser and Mr
> Holleyman?s successor at the software alliance, says: ?It is clear that the
> rules are not fit for today and are certainly not going to be adequate for
> where the economy is going in the future. The question is what do you do
> about it??
> The software group, which has long called for the inclusion of strong
> intellectual property rules in trade agreements, has turned its attention
> to securing guarantees on the free cross-border flow of data.
> The negotiations for an EU-US trade area and the TPP have both seen the US
> push for strong data rules. The move, argues Ms Espinel, offers an
> opportunity to establish a blueprint to influence global talks. She also
> likens the current situation to the 1990s Uruguay round of trade
> negotiations and efforts to convince governments that such agreements ought
> to tackle intellectual property rights.
> ?Any time you negotiate something new it is very, very difficult,? says Ms
> Espinel, a former US trade negotiator. ?You are asking the negotiators . .
> . to talk about, to think about, something that is cutting edge. Something
> that is not necessarily a problem they have to deal with at the moment. And
> that is a hard thing to do in trade agreements, which are already hard to
> negotiate.?
> But the need is urgent. Cross-border internet traffic grew 18-fold between
> 2005 and 2012, researchers from the McKinsey Global Institute stated
> <
> http://www.mckinsey.com/insights/globalization/global_flows_in_a_digital_age
> >in
> a report this year.
> Together with the continuing rise of emerging economies, the McKinsey
> report?s authors argued that growing digital trade and new technologies
> such as 3D printing could see global flows of capital, data, goods and
> services more than triple from the $26tn recorded in 2012 to $85tn by 2025.
> Digital commerce has come up against barriers before. While ecommerce, the
> buying of retail goods online, has soared across the world during the past
> two decades, it has remained an often local phenomenon. US consumers spent
> $384.8bn online in 2013 but only $40.6bn of that was cross-border.
> Even within the EU?s single market the situation is similar. In the UK,
> nearly 70 per cent of people reported buying at least one item online, the
> McKinsey researchers wrote, but only 10 per cent said they had bought
> anything from sellers in other EU countries.
> Language gaps and consumers? fear of online fraud are blamed for the slow
> pick-up.
> However, the McKinsey authors also cited a 2012 Swedish Board of Trade
> paper that concluded that ?customs barriers, tax regulation, and
> cross-border data transfer issues were all having a substantial drag on
> cross-border flows?.
> Researchers are only just beginning to quantify what digital trade barriers
> could mean for the global economy.
> In one study examining existing and proposed data localisation and related
> privacy and security laws in seven economies, including China and the EU,
> analysts at the European Centre for International Political Economy
> <http://www.ecipe.org/media/publication_pdfs/OCC32014__1.pdf> found that
> they were a significant drag on growth.
> In the case of both China and the EU, introducing restrictions on the free
> flow of data would cause a 1.1 percentage point contraction in the gross
> domestic product growth rate.
> Governments may feel compelled for security reasons to crack down on
> cross-border data flows, the ECIPE authors acknowledged, but added: ?The
> economic evidence however proves that unilateral trade restrictions are
> counterproductive in the context of today?s interdependent globalised
> economy.?
> Hosuk Lee-Makiyama, one of the authors of the ECIPE report, is among those
> who argue that the debate over data and digital trade between governments
> and among trade negotiators is only just beginning. And very few policy
> makers are considering the real impact of something like Ms Huang?s 3D
> printers.
> The debate now is about data flows. But he predicts it may soon be about
> finding new ways to protect domestic industries and fiscal demands. How,
> for example, does a government levy taxes on emailed production files?
> Then again, for governments, as is often the case with technology and
> innovation, battling that emerging reality may ultimately be a fruitless
> endeavour, Mr Lee-Makiyama says: ?If you have the *Star Trek* technology
> there is really nothing that trade barriers can stop.?
> *The internet of things: A morning routine with international
> repercussions*
> Fast forward a decade and imagine your morning routine.
> You wake up gently at a time carefully selected by a bracelet monitoring
> your sleep patterns after drawing on weeks of data stored on a server that
> lives somewhere in the American west. You trudge to the bathroom and step
> on to the scales, which quickly shoots your weight to that same server and
> helps determine just how long and how strenuous your next session on the
> treadmill will be.
> Breakfast is a special protein-rich cereal ordered a few days before by
> your fridge and a pot of coffee brewed extra strong with your meeting-heavy
> Google calendar in mind. Later, your toothbrush sends updates to a dental
> service and, spotting the early signs of a cavity, books an appointment.
> Welcome to the ?internet of things?, and the sort of not entirely
> far-fetched scenario now perplexing trade negotiators and experts on
> digital trade.
> It is easy to ignore but each of those functions could contain what amounts
> to a trade quandary or a cross-border transaction governed by international
> rules and standards.
> Were you to live in Europe those sleep records stored on a US server could
> easily violate data localisation and privacy laws. The same applies to the
> incriminating information shared by your bathroom scales.
> Your fridge and coffee pot might well be communicating via a server in
> South Korea or China, which in turn is liaising with a Google server in
> Ireland to check on your calendar. The first six months of your dental
> service came free with the Chinese-made toothbrush you bought at a local
> chemist but renewing it means paying your fees to the service in Germany
> that relays your data to a virtual clinic staffed by experts in Bangalore,
> who send your particulars to the local dentist.
> Goods, services and plenty of free-flowing data are all part of a morning
> routine that the world?s trade negotiators are beginning to ponder.


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