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The Internet of Things: Both Goods and Services

  • ANUPAM CHANDER (a1)

Abstract

International trade law, organized around the goods-services dichotomy, is about to meet the Internet of Things (IoT). How will rules written for the world of 1994 fare in a world of talking teapots and connected cars? IoT will especially raise governmental concerns with respect to privacy, security, and standards. Indeed, governments have already begun taking adverse measures against foreign IoT suppliers based not on the hardware, but on the digital features of the products. This paper argues that IoT devices comprise both goods and services, therefore calling into application multiple WTO disciplines, with the specific agreements that are applicable dependent on the particular governmental measure subject to challenge.

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Thanks to Merit Janow and Petros Mavroidis for inviting me to participate in their Columbia University digital trade seminar where I received insightful comments. I am grateful for a Google Research Award that supported this work. The work builds on earlier research conducted for UNCTAD. The views expressed herein, and any errors, are my own.

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1 In fact, the country schedules principally rely on a classification system that dates to 1991, when the United Nations published the provisional Central Product Classification scheme. Weber, R. H. and Burri, M., Classification of Services in the Digital Economy, Berlin: Springer-Verlag (2013), 19.

2 Recommendation ITU-T Y 2060.

3 D. Burrus, ‘The Internet of Things Is Far Bigger Than Anyone Realizes’ (2014), www.wired.com/insights/2014/11/the-internet-of-things-bigger/. For examples of IoT deployment in a variety of settings, see US Government Accountability Office, ‘Internet of Things: Status and Implications of an Increasingly Interconnected World (2017), www.gao.gov/assets/690/684590.pdf, 62–64.

4 www.gartner.com/newsroom/id/3598917. Additional estimates available at http://spectrum.ieee.org/tech-talk/telecom/internet/popular-internet-of-things-forecast-of-50-billion-devices-by-2020-is-outdated; International Telecommunications Union (ITU) and Cisco, ‘Harnessing the Internet of Things for Global Development’ (2016), 11.

5 Federal Trade Commission, ‘Internet of Things: Privacy and Security in a Connected World’ (2015); US Department of Commerce, ‘Fostering the Advancement of the Internet of Things’ (2017), www.ntia.doc.gov/files/ntia/publications/iot_green_paper_01122017.pdf. http://meity.gov.in/sites/upload_files/dit/files/Draft-IoT-Policy%20%281%29.pdf.

6 ‘China Said to Exclude Apple from Procurement List’, Bloomberg News, 6 August 2014, www.bloomberg.com/news/2014-08-06/china-said-to-exclude-apple-from-procurement-list.html; Charles Clover, ‘China Bans Federal Officials from Buying Apple Products’, Financial Times, 6 August 2014.

7 China accounted for 20% of Apple's global revenues in the last calendar quarter of 2017 (which Apple labels its first fiscal quarter of 2018), www.apple.com/newsroom/pdfs/Q1_FY18_Data_Summary.pdf.

8 www.ftc.gov/news-events/press-releases/2017/01/ftc-charges-d-link-put-consumers-privacy-risk-due-inadequate. The FTC alleged ‘hard-coded’ login credentials integrated into D-Link camera software, software flaws that enable remote attackers to control customer's devices, and the failure to encrypt login credentials on D-Link's mobile app.

9 L. Hay Newman, ‘The Army Grounds Its DJI Drones Over Security Concerns’, Wired, 8 August 2017, www.wired.com/story/army-dji-drone-ban/.

10 Farrokhnia, F. and Richards, C., ‘E-Commerce Products under the World Trade Organization Agreements: Goods, Services, Both or Neither?’, 50 Journal World Trade (2016), 793, 800 (‘the issue of classification is one of practical significance since it would determine the nature of the trade regime for relevant products’).

11 UNCTAD, 2017 Information Economy Report at 4.

13 UNCTAD, Information Economy Report 2017, at 5.

14 L. Hay Newman, ‘The Botnet that Broke the Internet Isn't Going Away, Wired, www.wired.com/2016/12/botnet-broke-internet-isnt-going-away/; Shackelford et al., 2017; ‘A new era of internet attacks powered by everyday devices’, New York Times, 23 October 2016.

15 Federal Trade Commission, supra note 5, at ii.

16 Peppet, Scott, ‘Regulating the Internet of Things: First Steps toward Managing Discrimination, Privacy, Security, and Consent’, 93 Texas Law Review (2014), 85.

18 UN General Assembly, ‘The Right to Privacy in the Digital Age’, G.A. Res. 68/167, U.N. Doc. A/RES/68/167 (18 December 2014), www.un.org/en/ga/search/view_doc.asp?symbol=A/RES/68/167; for a discussion, see Chander, A. and Land, M., ‘Introductory Note to United Nations General Assembly Resolution on the Right to Privacy in the Digital Age’, 53, International Legal Materials. (2014), 727731.

19 World Economic Forum, supra note 4.

20 Altimeter, ‘Interoperability: The Challenge Facing the Internet of Things’ (2014), www.prophet.com/thinking/2014/02/interoperability-the-challenge-facing-the-internet-of-things/.

21 ‘Digital Single Market’, Europe 2020 Strategy, https://ec.europa.eu/digital-single-market/en/europe-2020-strategy.

