The Future of Trade is Digital

Digital information increasingly drives bilateral and multilateral trade throughout the Indo-Pacific region. It behooves countries to devise agreements governing the use and exchange of the enormous amounts of vital data generated every day.

Neon colored boxes in circle with black background

Alan de Rochefort-Reynolds, Daniel Allman and Jo Feldman

September 29, 2022 04:30 PM

If trade is the lifeblood of the global economy, data is its DNA. Without good information, the entire worldwide system would collapse. Data flows don’t just support e-commerce by enabling physical goods to be traded online. They also enable fully digital products and services—search engines, social media, electronic payments and much else.

The growth in cross-border data flows is mind-boggling. This year, global internet traffic will reach some 150,000 gigabytes per second. That’s up from about 150 gigabytes per second in 2002, and just 100 gigabytes per day in 1992. Digital trade, too, has been growing faster than trade in physical goods since well before the pandemic.

Trade Rules Are Lagging

As digital transformation races ahead, though, international trade rules are falling behind. The World Trade Organization (WTO), for example, has no multilateral agreement on digital trade. Australia, Japan and Singapore are leading the effort to introduce new WTO rules, and the process is picking up speed after a period of fits and starts. A final agreement, though, is still some way off. Countries can find common ground when it comes to electronic signatures and paperless trading, but on issues such as electronic-transaction frameworks, the proposed text has been reduced to language and not binding commitments. Consensus is even harder to reach on the more contentious points.

This year, global internet traffic will reach some 150,000 gigabytes per second. That’s up from about 150 gigabytes per second in 2002, and just 100 gigabytes per day in 1992."

None of this comes as a surprise. At a time when data is upending the way businesses and societies interact, data governance is emerging as a geopolitical flashpoint. Tensions play out in regional trade groups and even smaller bilateral accords.

Recent Indo-Pacific Developments

For Australian businesses operating in the Indo-Pacific region, three recent developments bring the relevant geopolitics to the surface. First, in December 2021, Australia signed a so-called CLOUD Act Agreement with the United States. (The acronym stands for Clarifying Lawful Overseas Use of Data.) This will help American and Australian law-enforcement agencies, when investigating serious crimes, to access data held by service providers operating in the other’s jurisdiction.

In Australia, the agreement was referred back to Parliament’s Joint Standing Committee on Treaties this August. According to the U.S. Department of Justice, CLOUD Act Agreements make it less likely that countries will force businesses to store and process data locally. Some nations require data localization because, they say, it aids law enforcement and regulatory oversight. By facilitating government-to-government cooperation, the U.S.-Australia agreement addresses the concern that foreign data may be withheld for one reason or another.

Resisting data localization is consistent with the original Trans-Pacific Partnership (TPP), which included the United States. Although President Donald Trump withdrew from the original TPP on his first day in office in 2017, Australia is a party to its successor agreement, and the relevant rules remain unchanged: Countries must allow cross-border data transfers and must not introduce data localization measures unless they’re required to achieve a “legitimate public policy objective.”

Second, in January 2022, the Regional Comprehensive Economic Partnership (RCEP) came into force. RCEP is a trade pact among Australia and 14 other Indo-Pacific countries, including China but not the U.S. It reveals China’s hand on some thorny digital-trade issues. This was followed this May by substantive moves toward negotiating the Indo-Pacific Economic Framework (IPEF), which is spearheaded by the United States and does not include China. One key priority of IPEF is to develop regional standards for cross-border data flows.

The two groupings highlight the divided approaches to issues of data movement among Australia’s main partners. Under the auspices of IPEF, the U.S. is encouraging “high-standard rules of the road in the digital economy” to reduce data localization. As part of RCEP, China agreed to allow cross-border transfers and not to introduce localization measures—but those are subject to a public-policy exception that is entirely self-adjudicated. In other words, it’s up to the country introducing a restrictive measure to decide whether its restriction is necessary. RCEP dilutes these standards further by exempting measures that a country considers necessary to protect its “essential security interests” and by carving out all electronic commerce rules from state-to-state dispute settlement.

