Insight

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
AR

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

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

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

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

Latinflation


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

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

The 2023 Best Lawyers in Portugal™


by Best Lawyers

Announcing the elite group of lawyers recognized in Portugal for 2023.

Green and red Portuguese flag

Easton & Easton Knocks It Out of the Park


by Justin Smulison

With exceptional results and new strategic partnerships, 2023 U.S. News - Best Lawyers® "Best Law Firms" Tier 1* ranked powerhouse firm Easton & Easton is launching homeruns and scoring goals for personal injury victims.

Four men wearing jerseys and holding sports gear

Enhancing Consumer Safety Through Winning Jury Trials and Substantial Settlements


by Justin Smulison

Firm founder and lead trial lawyer James P. Frantz discusses how landmark victories in litigation and trial protect consumers.

Lawyers sitting around a table in conference room

California’s Plan to Phase Out Gas-Powered Cars by 2035


by Gregory Sirico

Best Lawyers weighs in on California, the largest automotive market in the U.S., and their current plan to phase out gas-powered transportation altogether.

Car fuel gauge reading empty

"Lawyer of the Year"


Woman standing in front of dark background

Julie Dunne

Litigation - Labor and Employment

San Diego, CA

2023

2023's Best Lawyers in Colombia™


by Best Lawyers

Announcing Colombia's elite group of lawyers recognized for 2023.

Yellow, blue and red stripes

Fighting for Florida


by Justin Smulison

Three-time “Lawyer Of The Year”* Steve Yerrid reflects on how South Florida was the setting for some of his most memorable trials.

Headshot of man with dark suit and red tie outside in front of fountain

IN PARTNERSHIP

Rewriting 𝙃𝙀𝙍𝙨𝙩𝙤𝙧𝙮 One Verdict at a Time


by Justin Smulison

Athea Trial Lawyers was formed only a year ago by several prestigious lawyers seeking justice for their clients, and together they are making history.

Six female lawyers sitting in office

Trending Articles

The Best Lawyers in Spain™ 2023


by Best Lawyers

Announcing Spain's recognized lawyers for 2023.

Flag of Spain

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 Best Lawyers in Chile™ 2023


by Best Lawyers

The results include an elite field of top lawyers and firms in Chile.

White star in blue box beside white box with red box on bottom

Thirteen Years of Excellence


by Best Lawyers

For the 13th consecutive year, “Best Law Firms” has awarded the most elite and talented law firms across the country through a thorough and trusted data review process.

Red, white and blue pipes and writing on black background

The Best Lawyers in South Africa™ 2023


by Best Lawyers

Best Lawyers proudly announces lawyers recognized in South Africa for 2023.

South African flag

The 2023 Best Lawyers in Portugal™


by Best Lawyers

Announcing the elite group of lawyers recognized in Portugal for 2023.

Green and red Portuguese flag

Announcing The Best Lawyers in Peru™ 2023


by Best Lawyers

Honoring our awarded lawyers for 2023 in Peru.

Red and white stripes with green leaf symbol

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

The Best Lawyers in Spain™ 2022


by Best Lawyers

The results include an elite field of top lawyers and firms.

The Best Lawyers in Spain™ 2022

Famous Songs Unprotected by Copyright Could Mean Royalties for Some


by Michael B. Fein

A guide to navigating copyright claims on famous songs.

Can I Sing "Happy Birthday" in Public?

IN PARTNERSHIP

Rewriting 𝙃𝙀𝙍𝙨𝙩𝙤𝙧𝙮 One Verdict at a Time


by Justin Smulison

Athea Trial Lawyers was formed only a year ago by several prestigious lawyers seeking justice for their clients, and together they are making history.

Six female lawyers sitting in office

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

Strength in Numbers: When Partnering Up May Be Best in Whistleblower Litigation


by Justin Smulison

Whistleblower claims make headlines when they result in multimillion-dollar settlements. But the journey to the courtroom is characterized by complexity and requires time and resources. Bienert Katzman Littrell Williams partner and The Best Lawyers in America awardee Michael R. Williams discusses when and why partnerships between counsel will strengthen whistleblower litigation.

A Blue Person in the Middle of White People

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?

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

Announcing the 2022 "Best Law Firms" Rankings


by Best Lawyers

The 2022 “Best Law Firms” publication includes all “Law Firm of the Year” recipients, national and metro Tier 1 ranked firms and editorial from thought leaders in the legal industry.

The 2022 Best Law Firms Awards