Nine takeaways on trade and technology


On my initiative the European Parliament's International Trade Committee is organising a hearing tomorrow on the international digital trade in goods and services. Cross-border trade, (digital) rights and the use and regulation of new technologies increasingly overlap, but discussions about these topics remain fragmented. Trade-negotiators, civil society organisations, legislators and tech experts try to address the opportunities of the digital economy, internet governance, the protection of digital rights in various fora - without necessarily having a clear overview of who is doing what. Some actors have raised concerns about the potential dangers of trade agreements, such as the cementing of outdated copyright rules or the circumvention of privacy standards. Others have focused on the opportunities to safeguard and strengthen the open internet, for instance by banning unjustified forced data-localisation or prohibiting online censorship. Below are my initial take-aways on trade and technology. I invite you to share your input about what can work and what does not work, where trade rules can help advance the open internet, and where we should be careful not to overregulate.

1.No old-school trade-views to address the digital economy of the future

The internet has fundamentally changed the way companies do business and reach consumers globally. Some business models are purely data-driven or focus only on the provision of digital goods and services. Other companies - in sectors ranging from design to legal services - have digitised their services, and used the internet to profoundly change their business models or value chains. Small and medium sized enterprises are now able to easier find and reach new customers and markets. The potential of digitisation processes is clear and goes far beyond only a digital economy. For the European Union, this increasing digitisation of more traditional aspects of our services economy provides great opportunities. Services make up around seventy per cent of the EU's GDP, and they are more often being delivered digitally. Close to a third of the growth of the overall industrial output in Europe is now a result of the uptake of digital technologies. The expectation is that the importance of the digital economy will only continue to grow as more of the world's population gets access to the internet and new technologies such as the internet of things become more widespread. These changes to how companies do business have a profound impact on the global trading system and raise new questions. Many of the global trading rules were not made for the 21st digital century, but for trade in goods, focusing on tariffs and manufacturing standards for example. The question of how we shape the rules for digital trade is becoming ever more relevant as technological advance continues. Trade agreements can play a crucial role in constructing a global, rules-based framework for digital trade. However, we must avoid using an old-school vision that focuses only on ‘removing trade barriers’ if we try to solve challenges posed by this new economic reality. In this new reality, consumer protection and digital rights such as free speech and access to information, as well as questions of cyber security, cryptography and copyright play an equally important role. The current process of creating a digital single market for Europe will address many of these principles. Furthermore the DSM seeks to end the fragmentation between 28 different legal systems. While some have too easily dismissed European proposals as being protectionist, they should instead make rules- and principles-based trade in the digital economy run smoothly.

2. Trade negotiations can learn from internet governance

Precisely because trade and online rights are so intertwined, it is important to discuss digital trade measures with all relevant stakeholders. The future of the open internet cannot be decided behind closed doors. At the same it is clear that we cannot have television cameras rolling inside trade negotiation rooms. Trade negotiators need to have some space to be able to make proposals and counterproposals and to be able to set out a strategy. However, demystification of negotiations would go a long way towards taking away suspicion and perceived threats. Some elements of the 'multi-stakeholder' model can serve as a source of inspiration. Trade negotiators should brief all relevant stakeholders, including digital rights groups, before and after negotiation rounds. Their views on proposed texts and drafts of trade-agreements will be helpful for trade negotiators and beneficial for EU citizens. Under pressure from the European Parliament, liberal Trade Commissioner Malmström started a transparency initiative for the TTIP negotiations, putting more texts than ever before online. This initiative should be broadened to other agreements under negotiation, and the EU should try to convince its negotiating partners to do the same. The public should be able to see both EU proposals and counter proposals. The alternative is growing suspicion of the process of negotiations.

3. Don't panic yet! Proposals in negotiations are not final texts

There have been a number of leaks of proposals in negotiations which have caused turmoil, such as the leak of the American proposal on e-commerce in the Trade in Services Agreement. While this proposal from the US was clearly not in line with what the EU would be aiming for in such an agreement, there is no reason to panic just yet. Proposals are in no way final texts or final agreements. And it can not be a surprise that a country tables an aggressive proposal which contains its goals. By looking at finalized texts, such as that of the Trans-Pacific Partnership we can see negotiated outcomes. Even so, the TPP will not necessarily provide the answer to what TTIP or TiSA (or any other agreement) would look like. Each agreement should be assessed on its own.

