Hostname: page-component-76fb5796d-vvkck Total loading time: 0 Render date: 2024-04-25T18:07:28.165Z Has data issue: false hasContentIssue false
  • English
  • Français

Governing Digital Trade

Published online by Cambridge University Press:  12 April 2019

JOSHUA P. MELTZER
JOSHUA P. MELTZER*
Affiliation:
The Brookings Institution, Washington, DC
*
*Email: JMeltzer@brookings.edu
Get access Rights & Permissions [Opens in a new window]

Abstract

As global data flows and digital technologies transform international trade, governments and regulators have to determine how to benefit from these developments while maintaining the integrity of their domestic regulations. Currently, governments are increasingly restricting global data flows and requiring data localization, undermining the economic benefits of digital trade. To address this trend will require a system of digital trade governance that has two key elements. One element is new digital trade rules, some of which exist in the WTO and others which are being developed in free trade agreements. The other is international regulatory cooperation to develop standards and mutual recognition agreements in areas such as privacy and consumer protection that gives domestic regulators confidence that allowing data to leave their jurisdiction will not undermine achievement of domestic regulatory goals. In the absence of such regulatory cooperation, governments are likely to continue to restrict data flows, relying on the exceptions provisions to their digital trade commitments.

Type
Review Article
Information
World Trade Review , Volume 18 , Special Issue S1: Digital Trade , April 2019 , pp. S23 - S48
Copyright
Copyright © Joshua P. Meltzer 2019 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Footnotes

I would like to thank Mira Burri, Daniel Crosby, Andrew Mitchel and Neha Mishra for their comments and feedback.

References

1 McKinsey & Company (2015), By 2025, Internet of Things Applications Could Have US$11 Trillion Impact, www.mckinsey.com/mgi/overview/in-the-news/by-2025-internet-of-things-applications-could-have-11-trillion-impact.

2 Price Waterhouse Coopers (2017), ‘Sizing the Prize’, www.pwc.com/gx/en/issues/analytics/assets/pwc-ai-analysis-sizing-the-prize-report.pdf (accessed 5 January 2019).

3 United States International Trade Commission (2014), ‘Digital Trade in the US and Global Economies’, Part 2, Investigation 332–540, Pub. No. 4485, August 2014.

4 S. Miroudot and C. Cadestin (2017), ‘Services in Global Value Chains: From Inputs to Value-Creating Activities’, OECD Trade Policy Paper 197, p. 16.

5 J. P. Meltzer (2013), ‘The Internet, Cross-Border Data Flows and International Trade’, Issues in Technology Innovation, No. 22, February 2013.

6 M. F. Ferracane (2017), ‘Restrictions on Cross-Border Data Flows: A Taxonomy’, ECIPE Working Paper No. 1/2017.

7 EU General Data Protection Regulation, 27 April 2016, L 119/1, 679, Article 45; see also Schrems v. Data Protection Commissioner [2014] I.E.H.C. 310, para. 73, where the CJEU found that a finding of adequacy requires other countries to have in place a privacy regime that is ‘essentially equivalent’ to that of the EU.

8 J. P. Meltzer and P. Lovelock, ‘Regulating for a Digital Economy: Understanding the Importance of Cross-Border Data Flows in Asia’, Brookings Working Paper 113, March 2018.

9 M. Bauer et al., ‘The Costs of Data Localisation: Friendly Fire on Economic Recovery’, ECIPE Occasional Paper No. 3/2014.

10 Bernard, A. B., Jenson, J. B., Redding, S. J., and Schott, P. K. (2007), ‘Firms in International Trade’, Journal of Economic Perspectives, 21(3): 105–130CrossRefGoogle Scholar.

11 Mattoo, A. and Meltzer, J. P. (2018), ‘International Data Flows and Privacy: The Conflict and Its Resolution’, Journal of International Economic Law, 21(4): 760–789Google Scholar.

