Today, SIIA filed comments in response to the Federal Register notice of April 1, 2013 from the United States Trade Representative (USTR) regarding a proposed Transatlantic Trade and Investment Agreement. The comment supported this TTIP initiative. SIIA is prepared to help both the US government and the EU reach a timely and comprehensive agreement.
The comments focused on the relationship between the seamless flow of information across borders and trade policy. A recent report on the Future of Trade by a panel convened by outgoing WTO Director General Pascal Lamy addressed this question of the relationship between domestic public policy and trade policy. Here’s what it said:
Regulations in key areas of the economy, such as health, safety, environmental quality and labour rights are not set in the WTO. What this means is that the WTO must consider how to articulate the relationship between trade opening and the existence of measures outside its remit that are nevertheless relevant to the conditions under which trade takes place. While a convergence of public policy design would facilitate matters from a purely trade perspective, we recognise that respect for differing social preferences is paramount. We must work towards a shared understanding of what constitutes a level playing field. As a matter of principle, we argue that the discriminatory application of NTMs (non-tariff measures) must be avoided where possible and that members should not restrict trade where this is not essential to the pursuit of public policy objectives.
The key idea is that domestic laws should not restrict trade where this is not essential to the pursuit of public policy objectives. Respect for different social preferences is paramount, but the means of implementing these social preferences have to be the least restrictive of trade possible. If there is a way to achieve a public policy objective in a way that is less restrictive of trade, countries should take this direction.
These principles are familiar to us from other contexts: the use of cost-effectiveness analysis to pick the project that achieves a policy goal with the least expenditure of social resources and the constitutional analysis of measures that restrict free speech which calls for an assessment of whether the speech-restricting measure is necessary to achieve a substantial government purpose. Applying these notions to the trade context ensures that both trade and non-trade social preferences are satisfied to the greatest extent possible.
It is worth paying some attention to these ideas in the context of the revision of the European data protection regulation and its relationship to trade. A recent report by the European Centre for International Political Economy for the U.S. Chamber of Commerce made the point that the revised EU privacy regulation could have an adverse effect on EU trade and thereby on EU’s domestic growth and employment. It urged that the EU pay attention to these possible economic effects and stressed the importance of getting data protection regulation right.
What does this have to do with trade negotiations? In particular, how does it relate to the upcoming TTIP negotiations?
The SIIA comments addressed this question. It argued that one goal of the TTIP negotiations should be to ensure that privacy rules do not act as an unnecessary barrier to cross-border flows of information. But it is important to approach this connection between trade and privacy very carefully.
A trade agreement is not the place for the US or the EU to set its substantive domestic privacy rules. SIIA does not endorse the idea of negotiating the specifics of the US or EU privacy regimes as part of TTIP. These privacy regimes are different, but compatible, attempts to achieve the same protective results through different means.
Still, it is crucial to understand that privacy rules can have an effect on trade and should be carefully crafted to minimally impede the cross–border flow of data. The standard that local rules should be crafted so as to be least restrictive of trade is well established in trade law and policy. And this standard specifically applies to privacy rules. Article 15 of the General Agreement on Trade in Services, for instance, permits, among other things, domestic measures “necessary” to secure compliance with local privacy rules. The WTO panel on the future of trade was relying on this standard in issuing its report.
In this regard, SIIA urges both the EU and US to recognize that a complete ban on the transfer of data across borders is not necessary to secure compliance with local privacy rules. If a company participates in an international agreement such as the US-EU Safe Harbor agreement, then its data should be able to flow seamlessly across borders. In a similar fashion, a company that is in compliance with an enforceable privacy code of conduct or subjects itself to binding corporate privacy rules or has a contract with a data protection authority regarding privacy should be able to transfer information across borders.
TTIP need not constrain the specifics of privacy rules, but it should reaffirm the obligation to provide companies with a usable means to demonstrate compliance with local privacy rules so that information can flow across borders. In this way, trade policy can help to ensure that privacy protection is done carefully and avoids unintended consequences on innovation and economic growth.
An important initiative in the area of trade and privacy is being run out of the law firm of Hogan Lovells. SIIA intends to work closely with them to ensure that TTIP and other trade negotiations address privacy is a positive way that balances the need for protection and the need for the seamless flow of data.
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. Follow the SIIA Public Policy team on Twitter at @SIIAPolicy