4. Data flows have a legitimate place in 21st century trade-agreements; but this does not mean our privacy will be destroyed

Some see trade agreements in general as a threat to human rights, labour rights, the environment and the social system of the EU. Some digital rights organisations in particular are concerned about the inclusion of data flows in trade agreements, and the negative impact this may have on the right to privacy and data protection. Data-driven economies require the free flow of data, but this does not mean the EU will use trade negotiations to lower data protection standards. It is clear that the European Commission does not have a mandate to negotiate about data protection within TTIP and has no intention to do so. The Americans know this too. Trade negotiations are not the arena to negotiate about fundamental EU law. European data protection law protects the personal data of European citizens, even when they are transferred to a third country. If your business model requires you to process European personal data, than you have to make sure data is protected in the same way as they would be protected in Europe. This is not a protectionist measure but a fundamental rights issue. That being said, it is clear that there is a legitimate place for data flows in a 21st century agreement. Some types of forced data localisation only serve a protectionist agenda, and trade agreements can be useful to break down these unnecessary barriers. Similarly, as the digital economy continues to grow, the percentage of non-personal data that is generated will also continue to grow with it. Open data, research data, anonymous data and other non-personal data that are generated as a by-product by machines/sensors must be able to be freely processed, transferred and aggregated to develop a truly data-driven economy.

5. Trade agreements can improve digital rights

It must be clear that trade agreements are not a zero-sum game between economic interests on one side and digital rights on the other. As the EU, we need to use trade agreements to try to improve and strengthen digital rights elsewhere, just like we do with other values such as respect for the environment, labour rights, animal welfare and human rights. Removing forced data localisation requirements can be beneficial for freedom of speech. Clear provisions that specify which traffic management practices are always prohibited could enforce net neutrality and the open internet. Trade agreements can also improve privacy and security by allowing the unrestricted import, use and sale in commercial markets of products with cryptographic capabilities.

6. Strengthening digital trade is not just a question of data flows

When we talk about digital trade, many people instinctively think of Google, Facebook and Amazon and the flow of (personal) data. However, there is much more to it. Digital trade and the digital economy are dependent on the physical trade in high tech products that give consumers access to the internet and digital services. The expansion of the Information Technology Agreement under the WTO, which was signed earlier this year, removes tariffs on over 200 high-tech products, from GPS devices to medical products and gaming consoles. This is good for trade in those products and should make them more widely available. Most trade agreements also contain a Telecoms chapter, which regulates the access that foreign providers actually have to the telecoms market and network in another country. Access is crucial in order to be able to do business.

7. The possibility of setting ICT standards in trade agreements should be explored

As the Internet of Things (IoT) increasingly becomes a reality, it will be crucial to ensure interoperability, security and to avoid fragmentation or the creation of separate architectures. To make sure that products are user-friendly and to reap the full economic benefits, we must avoid a scenario like the format wars of the seventies and eighties, where VHS and Betamax formats battled for market dominance. Setting common standards within the European Digital Single Market and furthering them through international trade agreements must be explored to avoid this kind of scenario. With the exponential growth of the Internet of Things, clarity on data protection as well as security will be key. Before the market will be filled with unsafe, communicating machines, minimum standards must be agreed. In a globally connected ecosystem online, these should be global standards.

8. Discussions at bilateral and multilateral levels are moving, more should be done at the WTO

In February 2016, the Trans-Pacific Partnership was signed. Although not yet ratified, it has already created a new mould for the way that digital chapters of trade agreements can be modelled. The negotiations on the Trade in Services Agreement and TTIP are also progressing and the outcome of these talks will also provide updates for future e-commerce chapters. However, while these bilateral and plurilateral agreements are progressing, there is hardly any movement at the World Trade Organisation level, even though there is a working group on e-commerce. In the end, the goal must be to strengthen the multilateral trading system and reach agreements at the WTO. In the post-Nairobi framework, the EU should make a push to move towards more concrete discussions on digital trade at the WTO. The work that the EU is doing at the bilateral and plurilateral level should provide a model for that.

9. Lessons from ACTA are still relevant

In the past, attempts to strictly enforce Intellectual Property Rights through a trade agreement failed. The European Parliament voted down the proposed Anti-Counterfeiting Trade Agreement out of concern for the impact on digital rights and access to medicines. Copyright and patent reforms should not be hindered as a result of trade agreements. The difference in purchasing power of consumers in developing economies must be considered, and a better balance between public and commercial interests must be found. Particularly in the digital economy, copyright protection risks stifling innovation, and enforcement can endanger people's freedoms.