12 WTO Panel Report, United States – Measures Affecting the Cross-Border Supply of Gambling and Betting Service, WT/DS285/AB/R, para. 6; WTO Appellate Body Report, China – Measures Affecting Trading Rights and Distribution Services for Certain Publications and Audiovisual Entertainment Products (China–Audiovisuals), WT/DS363/AB/R (21 December 2009), para. 364.

13 A. Chander and U. P. Le (2015), ‘Data Nationalism’, Emory Law Journal, 64: 677.

14 M. Burri (2017), ‘The Governance of Data and Data Flows in Trade Agreements: The Pitfalls of Legal Adaptation’, U.C.Davis Law Review, 51: 65–133; Mitchell, A. D. and Mishra, N. (2018), ‘Data at the Docks: Modernising International Trade Law for the Digital Economy’, JETLaw, 20: 1073, 1095Google Scholar.

15 M. Wu (2017), ‘Digital Trade-Related Provisions in Regional Trade Agreements: Existing Models and Lessons for the Multilateral Trade System’, RTA Exchange, Geneva: ICTSD and IDB, November 2017, p. 6.

16 Cisco (2017), ‘The Zettabyte Era: Trends and Analysis’, White paper, www.cisco.com/c/en/us/solutions/collateral/service-provider/visual-networking-index-vni/vni-hyperconnectivity-wp.pdf.

17 ‘Volume of data/information created worldwide from 2005 to 2025 (in zetabytes)’, www.statista.com/statistics/871513/worldwide-data-created/ (accessed 15 January 2019). A Zetabyte is a trillion gigabytes.

18 World Bank (2016), ‘World Development Report 2016: Digital Dividends’, World Bank, Washington, DC; Bernard et al. (2007), supra note 10, 105–130.

19 R. J. Gordon (2012), ‘Is US Economic Growth Over? Faltering Innovation Confronts the Six Headwinds’, Working Paper 18315, National Bureau of Economic Research; P. M. Romer (2008), ‘Economic Growth’, Library of Economic and Liberty, www.econlib.org/library/Enc/EconomicGrowth.html.

20 Krugman, P. (1997), The Age of Diminished Expectations: US Economic Policy in the 1990s, Cambridge, MA: MIT PressGoogle Scholar.

21 D. M. Byrne, J. G. Fernald, and M. B. Reinsdorf (2016), ‘Does the United States Have a Productivity Slowdown or a Measurement Problem?’, Brookings Papers on Economic Activity (Spring), 109; C. Syverson, ‘Challenges to the Mismeasurement Explanations for the U.S. Productivity Slowdown’, NBER Working Paper 21974, February 2016.

22 J. Remes et al. (2018), ‘Solving the Productivity Puzzle: The Role of Demand and the Promise of Digitization’, McKinsey Global Institute, February.

23 E. Brynjolfsson et al. (2017), ‘Artificial Intelligence and the Modern Productivity Paradox: A Clash of Expectations and Statistics’, NBER Working Paper 24001, October 2017 (revised December 2017), p. 10.

24 Ibid.

25 US Department of Commerce (2016), ‘Measuring the Value of Cross-Border Data Flows’, www.ntia.doc.gov/files/ntia/publications/measuring_cross_border_data_flows.pdf, 2.

26 McKinsey & Company (2016), Digital Globalization: The New Era of Global Flows, www.mckinsey.com/business-functions/digital-mckinsey/our-insights/digital-globalization-the-new-era-of-global-flows.

McKinsey & Company (2015), By 2025, Internet of Things Applications Could Have US$11 Trillion Impact, www.mckinsey.com/mgi/overview/in-the-news/by-2025-internet-of-things-applications-could-have-11-trillion-impact.

27 Ibid.

28 United States International Trade Commission (2014), ‘Digital Trade in the US and Global Economies’, Part 2, Investigation 332–540, Pub. No. 4485, August 2014; D. Castro (2013), ‘The False Promise of Data Nationalism’, Information Technology & Innovation Foundation (ITIF), www2.itif.org/2013-false-promise-data-nationalism.pdf.

