Digital Trade and NAFTA Renegotiation

The United States Trade Representative  recently issued a document describing its NAFTA negotiations  priorities. On 28 July 2017, The R Street Institute arranged a panel on NAFTA and Digital Trade. IGP’s Farzaneh Badiei was invited to take part in the panel. The panel discussed the policy and political issues surrounding the priorities on digital trade and NAFTA. This blog post will briefly discuss the points some panelists made:

Is TPP a good baseline for NAFTA negotiations?

To our surprise, the USTR position, especially the aspects related to digital trade, was not a total detour from US stances in the Trans-pacific Partnership negotiations and was quite aligned with the Trade Priorities Act 2015. The panel started the discussion by considering whether TPP is a good baseline for NAFTA negotiations for digital trade. The panel generally agreed that it was, but there were reservations about some of the provisions. One of the most important aspects of NAFTA, as IGP argued, were the provisions in support of cross border data flow and those prohibiting data localization laws. IGP believes that effective trade agreements can be a  tool for enhancing global connectivity and can strengthen the rights of users who do not reside in countries with good privacy measures and the rule of law. There are some privacy concerns regarding the prohibition of data localization but trade agreements generally have clauses that allow countries to take regulatory measures when it comes to public policy and public safety. Moreover, trade agreements might even encourage countries that do not have privacy laws in place to develop such laws. For example, TPP already had provisions for privacy protection.

Online trade involving physical goods and customs procedures

USTR rightly continues its commitment not to impose customs on digital goods. It also provides  provision to make the customs procedures more transparent and efficient under the section on Customs, Trade Facilitation and Rule of Origin. These provisions are very important. As IGP and other panelists pointed out, online market intermediaries such as eBay, Alibaba and Amazon are facilitating online cross border trade of goods on a scale that was not possible before the creation of these platforms. Easier customs procedures can facilitate online trade of goods and promote micro cross border sales online such as low value, high volume business to consumer transactions. This priority is also stated in US non-paper to WTO and more discussion needs to take place on their implementation.

Are some provisions in USTR problematic?

The intellectual property section, which mirrors the Trade Priority Act  2015, does not mention “fair use” as a criterion to be considered in the objectives. Moreover, intellectual property rights advocates have been leveraging trade agreements to inject a great dose of protectionism in free trade! These sections sometimes subordinate trade goals to a regulatory goals. For example, instead of facilitating free trade in the domain name market, TPP aims to require signatories to force domain name registrants to put personally identifiable information into indiscriminately accessible online public databases to help enforce intellectual property rights.

A provision that would prohibit governments from forcing companies to share their source code has been also an issue of concern, because it might not allow governments to implement source code audit laws. Access to source code can help researchers to detect and resolve vulnerabilities. But it seems like the cost of sharing source code is substantially more than its benefits, and source code can be abused for surveillance by states. The panel mentioned that this provision might have some national security implications which might obstruct trade negotiations.

The take aways:

The panel agreed that USTR priorities on digital trade were promising and that the United States administration and people/consumers should know the benefits of trade. Trade is not only about imports, it is also about exports and the US is the second largest exporter in the world. We should explore the effectiveness of trade agreements in strengthening our digital rights, and civil society organizations should understand and advocate for the benefits of digital free trade.

 

2 comments

  1. Richard Hill

    Here are contrary views on these matters (the comments relate to TISA and WTO negotiations, but they are equally valid for discussions in other trade negotiations):

    https://www.opendemocracy.net/digitaliberties/renata-avila-burcu-kilic/new-digital-trade-agenda-are-we-giving-away-internet

    http://www.itu.int/en/council/cwg-internet/Pages/display-June2017.aspx?ListItemID=5

    http://cepr.net/publications/op-eds-columns/twelve-reasons-to-oppose-rules-on-digital-commerce-in-the-wto

    https://www.citizen.org/sites/default/files/tpp-ecommerce-chapter-analysis.pdf

    http://www.huffingtonpost.com/entry/5951365ae4b0f078efd98399

    http://www.newsclick.in/e-commerce-discussions-wto-more-neo-liberal-policies-negotiated-secret

  2. Burner Combustion Systems LLC

    When you look at TPP as a whole, there are some general considerations to be concerned about.
    1. It is an agreement attempting to set rules for a global economy, and therefore, just like all other trade agreements between nations, tends to favor multinational corporate interests over all other interests. It is essential to be diligent in ensuring that national sovereignty, democracy and the public welfare be considered throughout the agreement, which is hard to believe was done when considering the fact that 600 corporate lobbyists went through various drafts of the agreement, in many cases writing parts of the agreement, while labor unions, environmentalists, and others had limited input. The fact that the process was so secretive doesn’t help much either.

    2. TPP exalts trade as a fundamental right. So, since privacy, data protection, access to knowledge, free expression, cybersecurity and other considerations are not ‘global fundamental human rights’, they’re not placed at the forefront and are instead addressed from a business context.
    So, trade and economic gains are valued above all other considerations and limitations are built into the agreement as an afterthought. It also tends to consider industry interests to be a proxy for individual interests.

    3. TPP hampers countries’ ability to regulate consumer protection, privacy, net-neutrality, IP, competition policy, cross-border data flows, amongst other things.
    – It includes a provision which prohibits data localization. An international trade agreement is the wrong vehicle to govern data localization. Do we really want a trade agreement trumping government rule and investment courts deciding disputes versus a government or even a human rights tribunal. Not to mention the fact that a country’s data which is its most valuable resource would be mandated to be given up.
    – IP is defined as an asset subject to ISDS, so companies can sue states for ANYTHING they deem to be limiting their commercialization efforts. ISDS challenges pose a significant threat for democratically elected rule of law to be trumped by multinational corporate powers. ie. Philip Morris suing Australia for trademark infringement. In many cases, countries will not have the muscle to fight these powerful multinational corporations.
    – It would prohibit governments from forcing companies to share their source code. Again, a trade agreement is the wrong vehicle to determine if governments would have this right.
    4 It would force governments to regulate companies in ways that that are different than what would be acceptable through normal democratic channels.

    In order to determine if the TPP should be the baseline used to renegotiate NAFTA, would require a thorough understanding of the fundamental presuppositions on which many of the provisions are based. To do so, would require not only understanding the e-commerce chapter which covers digital rights, but also the telecom services, financial services, transparency and government regulatory chapters to understand its full effect on the internet.

    So, considering the secretive manner in which TPP was created, with overwhelming lobbyist influence, and the complexity to understanding the fundamental presuppositions and biases baked-in to the trade agreement, I believe it would be difficult to build a fair, balanced agreement which would take care of minority stakeholders. We should start the NAFTA renegotiation by using a more transparent process that has less lobbyist-friendly influence.