WASHINGTON - Revelations about U.S. digital
eavesdropping have fanned concerns about Internet privacy and may complicate
U.S. attempts to write rules enshrining the free flow of data into trade pacts
with European and Pacific trading partners. As more and more consumers and
businesses shop and sign up for services online, the IT industry is working to
fend off rising digital protectionism it sees as threatening an e-commerce
marketplace estimated at up to $8 trillion US a year. “Restrictions on
information flows are trade barriers,” Google’s executive chairperson Eric
Schmidt said at a Cato Institute event last month, warning that the worst
possible outcome would be for the Internet to turn into “Splinter net.”
The
unease of U.S. technology companies has mounted in lockstep with rising worries
overseas about data privacy. German Chancellor Angela Merkel — a target of U.S.
spying — has called for a European Internet protected from Washington’s
snooping. Brazil and the European Union plan to lay their own undersea
communications cable to reduce reliance on the United States. And other
countries are showing a preference for storing data on local servers rather
than in the United States.U.S. President Barack Obama acknowledged this week
that it would take time to win back the trust of even friendly governments.
Trade
experts predict the United States will have to make concessions on data privacy
in the Transatlantic Trade and Investment Partnership talks (TTIP) with the EU, and
will probably not get all it wants in Pacific Rim trade talks either. “It is
unfortunate because there were some good nuanced conversations happening before
the spying allegations,” said Adam Schlosser, director of the Center for Global
Regulatory Co-operation at the U.S. Chamber of Commerce. “But there is now a
tendency to inappropriately conflate national security and law enforcement with
. . . commercial privacy practices, which has put a damper on rational debate.”
The
TTIP and the Trans-Pacific Partnership (TPP) talks are billed as
next-generation trade negotiations, covering not only tariffs and goods trade
but also common standards and goals in areas ranging from labour standards and
environmental protection to intellectual property and data flows.
The
last two issues are key for digital trade, which encompasses everything from
U.S. cherry farmers selling direct to Chinese families via Alibaba Group
Holdings’ electronic shopping platform to plane maker Boeing monitoring in-flight
diagnostic data on-line. A 2011 report by the McKinsey Global Institute found
almost $8 trillion changed hands each year through e-commerce, something that
explains the keen interest IT firms and industry associations are taking in the
trade agreements. According to data compiled by the Sunlight Foundation, the
computing and IT industry has been the second-biggest lobbyist on the TPP, after
the pharmaceutical industry. Industry groups such as the Software & Information
Industry Association say free exchange of data is the key focus.
“For
SIIA and its members, the most crucial issue in the trade agreements under
negotiation is to get provisions permitting cross-border data flows,” said Carl
Schonander, international public policy director at SIIA, whose members include
Reuters News parent Thomson Reuters. BSA The Software Alliance, an advocacy
group for the software industry has warned that TPP partners Australia, Canada,
Chile, Mexico, Peru and Vietnam are among countries adopting or proposing rules
banning or limiting companies from transferring personal information off-shore.
This might mean U.S. companies have to set up local servers in every country.
“Data
flows are the life blood of the digital economy,” said BSA policy director
David Ohrenstein. “Trade agreements (must) ensure borders are open to data
flows.” In an ideal world for IT companies, countries signing the TPP would
promise not to impede cross-border data flows or make companies set up local
servers. U.S-based lobbyists expect those provisions to make it in, possibly
with exceptions, but say work is still needed to convince trading partners to
promise that any new regulations, including on privacy, will not restrict trade
unnecessarily.
In
Europe, where the backlash against U.S. spying has been the strongest,
policymakers want changes by mid-2014 to the Safe Harbor Agreement, which
allows U.S. companies with European-level privacy standards access to European
data. An opinion poll by the Atlantic Council and the Bertelsmann Foundation
found rules governing cross-border data flows and the alignment of privacy
protections were among the most contentious and important, issues in the
U.S.-Europe talks. Atlantic Council vice-president Fran Burwell said it would
be hard to get support from the European Parliament or countries like Germany
without an agreement on data protection.
“I
think the big concession that (the U.S.) will have to make will be in the data
privacy area,” she said.Tension is also brewing over intellectual property.
U.S. music, book and software companies see piracy of copyright material as the
biggest threat to their exports, while companies like Google worry about being
held responsible for the actions of clients on their networks. Data privacy
group Electronic Frontier Foundation said proposals in draft TPP chapters would
restrict flexibility in allowing fair use of copyright materials and encourage
low-quality software patents by setting the bar too low.
A
group of 29 smaller tech companies wrote to U.S. Senate finance committee
chairperson Ron Wyden last week and warned against including harsher criminal
penalties for minor copyright infringements in the TPP. The committee has
jurisdiction over trade issues in the U.S. Congress. “Reddit is a platform the
same way that the telephone is a platform,” said Erik Martin, general manager
of on-ine news hub Reddit, one of the signatories to the letter. “To put so
much burden on the providers to deal with problems from individual users is
just really going to put a chill on investment and put a chill on innovation.”
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