Digitrade Digest #87
US, India and Saudi Arabia block global tax, US and Pakistan discuss digital trade, and more
DTA Webinar
What is the US-Kenya STIP and why does it matter for online privacy?
Tues., March 7 at 9am Eastern / 5pm EAT
Officials from the U.S. and Kenya recently met in Washington DC for their first conceptual discussions of the US-Kenya Strategic Trade and Investment Partnership (STIP). This STIP is the Biden administration’s alternative to the Trump-initiated U.S.-Kenya Free Trade Agreement (FTA) negotiations.
The Kenya STIP is the latest in a patchwork of pacts and agreements by the US that will deal with so-called “digital trade” among other issues. Tech giants and corporates mostly based in the US have made clear their hopes for the STIP, according to new research from Strathmore University’s Centre for Intellectual Property and Information Technology Law (CIPIT) based in Nairobi.
What exactly is the US-Kenya STIP? What are the concerns of digital rights experts and advocates in Kenya? Why should legislators in the US and Kenya care about its implications for consumer privacy and Big Tech accountability?
Learn more on Tues., March 7 at 9am Eastern / 5pm EAT. RSVP at: bit.ly/STIPWebinarRSVP
Speakers:
Dr. Melissa Omino, Acting Director, Strathmore University’s CIPIT
Dr. Paul Ogendi, University of Nairobi, Faculty of Law-Kisumu Campus
Melinda St. Louis, Director of Public Citizen’s Global Trade Watch
Digital Tax
Le Maire: global digital tax is ‘blocked’ by U.S., India, Saudi Arabia
PoliticoPro: France’s Finance Minister Bruno Le Maire Monday said that a global tax reform targeting multinationals, including Big Tech, is unlikely to go through and that the EU should come up with its own digital tax.
“Let’s face it, today things are blocked, notably by the United States, Saudi Arabia and India. We will plead for an unblocking of the situation on pillar 1 of digital taxation. The chances of success are slim,” Le Maire told reporters on Monday, during a press briefing ahead of a meeting of G-20 finance ministers in New Delhi, India, later this week.
Le Maire was referring to the first “pillar” of a global tax overhaul negotiated at the OECD, which aims to distribute corporate tax profits of the world’s 100 biggest companies to countries wherever they sell goods and services.
The reform was agreed to by more than 135 countries at the OECD in 2021 and endorsed by the G-20 countries, but it needs to be ratified via an international convention to enter into force. The deal would also need the nod of the U.S. Congress where it is facing opposition by Republican lawmakers.
If the situation doesn’t unlock, Brussels should move forward with an EU-wide tax on digital companies, the French minister said, stressing that France was right to keep in place its own digital tax while waiting for the outcome of global talks.
WTO e-commerce
WTO e-commerce participants aim to conclude talks by end of year
InsideTrade: The participants in the plurilateral World Trade Organization e-commerce negotiations are pushing to wrap up the talks by the end of 2023, although several difficult issues – including privacy and cross-border data flows – remain outstanding.
The plurilateral talks, known as a joint statement initiative, were launched in 2019. The parties to the talks cover more than 90 percent of global trade; they include the U.S., the European Union, China, Japan and dozens of other WTO members. The negotiations are closely watched not only for their potential to enshrine global rules and standards on digital trade but also as an example of new avenues for rulemaking at the WTO.
At the JSI’s first meetings of 2023 this week, Singaporean Ambassador Tan Hung Seng told participants that “we are now entering the final lap,” according to a WTO readout of the meetings. Tan and his fellow co-conveners – Australian Ambassador George Mina and Japanese Ambassador Kazuyuki Yamazaki – have previously said that they expected “accelerating” talks this year that would address some of the more challenging issues.
One such issue, privacy, was among those taken up this week, a Geneva-based trade official familiar with the meetings told Inside U.S. Trade. While China is an obvious outlier in its digital policies, compared to the U.S. and the EU, the two trans-Atlantic allies will have to solve their own fundamental differences on privacy to move forward. The EU has a strict data privacy law; the U.S. has no digital privacy laws on the books and has enshrined broad cross-border data flow provisions in its trade agreements.
Cross-border data flows are another difficult, and related, issue that is expected to be discussed in meetings later this year, according to the official.
To reach a conclusion by the end of 2023, the co-conveners will hold eight clusters of meetings; the next set is scheduled for late March, the official said. The meetings this week included negotiators in Geneva as well as experts in capitals who participated virtually, the official noted.
According to the WTO, the participants this week also focused on nondiscriminatory treatment of digital products, “digital inclusion” and the broad “principles and definitions” that will be part of the agreement.
The articles on electronic invoicing were finalized this week as well, the WTO said; that text will be “parked” as other issues are negotiated. The co-conveners last October named a number of issues for which text has essentially been agreed to, including electronic contracts, e-signatures, paperless trading, consumer protection, open government data and transparency, among others.
In the coming months, the co-conveners will “deepen discussion” on the scope and “legal architecture” of a future agreement, Yamazaki said, according to the WTO. In fact, the legal architecture of the deal will have a dedicated session in future meetings, the ambassador added.
Just before a winter break that began in December, the co-conveners released a consolidated negotiating text that collected the agreed-to texts as well as a variety of proposals.
This week’s meetings included “A ‘stocktaking session’ [that] looked at proposals that have not yet attracted universal support from participants in the negotiations. The proposals were examined to help their proponents decide how to take these proposals forward,” the WTO said.
