Agreement to Reduce Data Transfer and Localization Barriers

    Feb 10, 2016

    Trade ministers from 12 Pacific Rim countries, including the United States, Canada, Mexico, and Japan, formally signed the Trans-Pacific Partnership (TPP) trade agreement in Auckland, New Zealand, on February 2, kicking off a ratification process fraught with uncertainty in the U.S. Congress. If ratified, the agreement will reduce barriers to trade, including data transfer limitations and forced technology localization policies that limit the free flow of the global information and data that drive the digital economy.

    President Obama is hoping to submit the TPP agreement to Congress for ratification in 2016.  However, in addition to facing opposition from members of Congress in both political parties, there are several requirements the president must meet before it can be considered for approval. 

    Under the terms of his trade promotion authority, which allows a straight up or down vote on the agreement without amendment, the president has 60 days after the trade pact is signed to submit to Congress a description of the changes in U.S. law needed to implement the commitments in the agreement. The president must also submit to Congress the final legal text of the agreement along with draft legislation implementing the agreement, a statement of administrative action proposed to implement the agreement, and other supporting information.

    “No one should be under any illusions that, because the TPP is being signed today, an up or down vote on the agreement is imminent or that our oversight responsibilities are at an end,” said Sen. Orrin Hatch (R-Utah), chairman of the Senate Finance Committee, which has jurisdiction over the agreement. “If history has taught us anything, it’s that this process can, and often does, take a very long time to complete. In fact, it’s not an exaggeration – or even all that remarkable – to say that it can take years to get an agreement through Congress after it is signed.”

    Among the many negotiating objectives required to be included in the agreement are the elimination and prevention of policies in other countries that require U.S. producers and service providers to locate facilities, intellectual property, or other assets in a country as a condition of market access or investment.

    The electronic commerce chapter of the agreement requires participating countries to “allow the cross-border transfer of information by electronic means, including personal information, when this activity is for the conduct of the business.” It prohibits a country from requiring a company to locate its computing facilities in that country as a condition for conducting business in that country.

    The privacy provisions, however, appear to create potential loopholes in the provisions limiting restrictions on data transfer and localization. For example, the agreement calls on participants to respect differences in how countries provide protections for personal information and to acknowledge that a country “may have its own regulatory requirements regarding the use of computing facilities, including requirements that seek to ensure the security and confidentiality of communications.”  

    Overall, however, the agreement is seen as pivotal to the growth of digital trade.

    “By committing parties to protecting free cross-border data flows and prohibiting countries from requiring that their citizens’ data be stored on local servers, the TPP agreement ensures information technology will remain the principal driver of modern economic growth,” wrote Stephen Ezell of the Information Technology and Innovation Foundation in an online statement when the agreement was announced in October. “In addition, the new protections against trade secret theft help ensure that future generations of technological innovation continue to drive a robust global economy.”

    The Washington Policy Brief is an online advisory that contains brief summaries of recent legislative and regulatory issues that may affect the records and information management profession. Further information about the issue is accessed by clicking on the link provided at the end of each summary.


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