29 K. Barefoot et al. (2018), ‘Defining and Measuring the Digital Economy’, Bureau of Economic Analysis Working Paper, 15 March 2018.

30 United Nations (2017), ‘Digitalization, Trade and Development’, UNCTAD Information Economy Report 2017, United Nations Publications, Switzerland, p. 30.

31 D. Castro and A. McQuinn, ‘Cross-Border Data Flows Enable Growth in All Industries’, ITIF Report, February 2015, 1; USITC (2014), ‘Digital Trade in the US and Global Economies, Part 2’, Pub. No. 4485, August 2014, p. 29 .

32 J. P. Meltzer (2014), ‘The Importance of the Internet and Transatlantic Data Flows for US and EU Trade and Investment’, Brookings Institution, www.brookings.edu/research/the-importance-of-the-internet-and-transatlantic-data-flows-for-u-s-and-eu-trade-and-investment/.

33 Australian Computer Society (2017), ‘Data Sharing Frameworks’, Technical White Paper (ed. Ian Opperman), p. 9.

34 USITC (2014), supra n. 3, p., 275.

35 D. Gozman and J. Liebenau (2015), ‘The Role of Big Data in Governance: A Regulatory and Legal Perspective of Analytics in Global Financial Services’, SWIFT Institute Working Paper No. 2014-009, 6.

36 Calabrese, F., , Ferrari, L., and Blondel, V. (2014), ‘Urban Sensing Using Mobile Phone Network Data: A Survey of Research’, ACM Computing Surveys, 47(2): Art. 25CrossRefGoogle Scholar.

37 L. Yu et al. (2016), ‘Current Standards Landscape for Smart Manufacturing Systems’, NIST, NISTIR 8107, February 2016.

38 Caterpillar (2018), www.cat.com/en_US/by-industry/mining/articles/improving-safety-and-productivity.html.

39 McKinsey Global Institute (2018), ‘The Promise and Challenge of the Age of Aritificial Intelligence’, October 2018, www.mckinsey.com/~/media/McKinsey/Featured%20Insights/Artificial%20Intelligence/The%20promise%20and%20challenge%20of%20the%20age%20of%20artificial%20intelligence/MGI-The-promise-and-challenge-of-the-age-of-artificial-intelligence-in-brief-Oct-2018.ashx.

40 Snijders, C. et al. (2012), ‘Big Data: Big Gaps of Knowledge in the Field of Internet Science’, International Journal of Internet Science, 7(1): 1–5Google Scholar.

41 IBM (2017), ‘10 Key Marketing Trends in 2017’, http://comsense.consulting/wp-content/uploads/2017/03/10_Key_Marketing_Trends_for_2017_and_Ideas_for_Exceeding_Customer_Expectations.pdf.

42 OECD (2015), Data Driven Innovation: Big Data for Growth and Well-Being, Paris: OECD Publishing.

43 Davenport, T. H. et al. (2012), ‘How “Big Data” Is Different’, MIT Sloan Management Review, 52(1): 44Google Scholar, https://sloanreview.mit.edu/article/how-big-data-is-different/.

44 J. Bughin et al. (2016), ‘Digital Europe: Pushing the Frontier, Capturing the Benefits’, McKinsey Global Institute, June 2016.

45 J. Manyika et al. (2011), Internet Matters: The Net's Sweeping Impact on Growth, Jobs and Prosperity, p. 80, www.mckinsey.com/industries/high-tech/our-insights/internet-matters.

46 de Costa, F. (2014) ‘Big data in biomedicine’, Drug Discovery Today, 19(4): 433–440CrossRefGoogle Scholar.

47 Manyika supra note 45.

48 C. S. Yoo (2015), ‘Cloud Computing: Architectural and Policy Implications’, Institute for Law & Economics University of Pennsylvania Law School Research Paper No. 11-15, pp. 5–6.

49 Etro, F. (2009), ‘The Economic Impact of Cloud Computing on Business Creation, Employment and Output in Europe’, Review of Business and Economics, 54(2): 179–208Google Scholar.