Tan urged participants to be flexible. “This means that all of us must come prepared and equipped with the necessary mandate to negotiate substantively,” he said, according to the WTO.
Mina cited political guidance issued in January by trade ministers who met in Davos on the sidelines of the World Economic Forum. A ministerial statement from that gathering said they wanted to see a “substantial conclusion” of the e-commerce negotiations by the end of this year.
“What they're saying to us is that this initiative is within our grasp now. This is the year we can bring it home. So that's a really important political message,” Mina said this week. “Clearly, we are within range. Not only do we have the political guidance, but we know we are within range to be able to close this deal in the months ahead.”
US
U.S., Pakistan agree to 'intensify engagement’ on agriculture and digital trade
Insidetrade: Top U.S. and Pakistani trade officials this week agreed to “intensify engagement” on agriculture and digital trade, according to a joint statement issued at the conclusion of a Trade and Investment Framework Agreement Council ministerial.
The meeting in Washington, DC, was led by U.S. Trade Representative Katherine Tai and Pakistan’s Minister for Commerce Syed Naveed Qamar.
“The officials engaged on trade- and investment-related issues and concerns, including agriculture, digital trade, intellectual property protection and enforcement, labor rights, good regulatory practices, and women’s economic empowerment,” according to the joint statement. A separate statement said they had “affirmed a mutual commitment to advancing programs and policies that elevate women’s role in Pakistan’s long-term economic growth.”
The countries “resolved to increase dialogue on these topics, in order to deepen the economic bilateral relationship and further the prosperity of working people in both countries,” the joint statement said.
It added, “In recognition of the importance of agricultural and digital trade to the economic relationship, the Ministers directed officials to intensify engagement in these areas in advance of the next TIFA Council meeting.”
Specifically, the statement says the two sides agreed to work on more market access for agricultural products. Pakistan is looking to increase its exports of mangoes and dates to the U.S., while the U.S. is looking to boost exports of beef and soybeans.
“The U.S. welcomed the substantive conclusion of technical work on market access for beef from the United States; the ministers noted that work to operationalize this arrangement would be expedited,” the statement reads. “Both sides expressed their intent to enhance engagement on market access and the reduction of barriers for additional agricultural products.”
Pakistan, meanwhile, “welcomed the ongoing engagement on market access for its mangoes and fresh dates, and asked the U.S. to review additional market access requests for agricultural products once the current work is complete.”
The statement also notes that the U.S. said it “appreciated the efforts by Pakistan to improve worker rights and protections and strengthen its intellectual property regime. Both sides affirmed the importance of an effective IP regime, achieving high labor standards, and following good regulatory practices.”
USTR last year kept Pakistan on its “watch list” of countries considered problematic on intellectual property. While lauding the country for a “positive dialogue” with the U.S., the March 2022 Special 301 report said the U.S. still had “serious concerns … particularly in the area of IP enforcement.”
Lawmakers urge CFIUS to address TikTok privacy concerns
Insidetrade: Two senators are urging the administration to ensure that TikTok’s Chinese parent company cannot access U.S. consumer data, while lawmakers in the House and Senate are calling for the app to be banned.
Sens. Richard Blumenthal (D-CT) and Jerry Moran (R-KS) last week sent a letter to Treasury Secretary Janet Yellen in her role as the chair of the Committee on Foreign Investment in the United States urging CFIUS to quickly conclude its probe of TikTok and place structural rules between the app’s U.S. operations and its Chinese parent company, ByteDance, which they believe poses a threat to U.S. consumer data.
CFIUS is an interagency committee steered by the Treasury Department that examines the national security risks of transactions involving foreign investments.
The senators called on CFIUS to “impose structural separations and firm restrictions on ByteDance’s ability to: access Americans’ personal data; make decisions about content moderation; control its algorithmic recommendation systems; and oversee its U.S. operations,” the letter reads.
Blumenthal chairs the Senate Judiciary subcommittee on privacy; Moran serves on the Senate Select Committee on Intelligence.
In the letter, senators pointed to an incident in December, when ByteDance underwent an internal investigation and found its staff had spied on “private data of journalists and others in order [to] identify sources behind articles critical of the company.” TikTok fired the employees involved.
“The incident also occurred while TikTok’s executives had repeatedly promised that Americans’ personal data was secure against such spying, including during testimony to the Senate Commerce Committee’s Subcommittee on Consumer Protection in October 2021,” the letter stated.
“This bombshell disclosure demonstrates that TikTok and ByteDance cannot be trusted by CFIUS or its tens of millions of users in the United States,” the letter reads. “In response to these and other credible media reports, Congressional scrutiny, and investigative research about the threat of Chinese spying and malign influence, TikTok has pursued a campaign of diversion and deflection to distract from these serious risks.”
Blumenthal and Moran said CFIUS “should not put its imprimatur on a deal with TikTok” if the company cannot ensure U.S. consumer data and information will be secure.
“Moreover, monitoring and hosting requirements will never address the distrust earned from ByteDance’s past conduct,” the senators stated. “At a minimum, CFIUS should ensure that executive decision making about the platform is based in the United States and fully free from coercive influence from Beijing. It must also ensure that decisions about, and access to, all personal data, algorithms, and content moderation relating to American users is out of the reach or influence of the Chinese government.”
Meanwhile, some House lawmakers are proposing a bill that would ban TikTok in the U.S.