Third, there are signs that some countries’ views on data localization may be shifting. Indonesia—traditionally a strong advocate for data localization—passed Government Regulation 71 of 2019 in the face of opposition from Indonesian data companies. Regulation 71 allows private electronic systems operators to process and store data outside of Indonesia. With 204 million internet users, 370 million mobile phone connections and half its population under 30, this is a major step forward for tech businesses in the Indo-Pacific.

India’s support of data localization shows signs of receding as the number of Indian internet users—now nearly 650 million—is exploding. This August, Prime Minister Narendra Modi’s government withdrew its long-promised Personal Data Protection Bill after receiving feedback from a joint parliamentary committee. The bill would have required companies to store several kinds of data within India. While the committee’s report did not call for fully free data flows, it recommended narrowing the circumstances in which data must be stored domestically. The government is likely to introduce a revised bill late this year; however, ministers are already calling for it to include “global standard cyber laws.”

These are positive developments. Indonesia is a signatory to RCEP, and India is a founding member of IPEF. Their shifting views on cross-border transfers should encourage greater data liberalization across the region.

What Next?

Exporters, including those in Australia’s burgeoning tech sector, need strong and consistent digital-trade rules governing the Indo-Pacific region. Sometimes a push for data localization is benign. Prosecuting serious crime, for instance, and protecting government data or individual privacy are valid policy concerns. But these can be addressed in targeted ways, as the CLOUD Act Agreement shows. Likewise, concerns about consumer protections and privacy can be tackled with existing legal tools and customer disclosures. This is a key lesson from the Australian Competition and Consumer Commission’s recent string of actions in domestic courts against Google. Too often, calls for data localization are either simply misguided or, more malevolently, motivated by protectionism, censorship and control. In practice, whether well-intentioned or not, localization makes data-driven trade more costly and less secure.

A truly multilateral solution to cross-border data flows has clear advantages. But while exporters wait for the WTO to act, regional agreements and groupings can be a useful starting point. The IPEF in particular promises major strides toward data liberalization in the Indo-Pacific. Like-minded countries should continue working together to facilitate digital trade. Such efforts will find support in Washington, where a bipartisan group of senators called recently called on the White House to prioritize this. In their words, which should apply equally in other world capitals, including Canberra, “ongoing debate over domestic rules for the digital economy should not hold us back from substantive engagement with our allies.”

Jo Feldman is a partner at Norton Rose Fulbright in Australia. She is an arbitration and litigation lawyer with over 17 years’ experience working with government and the private sector. She has broad experience in disputes under national and international laws and has acted for and against states in investment treaty arbitrations.

Daniel Allman is a special counsel at Norton Rose Fulbright in Australia. He is a dispute resolution lawyer and has been recognized in Best Lawyers: Ones to Watch in Australia™ for 2023 in both Alternative Dispute Resolution and International Arbitration.

Alan de Rochefort-Reynolds is an associate at Norton Rose Fulbright in Australia. He is a commercial dispute resolution lawyer and his practice focuses on acting for parties in arbitration and litigation relating to contracts, financial services and corporations legislation.

Headline Image: ISTOCK/Normform, ISTOCK/M_PAVLOV

Related Articles

The Antipodean Advantage

by Gordon Grieve and Tony Britten-Jones

As the pandemic recedes, Australia remains one of the best countries in which to invest. The commercial law experts at Piper Alderman review the country’s advantages when it comes to outside money looking for outsized returns.

Man pointing to cave wall

It’s Official: Options for Challenging “Official Marks” in Canada

by Jamie-Lynn Kraft and Philip Lapin

“Official marks” are a strangely obscure corner of Canadian intellectual-property law. What are they, what explains their strength and what can a business owner in search of a trademark do to challenge them?

Two griffins on royal crest


by Alejandra Daroch, Domingo Russi and Jaime Carey Astaburuaga

Long a beacon of economic stability in South America, Chile has been buffeted lately by the global rise in inflation. Can a key element of its monetary policy help it weather the storm?