50 Ibid., at 179–208.

51 eBay (2016), ‘Small Online Business Growth Report’, January 2016.

52 M. Graf, J. Hlavka, and B. Triezenberg (2016), ‘A Change is in the Air, Emerging Challenges for the Cloud Computing Industry’, Rand Working Paper WR-1144, March 2016, p. 19.

53 US Federal Trade Commission Staff Report (2015), ‘Internet of Things, Privacy and Security in a Connected World’.

54 Tsai, Chun-Wei et al. (2014), ‘Data Mining for Internet of Things: A Survey’, IEEE Communications Surveys & Tutorials, 16(1): 77–97CrossRefGoogle Scholar.

55 Davenport, T. H. et al. (2012), ‘How “Big Data” Is Different’, MIT Sloan Management Review, 52(1): 44Google Scholar.

56 McKinsey & Company (2016), Digital globalization: The New Era of Global Flows.

57 D. Greer (2013), ‘Big Data Security, Privacy Concerns Remain Unanswered’, Computerworld, 3 December 2013.

58 WTO (1998), Work Programme on Electronic Commerce (1998), WT/L/274, 30 September 1998.

59 USITC (2014), supra n. 22, p. 29.

60 J. P. Meltzer (2016), ‘Maximizing the Opportunities of the Internet for International Trade’, E15 Expert Group on the Digital Economy – Policy Options Paper, E15 Initiative, Geneva, International Centre for Trade and Sustainable Development (ICTSD) and World Economic Forum.

61 Ibid.

62 J. P. Meltzer (2014), ‘Supporting the Internet as a Platform for International Trade: Opportunities for Small and Medium-Sized Enterprises and Developing Countries’, Brookings Working Paper 69, February 2014.

63 OECD (2009), ‘Top Barriers and Drivers to SME Internationalization’, Report by the OECD Working Party on SME and Entrepreneurship, OECD, Paris.

64 Schoonjans, B., Van Cauwenberge, P., and Bauwhede, H. Vander et al. (2013), ‘Formal Business Networking and SME Growth’, Small Business Economics, 41: 169–181CrossRefGoogle Scholar.

65 Ebay (2015), ‘Empowering People and Creating Opportunity in the Digital Single Market’, eBay report on Europe's potential, October 2015.

66 United States International Trade Commission, ‘Digital Trade in the US and Global Economies, Part 2,Investigation 332-540’, Pub. No. 4485, August 2014, p. 42.

67 United States International Trade Commission, ‘Global Digital Trade 1: Market Opportunities and Key Foreign Trade Restrictions’, Pub. No. 4716, August 2017, pp. 58–66.

68 PricewaterhouseCoopers (2016). ‘Industry 4.0: Building the Digital Enterprise’, 2016 Global Industry 4.0 Survey.

69 B. Hoekman and A. Mattoo (2008), ‘Services Trade and Growth’, Policy Research Working Paper No. 4461, World Bank, Washington DC; X. Liu, A. Mattoo, Z. Wang, and S.-J. Wei (2017), ‘Services Development and Comparative Advantage in Manufacturing’, Unpublished manuscript.

70 OECD (2012), ‘Mapping Global Value Chains’, TAD/TC/WP/RD(2012)9.

71 Baldwin, R. (2016), The Great Convergence: Information Technology and the New Globalization, Boston, MA: Harvard University PressGoogle Scholar.

72 K. de Bacher and F. Dotothee (2017), ‘The Future of Global Value Chains’, OECD Science, Technology and Innovation Policy Papers, 41, July 2017.

73 Helpman, E. (2011), Understanding Global Trade, Cambridge, MA: Harvard University PressCrossRefGoogle Scholar.

74 Miroudot and Cadestin (2017), supra n. 4, at 16.

75 M. F. Ferracane (2017), ‘Restrictions on Cross-Border Data Flows: A Taxonomy’, ECIPE Working Paper No. 1/2017, p. 2.

76 Vietnam Decree No. 72 /2018/NC-CP amending and supplementing Decree No. 72/2013/ND-CP on Internet Services and Online Information; over-the-top refers to services that bypass traditional telecom and media distribution channels – e.g. Skype or Netflix.

