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Can the G20 Address Digital Protectionism?

Last week I was in Istanbul, Turkey, to participate in the G20, B20, and International Chamber of Commerce (ICC) meetings related to the digital economy and the importance of addressing data localization requirements and other types of forced localization measures.

The news concerning the Safe Harbor ruling by the European Court of Justice colored all of the discussions at these meetings, as business representatives reinforced the fact that the global economy cannot operate without the free flow of data. We take for granted the complex networks of data streaming around the globe that make going online seem routine. However, this connectivity is increasingly under threat by attempts to keep data within borders in an online world that thrives culturally and economically, thanks, in part, to the free flow of data.

Why Istanbul? Turkey is hosting all of the G20 meetings this year, which also means its business community is hosting the B20 meetings. The G20 is a forum consisting of the twenty largest countries in the world in terms of their economies. The G20’s prominence has grown since the financial crisis of 2008-2009, when its members decided it would become a forum where their leaders could meet annually to discuss critical economic, trade and finance issues. The B20 serves as the G20’s business counterpart, and makes specific recommendations to the G20 on what its agenda should be.

In early September, the B20 trade policy taskforce provided a set of recommendations to their G20 counterparts on priority trade policy issues, many of which reflect ITI company priorities. Addressing harmful localization barriers to trade, including data localization requirements and restrictions on cross-border data flows, is high on this list, as is finalizing the negotiations to expand the Information Technology Agreement (ITA) and implementing the new World Trade Organization (WTO) Trade Facilitation Agreement.

The B20 Digital Economy Forum in Istanbul last week was another key opportunity for the global business community, including ITI, to reinforce these messages. The group has produced its own set of draft recommendations to the G20, including to develop alternative policies to data localization by “addressing growing issues concerning the movement of data and adopt alternative policies to data localization such as the ‘accountability principle’.”

Turkey’s B20 team is revising these recommendations to take into account reactions from Forum participants. ITI has requested that they go a step further and recommend that G20 governments avoid and roll back data localization requirements entirely. Often done under the guise of promoting local industries or protecting privacy, data localization has proven to be ineffective at achieving these goals. Every year, G20 Leaders make a strong commitment to combatting protectionism and rolling back protectionist measures. From our perspective, that commitment should also include combatting digital protectionism.

In fact, experts and studies warn that a vibrant global economy cannot exist when governments in both developed and developing countries consider or implement such measures. As ITI has stated previously, this trend will lead to significant market segmentation, increased costs for companies of all sizes, and splintering of the Internet. The G20 has a responsibility to prevent these outcomes from happening. We have also requested that the Forum recommendations echo the September B20 call to finalize the ITA expansion negotiations as soon as possible.

The G20 Trade Ministers meeting also took place last week in Istanbul, with a focus on preparations for the December WTO Ministerial Conference in Nairobi. ITI has advocated that the WTO can remain and become more relevant to the business community if it can begin meaningful work on promoting digital trade and addressing forced localization measures, including data localization requirements. The TPP agreement reached this week will do exactly that. If the WTO could also take up these issues, as we argued last week, it would again become relevant to the global business community. We hope that the high standard provisions of the TPP that prevent and address forced localization measures can serve as the standard for future discussions on these issues at the WTO.

Finally, the ICC Digital Economy Commission meeting is taking place on October 7-8. The ICC is a business community forum where companies and associations from ICC member countries around the world cooperate and strive to reach common positions on a wide range of global policy issues that impact businesses. On the agenda for this meeting is addressing data localization requirements and restrictions on cross-border data flows.

ITI, through the U.S. Council for International Business (the official U.S. representative to the ICC), will work to ensure that whatever statement the ICC makes on these issues fully reflects the priorities and concerns of our members. Such a statement could be a useful tool in persuading skeptical government ministries around the world that data localization is a problem that merits solving.

Public Policy Tags: Forced Localization, Trade & Investment