Waves crashing into lighthouse

Hobbling the War Machine

by Shawn C.D. Neylan

Since late spring, the Canadian government has been actively sanctioning business and political entities, as well as numerous individuals, with alleged ties to Vladimir Putin and the Russian military, including some in Belarus. You can’t tell the players without a scorecard—so here’s an overview.

Military tank with prohibited symbol

Growing Canadian Business Abroad

by Didier Culat

Canadian entrepreneurs looking to expand their businesses beyond the geographic confines of their home dominion must consider a vast range of questions to ensure they’re fit to branch out. Here’s a quick primer.

Green arrows rising with Canada in backdrop

The Carbon Conundrum

by Martin Hamer and Natalie Kopplow

Companies that trade internationally might soon face a “carbon tariff” when importing certain goods into the European Union. Why is the EU doing this—and how will it affect world trade?

Power plant billowing smoke

Competitive Balance

by David Feldman and Peter Flynn

Major amendments to Canada’s Competition Act were rushed through Parliament this June with scarcely any debate. They will likely have enormous antitrust ramifications—and businesses had better be ready.

Blaring megaphone sounds the alarm

Rental House of Cards

by Tyler D’Angelo

The pandemic devastated uncountable businesses worldwide. A recent court case involving some of Canada’s most venerable companies and pension funds sheds light on the stringency of the country’s commercial leases—and the judiciary’s reluctance to meddle in sophisticated commercial contracts amid a “black swan” event.

Toppling house of cards


Should I Hire a Lawyer After a Car Accident in Brentwood, TN?

by Harlene Labrum

Learn whether you should hire a lawyer after a car accident lawyer in Brentwood, TN. Contact Labrum Law Firm Personal Injury Lawyers for a free consultation.

Road caution sign in front of two wrecked cars


What Will a Chicago Car Accident Lawyer Actually Do for You?

by Adam Zayed

Personal injury lawyer Adam Zayed explains the important steps a Chicago car accident lawyer will take to ensure you receive the best legal representation.

Blurry image of fast moving traffic in big city

How Palworld Is Testing the Limits of Nintendo’s Legal Power

by Gregory Sirico

Many are calling the new game Palworld “Pokémon GO with guns,” noting the games striking similarities. Experts speculate how Nintendo could take legal action.

Animated figures with guns stand on top of creatures

How Much Is a Lawyer Consultation Fee?

by Best Lawyers

Best Lawyers breaks down the key differences between consultation and retainer fees when hiring an attorney, a crucial first step in the legal process.

Client consulting with lawyer wearing a suit

How To Find A Pro Bono Lawyer

by Best Lawyers

Best Lawyers dives into the vital role pro bono lawyers play in ensuring access to justice for all and the transformative impact they have on communities.

Hands joined around a table with phone, paper, pen and glasses


Knowing When to Hire a Car Accident Lawyer

by Muhammad Ramadan

Chicago personal injury lawyer Muhammad Ramadan offers advice on how to know when to hire a lawyer after you have been involved in a car accident.

White and grey cars crashed together with man standing between them


How to Protect Your Inheritance from Divorce in Ontario

by Usman Sadiq

One lawyer in Canada explains that, although division of assets does not always have to be evenly split, it should be fair, and inheritance is no exception.

Small grey house with red roof under large red umbrella on blue background


What Are the Stages of a Criminal Case in California?

by Nafiz M. Ahmed

Criminal cases in California must follow proper procedures in court. One lawyer outlines each stage of a criminal case to offer guidance to all involved.

Person in grey sweatshirt with hands behind back in handcuffs being arrested by cop

Trending Articles

How Palworld Is Testing the Limits of Nintendo’s Legal Power

by Gregory Sirico

Many are calling the new game Palworld “Pokémon GO with guns,” noting the games striking similarities. Experts speculate how Nintendo could take legal action.

