Internet Freedom is an Economic Issue, Too

Much has been accomplished in the two years since Secretary of State Hilary Clinton launched a foreign policy initiative designed to press other governments to recognize the unrestricted flow of information on the Internet as a human right. The thirty-four countries in the Organization for Economic Cooperation and Development (OECD) adopted Principles for Internet Policy Making. The principles call for free flow of information on the Internet, especially across borders. This approach extends ideals of free expression and exchange of ideas–at the heart of our First Amendment and the United Nations Declaration of Human Rights–to the global Internet.

But there is another way to look at Internet freedom. When a country keeps out or restricts offshore social networks, search engines and micro blog platforms, or restricts access to offshore news and cultural affairs sites, or requires domestic location of cloud computing facilities, or does not allow the transfer of information abroad for data processing, this assault on freedom becomes protectionism. These actions have a substantial effect on trade, jobs, and economic growth. Internet freedom is an economic issue, too. And thinking of Internet freedom as a trade issue provides its proponents with a range of new tools and policy mechanisms for advancing this public policy objective.

Several recent industry initiatives recognize the economic dimensions of Internet freedom. The principles on cross-border data flows, adopted by National Foreign Trade Council, SIIA and other trade associations in November, call for governments to allow the unrestricted flow of information across borders and to refrain from imposing localization requirements on remote computer processing services. In April, the U.S.Trade Representative (USTR) and the EU signed an agreement on trade in the information and Computer Technology services, which also contain these principles of no data barriers and no localization requirements.

Restrictions on Internet-based services are problematic under General Agreement on Trade in Services (GATs). GATs generally prohibits barriers on cross-border flows of information related to Internet-based services when the country has agreed to open that service sector. These commitments can be enforced through a well-developed dispute resolution mechanism at the World Trade Organization. Are existing restraints on Internet-based services acceptable under WTO rules? Exploring that question would provide a step toward thinking of Internet freedom as an economic and trade issue.

It is true that countries retain the right under GATs to pursue a variety of domestic public policies, even if it has a chilling effect on trade. Countries have substantial leeway to provide for privacy, consumer protection, cybersecurity, and the protection of intellectual property. They can also take measures that are ‘‘necessary to protect public morals or to maintain public order.’’ Many restrictions on Internet-based services might seem to be legitimate under these exceptions.

But these exceptions are limited. The public morals exception, for example, must be “necessary” to achieving the public policy goal and no more restrictive of trade than is necessary to achieve this objective. Under existing WTO precedents, countries must do more than claim the exemption under these WTO precedents; they must be able to show that is narrowly tailored to meet the public policy objective.

Trade negotiations can be a tool in advancing Internet freedom. The U.S. – Korea Free Trade Agreement recently approved by Congress calls for the signatories to “endeavor to refrain from imposing or maintaining unnecessary barriers to electronic information flows across borders.” The U.S. is attempting to improve on this hortatory language in discussions surrounding the Trans Pacific Partnership (TPP) trade agreement. They have tabled proposals to eliminate barriers to information flows across borders and to prohibit a domestic presence for remote data processing.

The TPP proposals acknowledge that countries can have different substantive privacy regimes, but narrows this exception by proposing that enforcement cannot take the form of a ban on transfers of information. A country’s privacy regime must allow global companies to demonstrate compliance with local privacy rules through mechanisms such as binding contracts or adherence to enforceable codes of conduct.

The proponents of Internet freedom need new tools and policy mechanisms for advancing this noble objective. Thinking of Internet freedom as a trade issue provides just that.

Mark MacCarthy will participate in a free panel discussion, “The Global Internet and the Free Flow of Information,” Tuesday, February 7th, 9:30 am-12:30 pm at the Pew DC Conference Center, for part two of Media Access Project’s fifth annual Forum Series.


Mark MacCarthy, Vice President, Public Policy at SIIA, directs SIIA’s public policy initiatives in the areas of intellectual property enforcement, information privacy, cybersecurity, cloud computing and the promotion of educational technology.

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