In May 2020, PubAffairs Bruxelles organised an evening discussion on the question of the prospect and importance of a global consensus on non-personal data with Mr Christophe Kiener, Head of Unit, Services and Digital Trade, European Commission, Ms Helen Stylianou, Deputy Head of the Australian Mission to the EU, Mr Javier Lopez-Gonzalez, Senior Trade Policy Analyst, OECD, Mr Robert MacDougall, Head of Enterprise Public Policy, Vodafone Group and Mr Kevin Rogers, Head of Mobile Services, Panasonic.
Mr Alejandro Cainzos, Member, External digital connectivity, VP Vestager Cabinet, European Commission held the introductory remarks.
The debate was moderated by Matthew Newman, EU Chief Correspondent, MLex
Mr Alejandro Cainzos started his introductory speech by stating how, in the last fifteen years, the relevance of the digital sector has been enormous, as we witnessed a growth of the digital economy at double the rate of GDP in several countries. Hence, the speaker stated, it is not surprising that both the European Council and the European Commission aim to focus Europe’s recovery plan in order for the old continent to become both greener and more digital. As a direct consequence of this trend, the speaker highlighted how data is and will be, an essential feature of society at large and that digital technologies will continue to see their relevance grow. Despite not being at the forefront of the consumer’s technology revolution, the EU has been preparing to make the most out of the industrial data revolution. Mr Cainzos also explained how the immense growth in the digital sector and digital trade has made all global actors more connected and dependent on each other. However, the speaker also highlighted how the Coronacrisis has exposed some of the weaknesses of the current European and international trade system, as a consequence of the lockdown measures imposed around the world. On the one hand, Mr Cainzos stated, the crisis has shown how deeply dependent many countries are on single suppliers, with special regard to medical equipment and pharmaceutical goods. On the other hand, the speaker remarked how this crisis has made it evident that the growing interdependency between countries requires international collaboration for effective solutions. He subsequently specified that trade accounts for 35% of EU GDP and will be key to the economic recovery. While there are clear benefits for businesses and the economy with the free flow of non-personal data, Mr Cainzos explained that several countries have started to wonder if they will be able to maintain their sovereignty, especially considering that trade will be increasingly digital or digitally enabled. In the future, this question will go beyond privacy and also affect non-personal data, considering the many different jurisdictions that it comes across. As an example, Mr Cainzos explained the difficulty when regulating AI coming from third countries if the EU decides that algorithms for AI used in Europe are not compliant with its ethical standards. Indeed, it would make it difficult to enforce such decisions in a third country where there is no regulation on the data that underpins that technology. The speaker added that some have called for imposing data localisation as a solution. However, he explained that this process is immensely costly, as it has been proven that full data localisation could cost up to 1% of GDP. Furthermore, data localisation will trigger a domino effect of protectionism measures. Mr Cainzos also stated that the solution in avoiding such barriers in the free flow of data is to find a balance between sovereignty and openness. There will be a need to maintain connections with non-EU players to make the most out of industrial data. Mr Cainzos concluded his speech by affirming that for any model to function on the global stage, the only solution is a multilateral agreement.
After the introductory speech, Matthew Newman started the panel discussions by remarking on the current state of play for the question of non–personal data flow and added that, following the concerns of governments and citizens, many countries have imposed more restrictions on data flow, thus creating more barriers to business and trade. Turning to the speakers, he asked their opinion on the current state of affairs of international cross-border data flows.