Animated figures with guns stand on top of creatures

Announcing the 2023 The Best Lawyers in America Honorees

by Best Lawyers

Only the top 5.3% of all practicing lawyers in the U.S. were selected by their peers for inclusion in the 29th edition of The Best Lawyers in America®.

Gold strings and dots connecting to form US map

The U.S. Best Lawyers Voting Season Is Open

by Best Lawyers

The voting season for the 31st edition of The Best Lawyers in America® and the 5th edition of Best Lawyers: Ones to Watch® in America is officially underway, and we are offering some helpful advice to this year’s voters.

Golden figures of people standing on blue surface connected by white lines

How To Find A Pro Bono Lawyer

by Best Lawyers

Best Lawyers dives into the vital role pro bono lawyers play in ensuring access to justice for all and the transformative impact they have on communities.

Hands joined around a table with phone, paper, pen and glasses

Announcing the 2022 Best Lawyers® in the United States

by Best Lawyers

The results include an elite field of top lawyers listed in the 28th Edition of The Best Lawyers in America® and in the 2nd Edition of Best Lawyers: Ones to Watch in America for 2022.

2022 Best Lawyers Listings for United States

What the Courts Say About Recording in the Classroom

by Christina Henagen Peer and Peter Zawadski

Students and parents are increasingly asking to use audio devices to record what's being said in the classroom. But is it legal? A recent ruling offer gives the answer to a question confusing parents and administrators alike.

Is It Legal for Students to Record Teachers?

Best Lawyers: Ones to Watch in America for 2023

by Best Lawyers

The third edition of Best Lawyers: Ones to Watch in America™ highlights the legal talent of lawyers who have been in practice less than 10 years.

Three arrows made of lines and dots on blue background

2021 Best Lawyers: The Global Issue

by Best Lawyers

The 2021 Global Issue features top legal talent from the most recent editions of Best Lawyers and Best Lawyers: Ones to Watch worldwide.

2021 Best Lawyers: The Global Issue

The Upcycle Conundrum

by Karen Kreider Gaunt

Laudable or litigious? What you need to know about potential copyright and trademark infringement when repurposing products.

Repurposed Products and Copyright Infringemen

The Best Lawyers in Australia™ 2024 Launch

by Best Lawyers

Best Lawyers is excited to announce The Best Lawyers in Australia™ for 2023, including the top lawyers and law firms from Australia.

Australian Parliament beside water at sunset

Best Lawyers Voting Is Now Open

by Best Lawyers

Voting has begun in several countries across the globe, including the United States, the United Kingdom and Europe. Below we offer dates, details and answers to voting-related questions to assist with the voting process.

Hands holding smartphone with five stars above phone

Inflation Escalation

by Ashley S. Wagner

Inflation and rising costs are at the forefront of everyone’s mind as we enter 2023. The current volatile market makes it more important than ever to understand the rent escalation clauses in current and future commercial lease agreements.

Suited figure in front of rising market and inflated balloon

Wage and Overtime Laws for Truck Drivers

by Greg Mansell

For truck drivers nationwide, underpayment and overtime violations are just the beginning of a long list of problems. Below we explore the wages you are entitled to but may not be receiving.

Truck Driver Wage and Overtime Laws in the US

A Celebration of Excellence: The Best Lawyers in Canada 2024 Awards

by Best Lawyers

As we embark on the 18th edition of The Best Lawyers in Canada™, we are excited to highlight excellence and top legal talent across the country.

Abstract image of red and white Canada flag in triangles

Presenting the 2024 Best Lawyers Family Law Legal Guide

by Best Lawyers

The 2024 Best Lawyers Family Law Legal Guide is now live and includes recognitions for all Best Lawyers family law awards. Read below and explore the legal guide.

Man entering home and hugging two children in doorway

Announcing the 2023 The Best Lawyers in Canada Honorees

by Best Lawyers

The Best Lawyers in Canada™ is entering its 17th edition for 2023. We highlight the elite lawyers awarded this year.

Red map of Canada with white lines and dots