77 Reserve Bank of India Notification, ‘Storage of Payment Systems Data’, RBI/2017-18/153.

78 Personally Controlled Electronic Health Records Act 2012, Section 77.

79 General Data Privacy Regulation Article 45. Personal data can also be transferred under binding corporate rules and standard contractual clauses, and in a limited number of other circumstances, see article 47.

80 USTR National Trade Estimates Report 2017, pp. 89–90, https://ustr.gov/sites/default/files/files/reports/2017/NTE/2017%20NTE.pdf.

81 Meltzer (2014), supra n. 62.

82 GATS art. 1(3)(b).

83 GATS art. 1.2.

84 Panel Report, United States – Measures Affecting the Cross-Border Supply of Gambling and Betting Services (US–Gambling, WT/DS285/R (10 November 2004) ), paras. 6.285–87; Appellate Body Report, United States – Measures Affecting the Cross-Border Supply of Gambling and Betting Services, WT/DS285/AB/R (7 April 2005), para. 215.

85 WTO Panel Report, China – Certain Measures Affecting Electronic Payment Services (China – Electronic Payments), WT/DS413/R, para. 7.575.

86 WTO Panel Report, US–Gambling, para. 6.285; WTO Appellate Body Report, China-Audiovisuals, WT/DS363/AB/R (21 December 2009), para. 364.

87 WTO Appellate Body Report, US–Gambling; WTO Appellate Body Report, China–Audiovisuals.

88 WTO Services Sectoral Classification List (1991).

89 A. Mattoo and S. Wunsch (2004), ‘Pre-empting Protectionism in Services – the WTO and Outsourcing’, World Bank Policy Research (2004).

90 Wunsch-Vincent, S. (2006), The WTO, The Internet and Trade in Digital Products: EC–US Perspective, Oxford: Hart Publishing, pp. 90–91Google Scholar.

91 Tuthill, L. (2017), ‘Implications of the GATS for Digital Trade and Digital Trade Barriers in Services’, DigiWorld Economic Journal, 107: 114Google Scholar.

92 WTO Committee on Specific Commitments, ‘Report of the Meeting Held on 18 September 2014, Note by the Secretariat’, S/CSC/M/71; see also Shin-yi Pent, ‘GATS and the Over-the-Top (OTT) Services – A Legal Outlook’, Journal of World Trade, 50(1): 10–13.

93 WTO Committee on Specific Commitments, supra n. 92, para. 1.6.

94 Ibid., para. 1.3.

95 R. Zhang (2015), ‘Covered or Not Covered: That Is the question’, WTO Working Paper ERSD-2015-11, 7 December 2015, p. 9.

96 Ibid., p. 10.

97 ‘Comprehensive Economic and Trade Agreement between Canada and the European Union and Its Member States’, Annex 9-B.

98 Mitchell, supra note 14.

99 WTO Panel Report, China – Electronic Payments, para. 7.61.

100 Ibid. at para. 7.180; D. Crosby, ‘Analysis of Data Localization Measures under WTO Services Trade Rules and Commitments’, E15 Policy Brief, March 2016, p. 4.

101 WTO Appellate Body Report, US–Gambling, paras. 238, 251.

102 Hestermeyr, H. P. and Nielsen, L. (2014), ‘The Legality of Local Content Measures under WTO Law’, Journal of World Trade, 48(3): 588Google Scholar.

103 WTO Appellate Body Report, Brazil – Measures Affecting Imports of Retreaded Tyres, WT/DS33/AB/R, December 2007; WTO Appellate Body Report, US-Gambling, paras. 306–308.

104 A. Chander and P. Le Uyen (2014), ‘Breaking the Web: Data Localization vs. the Global Internet’, UC Davis Legal Studies Research Paper Series No. 378, April 2014, p. 5.

