MEP Christofer Fjellner outlines his concerns with the language in the European Commission’s proposal last week on data flow provisions in free trade agreements.
It is impossible to underestimate the importance of data transfers in the global economy and for the functioning of international trade. Still, digital protectionist tendencies are on the rise. It is therefore highly unfortunate that the EU, until now, hasn’t been able to present a way to guarantee data transfers as part of its free trade agreements. I have raised my concerns about the reluctance of the European Commission to include data transfer provisions in FTAs many times, most recently in the negotiations with Japan.
I am happy to see that the commission presented a position on the matter last Friday, but after reading the paper, I am saddened to see that the proposed provisions aren’t fit for the job. The commission still seems to believe guaranteeing data transfers should primarily be pursued by analysis of other countries’ privacy legislation.
Also, the exceptions to stop data transfers are so vague that it will be impossible to prevent trading partners from putting up new digital barriers.
Today, virtually all trade in goods and services requires data transfers. By 2020, more than 50 billion devices will be connected to the Internet. Between 2010 and 2015, the amount of data generated by Internet-connected devices grew by almost 300 percent, most notably in the utilities sector and healthcare. It should be apparent that data transfers are no longer a specific interest for large tech companies.
Of course, the digital revolution creates privacy concerns, and there is a legitimate public interest for governments to regulate to protect personal data. Nevertheless, this isn’t the first time there is a conflict of interest between enabling as friction-free trade as possible and regulating in the public interest.
Equally, we all know that such regulations can easily become a tool for disguised protectionism. To ensure that new regulations don’t become just a protectionist tool, trade agreements at both the World Trade Organization and bilateral level include rules saying such regulations must be necessary, non-arbitrary, non-discriminatory and not be a disguised restriction to trade.
Who is being protected?
Food safety is perhaps the most known example. Citizens rightly expect that governments ensure that their food is safe, and food imports are hence subject to stringent rules and border checks. But under the WTO agreements, these rules cannot take any form. They must be scientifically based and non-discriminatory.
Still, there are numerous examples of when food safety rules are designed to protect local producers from foreign competition rather than to ensure consumer safety. European exports of dairy and meat to Japan and Korea are often stopped for dubious and non-scientific reasons. Most importantly, however, trade agreements provide avenues to discipline trading partners and stop the most blatantly protectionist practices in this area – albeit not all.
Naturally, privacy legislation should be subject to the same conditions of necessity, non-arbitrariness and non-discrimination as other regulations in the public interest. But the commission’s position on data transfer would give a blank check to any data-transfer restriction as long as it is labelled ‘data protection’ – a blank check that no other country with high data-privacy standards, such as Norway or New Zealand, say they need.
The only consequence would be that governments get a “get of out of jail for free” card for any form of digital barrier. In essence, the provisions for the free flow of data become next to meaningless.
What perhaps worries me more is that the commission still doesn’t see trade agreements as the way to guarantee data transfers between trading partners. It says it will work primarily with recognition of other countries’ privacy legislation as a right to transfer EU citizens private data to third countries. But these so called-adequacy decisions do nothing to ensure data can be transferred to the EU, nor to ensure non-personal data can flow freely.
The proposed provisions entail so many extra layers of safeguards for privacy regulation that even other countries with high data-protection standards seem not to understand the EU. The consequence is that future trade agreements would do little to prevent European companies from being subject to data protectionism in the form of data-localisation requirements or forced processing in another country.
The EU’s slow pace in forming a position on this matter has already resulted in talks on the plurilateral Trade in Services Agreement failing in the fall of 2016. I am almost certain our negotiating partners in current and future trade negotiations will consider the proposal equally dissatisfying.
If this position isn’t changed, we will most likely see another couple of lost years in fighting digital protectionism. But it might be even worse. When looking at the paper, I am not sure if the commission keeps strong data-transfer language outside of FTAs because it hasn’t understood the new nature of the global economy, where data has to be moved for trade to take place.
Christopher Fjellner (@fjellner) is a Swedish MEP from the European People’s Party. He is a regular columnist for Borderlex.