US sets sights on strong WTO rules for e-commerce, cloud computing

Given Edward Snowden’s revelations on US surveillance, several governments are likely to oppose the US move


The US wants an agreement at the WTO because of potential gains from multilateral trade deals with emerging economies like China, India, Brazil, South Africa and Indonesia. Photo: AFP
The US wants an agreement at the WTO because of potential gains from multilateral trade deals with emerging economies like China, India, Brazil, South Africa and Indonesia. Photo: AFP

Geneva: After clinching the first multilateral agreement on trade facilitation, the US has now set its sights on securing strong trade rules at the World Trade Organization (WTO) for rapidly expanding electronic commerce and cloud computing.

Washington has proposed a robust work programme to frame trade rules to allow cross-border information flows, remove localization requirements for protecting personal data within national borders, and agree to a proper coverage of cloud computing as part of computer and related services.

Given Edward Snowden’s revelations on the US’s global surveillance of several countries, and concerns about corporate espionage, several governments are likely to oppose the US move.

Cloud computing has emerged critical to data storage and hosting, processing and certain software services. US companies such as Amazon.com Inc., Microsoft Corp. and International Business Machines Corp., which dominate cloud computing, will be the biggest beneficiaries from having binding legal rules that are yet to be negotiated.

The US has signalled its intent to push the envelope on a range of issues covering e-commerce. The US is currently negotiating robust rules for localization and e-commerce within the Trans-Pacific Partnership (TPP) regional trade liberalization talks and also in Trade in Services Agreement (TISA) talks with select countries in Geneva.

However, it wants an agreement at the WTO because of the potential gains from having a multilateral trade deal in which China, India, Brazil, South Africa, Indonesia and other developing countries will need to undertake legally binding commitments as and when finalized.

In a restricted proposal circulated at the WTO’s Council for Trade in Services last Thursday, the US has explained its priorities to facilitate e-commerce. Trade ministers had authorized their negotiators to prepare a work programme at the ninth ministerial meeting in Bali, Indonesia, to prepare the work programme on e-commerce, an area in which WTO members have remained unsuccessful in arriving at an agreement since 1998.

It calls on WTO members to ensure that existing commitments to computer and related services are robust and clear in terms of coverage, particularly for cloud computing, as they constitute the “building blocks of information-intensive commerce”. “Cloud computing is a critical component for any e-commerce and it is essential trade commitments reflect a high degree of openness for this service,” the US has argued.

Although cloud computing forms part of what is termed “computer and related services”, local regulations in some countries see it as a telecommunications service. Therefore, there is a need to clarify on the coverage of these services provided via cloud computing to avoid potential negative consequences for one of the fastest growing and important infrastructure service for expanding e-commerce, the US has suggested.

The US wants complete freedom for cross-border information flows. It says “governments should not prevent services suppliers of other countries or customers of those suppliers, from electronically transferring information internally or across borders, accessing publicly available information, or accessing their own information stored in other countries”.

More importantly, governments should not insist that “ICT (information and communications technology) service suppliers use local infrastructure, or establish a local presence, as a condition of supplying services”. Further, governments must not give priority or preferential treatment to national suppliers of ICT services in the use of local infrastructure, national spectrum or orbital resources.

As part of online personal data protection, the US says members must adopt a domestic legal framework that ensures the protection of the personal data of the users of electronic commerce.

It has underscored the need to reconsider the utilization of “localization requirements” such as protecting personal data or restricting cross-border data flows, including measures that require consumer’s personal data to be processed and stored within their borders. These measures, according to the US, “have the potential to impede economic activity and do not necessarily provide data security that they ostensibly seek to achieve”. Canadian firm Research in Motion ran into trouble over its BlackBerry devices and service in India over this issue.

The US says “data security may be enhanced through external storage, where economies of scale in specialized security practised by best-in-class data processors may surpass what is available in storage facilities within one particular jurisdiction”. Privacy and personal data protection are best served when countries do not restrict data being exported to a particular country even if the destination country does not share a formal privacy or data security regime with the source country.

The US proposal is, however, expected to face stiff opposition from WTO members given the quantum of economic spying, particularly on foreign firms, to help its domestic companies in violation of intellectual property rules that protect technological prosperity, said a developing country trade official.

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