22 B. Nonnecke, M. Bruch, and C. Crittenden, ‘IoT & Sustainability: Practice, Policy and Promise’, Citris (3 June 2016).

23 One study places information at the heart of IoT (noting that ‘information lies at the heart of IoT, feeding into a continuous cycle of sensing, decision making, and actions’), but it also observes that ‘It is imperative for things to have the capability of communication – exchanging data over a network between them and/or with the cloud backend services’, ENISA, ‘Baseline Security Recommendations for IoT in the Context of Critical Information Infrastructures’ (November 2017), 18–19.

24 European Commission, ‘Advancing the Internet of Things in Europe’ (2016), 13.

25 For a roundup of data localization obligations, see Chander, A. and , U. P., ‘Data Nationalism’, 64 Emory Law Journal (2015), 677.

26 Nigerian Law Intellectual Property Watch, ‘Guidelines for Nigerian Content Development in Information and Communications Technology (ICT)’ (section 12.1), https://nlipw.com/guidelines-nigerian-content-development-information-communications-technology-ict/.

27 U. Ahmed and A. Chander, ‘Information Goes Global: Protecting Privacy, Security, and the New Economy in a World of Cross-Border Data Flows’, E15 Initiative (2015).

28 World Bank, ‘Reaping Digital Dividends Leveraging the Internet for Development in Europe and Central Asia’, at 145.

29 For an important overview of trade law's discipline of data regulation, see Burri, M., ‘The Governance of Data and Data Flows in Trade Agreements: The Pitfalls of Legal Adaptation, 51 UC Davis School of Law – Law Review (2017), 65. For an examination of data localization measures from a trade law perspective, See Daniel Crosby, ‘Analysis of Data Localization Measures under WTO Services Trade Rules and Commitments’ (E15 Initiative, March 2016), http://e15initiative.org/wp-content/uploads/2015/09/E15-Policy-Brief-Crosby-Final.pdf.

32 WTO, ‘Work Programme on Electronic Commerce’, adopted on 25 September 1998 (WT/L/274). In 2013, the General Council expanded its discussions as follows: ‘the Work Programme should continue to examine the trade related aspects of, inter alia, enhancing internet connectivity and access to information and telecommunications technologies and public internet sites, the growth of mobile telephony, electronically delivered software, cloud computing, the protection of confidential data, privacy and consumer protection’, WTO, Ministerial Decision of 7 December 2013, WT/MIN(13)/32, WT/L/907, 11 December 2013.

33 GATS, Art. I:1.

34 Ministerial Declaration on Trade in Information Technology Products, WT/MIN(96)/16 (1996); General Council, Declaration on the Expansion of Trade in Information Technology Products, WT/L/956 (28 July 2015).

36 Appellate Body, Canada  Certain Measures Concerning Periodicals, WT/DS31/AB/R (30 June 1997).

37 Ibid. at 19.

39 Ibid. at 17.

41 Cf. Smith, F. and Woods, Lorna, ‘A Distinction without a Difference: Exploring the Boundary between Goods and Services in the World Trade Organization and the European Union’, 12 Columbia Journal of European Law (2005/06), 463, 510 (‘[N]ew products may not fit easily into the existing coding systems with disagreement arising over the correct classification of the product. There is a risk of discrepancies arising in two contexts: either products can be classified differently within the HS or W/120/CPC code, or, more radically, products can be classified as goods in one scheme and services in another. This problem is acute for products traded online although more established products, such as those of the communications industry, have also given rise to problems.’)

42 Appellate Body, China  Certain Measures Affecting Electronic Payment Services, WT/DS413/AB/R, para. 7.41.

43 https://store.nest.com/product/camera/NC1102ES (advertising $199 camera and a $5/month or $50/year service for ‘continuous recording, intelligent alerts’).

44 https://www.samsungsmartcam.com/manual/android_en.pdf (‘A 30-second video clip is uploaded automatically to the user's Google Drive account’). Samsung earlier offered to upload video to the user's private YouTube channel, but discontinued that feature in 2014, www.samsungsmartcam.com/web/cmm/board/view.do?idx=151&currPage=1&lastPage=1.

45 Appellate Body, China – Measures Affecting Trading Rights and Distribution Services for Certain Publications and Audiovisual Entertainment Products, WT/DS363/AB/R (21 December 2009), para. 194.

46 Ibid. at 18.

47 GATS, Art. 1:1.

48 Appellate Body, China Audiovisual, para. 193.

49 Ibid. at paras. 196–198.

50 Ibid. at para. 188 (‘where the content of a film is carried by physical delivery materials, Article 30 of the Film Regulation will inevitably regulate who may import goods for the plain reason that the content of a film is expressed through, and embedded in, a physical good’).

51 Appellate Body Report, European Communities – Regime for Importation, Sale and Distribution (EC–Bananas III), WT/DS27/AB/R (25 September, 1997).

52 Ibid. at para. 244.

53 Ibid. at para. 226.

54 Ibid. at para. 221.

56 Ibid. at para. 221.

57 Farrokhnia and Richards, supra note 10, at 810.

58 Ibid at 815.

59 Cernat, L. and Kutlina-Dimitrova, Z., ‘Thinking in a Box: A “Mode 5”Approach to Service Trade’, 48 Journal of World Trade (2014), 1109 (‘The [existing] GATS four modes of services supply … do not account for the fact that a substantial and increasing share of services is being embodied in products and traded around the globe.’)

Thanks to Merit Janow and Petros Mavroidis for inviting me to participate in their Columbia University digital trade seminar where I received insightful comments. I am grateful for a Google Research Award that supported this work. The work builds on earlier research conducted for UNCTAD. The views expressed herein, and any errors, are my own.

The Internet of Things: Both Goods and Services

  • ANUPAM CHANDER (a1)

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