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Business News/ Opinion / Views/  Opinion | Mike Pompeo’s visit and the tussle over data localization

Opinion | Mike Pompeo’s visit and the tussle over data localization

It’s foolish to allow the free flow of data across borders without a grasp of all legal implications

File photo of US Secretary of State Mike Pompeo (Photo: AFP)Premium
File photo of US Secretary of State Mike Pompeo (Photo: AFP)

India’s retaliatory tariff on 28 US products, in response to US’ hiking of tariff on aluminium and steel imports, has come into force on 16 June. This came in the wake of US’ withdrawal of benefits to Indian exports under Generalised System of Preferences on 5 June. For the US, India is the ‘Tariff King’ of the world, although India’s tariffs conform to its commitments in the WTO.

As the US Secretary of State, Mike Pompeo, is set to visit India next week, everyone in the policy circles is keeping a close watch on the likely developments in trade front. Pompeo, in his address during the India Ideas Summit of US-India Business Council on 12 June, stated that trade barriers and data localisation requirements are issues of major concern in its trade engagement with India.

The US’ National Trade Estimate (NTE) Report 2018 highlights the trade barriers US firms face in India. Some of them are: high tariffs, price control of medical devices, preference to domestically produced products in government procurement, data localisation requirements, enforcement of intellectual property rights and local content requirements. On these issues, except tariffs and data localisation, discussions have been going on between the two countries for quite some time.

Among tariffs and data localisation, the latter is likely to dominate the forthcoming discussion. It has been well recognised that big data, the new oil, is key to the emerging technologies and industry 4.0. The data - personal, financial and social, collected by search engines, social media, e-commerce platforms, internet of things, etc. provides the raw material for deep learning, machine learning and Artificial Intelligence (AI), which would drive the next industrial revolution.

AI is expected to enhance the productivity considerably, which is projected to add $16 trillion to global GDP by 2030. Use of personal data such as genetic data and AI would revolutionize the future medical research and business. Given the potential big data holds for future economy, US’ endeavour will be in ensuring unhindered cross-border flow of data, which the US based tech-firms can take advantage of. The virtual ‘Healthcare Innovation Lab’, established very recently by Sanofi and Google, to use AI and big data analytics tools to analyse Google’s data for developing new treatments, is just an illustration the huge opportunity big data throws open to tech-companies. The personal genetic data of Indians will be of immense value to such firms as India is having six of the seven genetic varieties of the human race in the world. There are foreign firms already operating in India in providing genetic testing services.

In India, RBI requires data localisation by payment service firms. The (draft) Personal Data Protection Bill 2018, and (draft) National E-Commerce Policy 2019 also have provisions restricting the cross-border transfer and use of personal and other data of Indians. Piyush Goyal, Minister for Commerce and Industry, India, has already clarified that India will not relent on data localisation requirements, during a recently held stakeholder meeting.

US alleges, in its NTE 2018 Report, that such moves damage the digital economy and harms privacy. Pompeo, in his address during the India Ideas Summit said “we will also push for free flow of data across borders, not just to help American companies, but to protect data and consumer’s privacy". The argument is that localizing data will be compromising on consumers’ privacy and therefore firms, which compiles the data, should be allowed to transfer it to wherever they want to. This indicates a shift in the narrative as negotiations on digital trade is gaining momentum. Till recently, ‘labour rights’ have been used by advanced countries in the trade negotiations to restrict market access to products from labour abundant countries. Now, ‘consumer rights’ is likely to become the new bandwagon for the free transfer of raw material, i.e., big data, for future innovation and economic growth, which would benefit the technologically advanced countries.

Use of data, especially personal data, will involve a number of legal issues, national and international. Without developing a proper understanding of legal implications, agreeing to free flow of data is going to be a foolish step. The Convention on Biological Diversity (1992) and Nagoya Protocol (2010) requires sharing of benefits derived out of the use of genetic resources and associated traditional knowledge. What will be the mechanism to monitor the use of genetic data in machine learning and AI?

It will be interesting to see how the trade ties evolve between the two countries. Unlike the US-China trade war, the trade relation between India and US can’t be seen in isolation from the strategic engagement the two countries are having. US foreign policy in Indo-Pacific region is centered on India. Similarly, India is dependent on US in countering Chinese aggression in the region. In defence and counter-terrorism measures as well, the two countries are deeply engaged. Discussions on trade issues, especially the data localisation requirements, will be a real test of statecraft and diplomacy of Modi 2.0 regime.

Reji K. Joseph is Associate Professor at Institute for Studies in Industrial Development

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Published: 20 Jun 2019, 05:41 PM IST
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