105 WTO Appellate Body Report, European Communities – Measures Prohibiting the Importation and Marketing of Seal Products, WT/DS4-00/AB/R, 22 May 2014, para. 5.261.

106 J. P. Meltzer and P. Lovelock (2018), ‘Regulating for a Digital Economy: Understanding the Importance of Cross-Border Data Flows in Asia’, Brookings Working Paper 113, March 2018, for a discussion of how to achieve legitimate policy goals while minimizing restrictions on cross-border data transfers.

107 WTO Appellate Body Report, US – Gambling, para. 339.

108 WTO Appellate Body Report, US–Shrimp, WT/DS58/AB/R (12 October 1998), paras. 115–116.

109 Burri (2017), supra note 14. at 76.

110 TBT Agreement, Art. 2.1 & Art. 2.4.

111 WTO Trade Facilitation Agreement, Art. 3.

112 WTO Trade Facilitation Agreement, Art. 1.1 & 1.2.

113 www.wto.org/english/tratop_e/serv_e/telecom_e/tel23_e.htm.

114 WTO Work Programme on Electronic Commerce, Ministerial Decision of 13 December 2017, WT/MIN(17)/65, 18 December 2017.

115 Members debate cyber security and chemicals at technical barriers to trade committee, June 2017, www.wto.org/english/news_e/news17_e/tbt_20jun17_e.htm.

116 WTO Council for Trade in Services, Communication from the United States, ‘Measures Adopted and under Development by China Relating to Its Cybersecurity Law’, S/C/W/374, 26 September 2017.

117 Request for consultations by the United States, China – Certain Measures Concerning the Protection of Intellectual Property Rights, WT/DS542/1, 26 March 2018.

118 China – Certain Measures on the Transfer of Technology, WT/DS549/1/Rev.1 (9 January 2019).

119 WTO Joint Statement on Electronic Commerce, 25 January 2019, WT/L/1056.

120 WTO Ministerial Conference (2017), WT/MIN(17)/60.

121 Wu (2017), supra note 15 at p. 6.

122 Ibid. at p .7.

123 EC 2017, Art. 12 (as of July 2017).

124 CPTPP 2018, Art. 14.11; USMCA Art. 19.11, 19.12.

125 CPTPP 2018, Art. 14.10 & 14.13; USMCA Art. 19.16 & 19.10.

126 CPTPP 2018, Art. 14.8; USMCA Art. 19.8.

127 A. Mattoo and J. P. Meltzer (2018), ‘International Data Flows and Privacy: The Conflict and Its Resolution’, Journal of International Economic Law, 21(4).

128 USMCA Art 20.J.11.

129 CPTPP 2018, Art. 18.66.

130 A. Chander (2014), ‘How Law Made Silicon Valley’, Amory Law Journal, 63: 639.

131 Authors Guild v. Google Inc., 804 F.3d 202 (2nd Cir. 2015).

132 USMCA Art. 19.17.

133 Communications Decency Act of 1996, Pub. L. No. 104–104, sec 230; see also Chander, A. (2014), ‘How Law Made Silicon Valley’, Amory Law Journal, 63: 650–652Google Scholar.

134 PWC (2016), Industry 4.0: Building the digital enterprise.

135 Lan Yu et al. (2016), ‘Current Standards Landscape for Smart Manufacturing Systems’, NIST, NISTIR 8107, February 2016.

136 CPTPP Annex 8.B Information and Communications Technology Products; USMCA Art. 12.C.2.

137 See generally R. Howse, ‘The World Trade Organization 20 years on: Global Governance by Judiciary’, European Journal of International Law, 27(1).

138 Drezner, D. W. (2008), All Politics is Global: Explaining International Regulatory Regimes, Princeton, NJ: Princeton University PressGoogle Scholar.

139 See generally, T. J. Bollyky and P. C. Mavroidis, ‘Trade, Social Preference and Regulatory Cooperation’, EUI Working Papers RSCAS 2016/47.

140 Mattoo and Meltzer, supra n. 127.

141 USMCA Article 19.8.