Digitrade Digest # 51
USTR meets Indian representative; new USTR report criticizes India's data localization rules; EU's digital affair chief meets USTR and more...
The Digitrade Digest delivers the latest developments in global digital trade right to your inbox every week. To get the news as it happens, follow us on Twitter @DigiTradeDaily.
India
Data divide
Hindubusinessline: India should continue its efforts to localise data, notwithstanding USTR’s protestations. The recent report from the office of the United States Trade Representative (USTR) criticising the data localisation rules being implemented in India, need not unduly concern policymakers. The report alleges that India has proposed and implemented several data localisation rules that could act as an impediment to digital trade and increase the cost of operations of multinational service providers, resulting in some of the smaller firms moving away from India. But the USTR is obviously batting for US companies and fails to recognise the challenges faced by policymakers in monitoring data that is stored in servers outside the country. Besides making surveillance of these financial transactions easier, there are several other benefits in insisting on data localisation. Protection of privacy of personal data of customers can be ensured more effectively if it is housed in servers in the country. While the construction of local data centres by the MNC payment service companies may appear ‘unnecessary and redundant’ to USTR, it helps create employment locally and also increases the physical presence of these companies in India, thus making them more accountable to the Indian authorities. Also, with data emerging as the new oil, it will be best to keep it on Indian shores. As the second largest internet market with 658 million online users, the data generated in India is humongous.
RBI’s firm implementation of the order issued in 2018 — that all payment service players should store all information relating to payments by Indian citizens on servers located in India — affirms the advantages of data localisation. Large card companies such as American Express Banking Corp, Diner’s Club and Mastercard were found non-compliant with RBI’s rules and were stopped from onboarding new customers on their network in 2021. But this move did not cause any disruptions in the industry and has, instead, benefited other domestic players in the segment. Sensitive data relating to credit and debit card payments are now being stored in servers within the country and the RBI has better access to the data for surveillance purposes. Indian policy makers should, similarly, hold their ground in other issues flagged by the USTR.
The US trade representative office has, for instance, flagged concerns about provisions in the Personal Data Protection Bill, the Non-personal Data Governance Framework and the e-commerce policy that are on the anvil. These regulations insist on storing data generated by Indians on local servers. The trade representative office has stated that it is concerned over the provision that cross border transfer of sensitive personal information can be done only with explicit consent of the owner of the data and that critical personal information cannot be transferred outside India under the Personal Data Protection Bill. It is apprehensive that the e-commerce policy could lead to forced sharing of business sensitive information, trade secrets, intellectual property and proprietary source codes. While it is the USTR’s mandate to raise its voice against laws that are not conducive for US companies, the above-mentioned rules are needed to ensure the right to privacy of Indian citizens and to safeguard the interests of Indian businesses. The latter clearly takes precedence.
India, US to restart commercial talks, CEO forum later this year: Blinken
BusinessStandard: During the 2+2 Ministerial, the two sides discussed their goal of driving inclusive economic growth in the two countries and across the region, said the secretary of State.
India and the US already trade to the tune of more than USD 150 billion each year, he said.
We are deepening that relationship by restarting the US-India commercial dialogue and the US-India CEO forum later this year, where our private sector partners can offer recommendations to strengthen even more our trade and investment relationship, Blinken said.
Earlier during a virtual meeting, Prime Minister Narendra Modi welcomed President Joe Biden's Indo-Pacific Economic Framework Initiative.
It can allow us to increase our collaboration across more issues including digital trade, supply chain resilience, infrastructure, and tax policy, Blinken said.
The last meeting of the India-US Commercial Dialogue was held on July 2020 through a telephonic conference.
The CEO forum also last met virtually in July 2020.
The forum is an effective platform to highlight key issues that affect business entities and to identify areas for closer collaboration for mutual benefit of both economies.
US
TAI, VESTAGER DISCUSS TTC PREPARATIONS
Politico: The next meeting of the U.S.-EU Trade and Technology Council will be held near Paris on May 15-16, the EU’s chief digital affairs official, Margrethe Vestager, tweeted on Friday one day after POLITICO reported the same.
She also told reporters after meetings with Tai and Raimondo that EU’s antitrust regulators are “actively following up” on a complaint by European cloud players who feel they are being boxed out by U.S. tech giant Microsoft.
The French company OVHcloud has accused Microsoft of abusive licensing terms, while the German firm Nextcloud is concerned about the bundling of Microsoft’s OneDrive products and services with the Windows operating system.
USTR stresses the positive: USTR’s readout of a meeting Friday morning between Tai and Vestager gave little indication of any trade frictions, despite U.S. business community concern that the EU’s Digital Markets Act unfairly targets big U.S. tech companies.
Both Tai and Vestager “agreed that U.S.-EU cooperation in the Trade and Technology Council has been excellent to date, and that this cooperation has been instrumental to the strong, united transatlantic response to Russia’s unjustified and unprovoked attack on Ukraine,” USTR said.
Spanish olive mystery: A readout of the meeting between Tai, Deputy USTR Jayme White and Spanish Minister of Industry, Commerce and Tourism María Reyes Maroto, did not mention a hard-fought dispute over U.S. anti-dumping and countervailing duties on Spanish olives.
A WTO panel in November found that the Commerce Department violated global trade rules in the way it calculated the final subsidy rate for one of the firms involved in the case and by relying upon a provision of the Tariff Act of 1930 to attribute benefits to downstream agricultural processors. The panel also found that certain factual findings related to Commerce’s specificity determination were inconsistent with the SCM Agreement, according to USTR.
The United States agreed in December not to appeal the panel’s report, but it’s still not clear what steps it is taking to comply with the ruling. A USTR spokesperson did not respond on Friday to a question on that topic.
Japan
Can Japan Take the Lead in Governing Digital Trade?
Tokyo Review: Regional trade agreements among like-minded economies have managed to make more progress, with free trade agreements like the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) and the Regional Comprehensive Economic Partnership (RCEP) both including chapters on digital trade and e-commerce. Chile, New Zealand, and Singapore have completed work on the Digital Economy Partnership Agreement (DEPA) whose provisions are intended to serve as building blocks to a larger and more comprehensive agreement. The obvious problem is that the coverage of regional agreements is, by definition, limited. As long as major markets are sitting outside such agreements and developing their own norms, the risk of a divided and more expensive internet will remain.
There are real costs to having a divided system of cybergovernance. The biggest threat is that “balkanization” would lead to the creation of a multiverse of networks, and with that would follow fragmented economic structures and services even though commerce works best when the most governments are more aligned on regulatory policies. In practical terms, this would lead to a growing need for of data localization, which increases transaction costs as companies must build multiple data storage facilities, as well as greater potential for censorship.
For governments, the essential challenge is whether to bring order or manage chaos. The necessarily multilayered nature of cybergovernances means that no single actor or node will be able to entirely exert control in the way that states and international organizations dominated the liberal order, but all can present veto points to different degrees. Governments are only one of several critical actors – and not even at the top of the hierarchy – in cybergovernance, along with the private sector, and civil society. The private sector’s essential role as the innovators possessing technological expertise is unique to cybergovernance. Put simply, the private sector and not national governments are effectively governing the public square. Actors in cybergovernance frequently “ask for forgiveness rather than ask for permission,” which is to say that they often take the initiative to act and set new norms and practices rather than waiting for governments and regulators to set the terms for them, even though these companies do not have formal accountability to the public, may not act in the best interests of the broader public, and may even cause demonstrable harm – as in the case of “fake news” leading political violence in Myanmar, Kenya, the United States, and elsewhere.
The Digitrade Digest is a weekly publication of the Digital Rights Program at Public Citizen.