Mr Javier Lopez-Gonzalez began his speech by clarifying the peculiarity of the question on data as a whole. Indeed, he clarified that data can be considered equivalent to labour and capital as a means of production. However, unlike labour and capital, data cannot be depleted and can be copied and shared for virtually no cost. For this reason, Mr Gonzales continued, data has huge potential to trigger economies of scale and scope, making the possibility of the free flow of data appealing for economic actors. In fact, the multifaceted role that data plays is more visible in international trade, as data can be exchanged as an asset or means of production, whilst allowing the movement of goods through borders and facilitating trade. The OECD analyst continued by going into detail on how, as a result of the nature of data, there are many different policies to regulate its flow. Notably, he explained, how the OECD studied and categorised the policies adopted in 160 countries regarding cross-border data flow. The speaker explained that the research found that each approach is not limited to any one kind of data, but differs according to the type of data and how they are classified in a given jurisdiction. The first approach can be classified as a “non-approach”. In fact, this type of engagement does not include any restrictions on data flow or any regulation on the matter. While this approach ensures freedom in the movement of data, it raises concerns among citizens, as privacy is not ensured and there is no legislation that regulates how they are used. The second approach is that of “ex-post accountability”. In this case, data can be shared, but from the moment they are transferred, any infringement in the legislation that regulates the matter is directly accountable to the entity that shared them. Another way of regulating data flows is “ex-ante conditionality”: according to this model, data can flow, provided that there are appropriate safeguards in place. In the last approach, flows of data are allowed but conditional to ad-hoc authorisation, where data can be shared only if subjected to very stringent control by the authorities. Mr Gonzales concluded his remarks by stating that while there are reasons to adopt restrictions, governments should also consider the value of data sharing. Indeed, he stated that the challenge for governments is to create an environment of trust, where regulatory standards are met and data can be moved across jurisdictions; in short, the gist of the so-called ‘Osaka Track’ framework.
Ms Helen Stylianou replied to Mr Newman’s question by stating that creating an international environment and framework of trust was an essential underpinning to trade in data, as there was currently a vacuum in the rules. For this reason, she stated, a multilateral framework of trust for consumers would allow local and global players to harmonise and legitimise the trade of data. The speaker then explained that a set of standardised rules was the best way to facilitate trade. This was why Australia was chairing negotiations on a new set of rules, under the auspices of the WTO, to create a framework of rules for trade in data, and ecommerce more broadly. The current governing rules in international trade dated back to 1994, despite the growth in digital trade over the past 25 years. She continued that the environment we were dealing with now was very different from the one in 1994 in light of the significant technological advancements and the value of digital trade, which was over USD29 trillion in 2017. Ms Stylianou then provided an update on WTO e-commerce negotiations. While COVID-19 has affected the negotiations, it has also given impetus to the negotiations. The speaker then outlined the state of play of the Geneva-based negotiations and Australia’s approach to the negotiations. Furthermore, she explained that the topics of discussion were broader than data flow, as they also covered localisation, the moratorium on customs duties and consumer confidence building. She elaborated that Australia pursued these negotiations with a view to facilitate trade, allowing for data transfers while providing the necessary protections. This balanced approach adopted by Australia was evident in the Trans-Pacific Partnership (TPP) Agreement and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). She also noted that Australia’s 14 FTAs have e-commerce provisions and the APEC framework consisted of certifying businesses.
Taking the cue from Ms Stylianou’s speech, the moderator asked Mr Kiener to provide the point of view of the European Commission on the topic of international trade and the flow of data.
Mr Christophe Kiener opened his speech by stating that digital trade has been a priority of the EU for some time now. The main reason for the advancement of this process is that, in the last few years, there has been an increase in protectionist tendencies around the world and, as a result, many European companies and businesses have suffered from the costs of mandatory localisation. Furthermore, in the current Covid-19 circumstances, the capacity of the international community to find an agreement and remove excessive barriers is crucial. Mr Kiener then proceeded to explain the European approach on trade and data. He said that privacy concerns have played a relevant role in the ongoing negotiations between the Union and other partners. Hence, the EU has developed an approach that, on the one hand, leaves the flow of data as free as possible, namely without any localisation requirements, however, on the other hand, it includes provisions aimed at adding some exceptions to privacy and security concerns. A further step taken in assuring the respect of data privacy is through the transparency of these actions, Mr Kiener specified, as all the legislative steps that are taken by the European Union are public and available for consultation. Mr Kiener explained, that the results of this trend are evident in EU trade policy, particularly if we consider the number of ongoing free trade negotiations with other countries, such as Australia, New Zealand, Chile and Indonesia. However, the speaker also highlighted that the number of bilateral agreements being developed across the world inevitably results in fragmentation of the rules on data flow, thus making the global environment uneven. For this very reason, he added, a set of genuinely global rules is needed in order to bring more harmony in the sector. Continuing with his speech, Mr Kiener mentioned that a set of standardised rules at the global level is important not only to protect the centrality of the current WTO-based trade system but also to address the concerns that companies have in emerging markets such as Brazil, Russia and China, which are all participants in WTO negotiations on e-commerce. He also pointed out that, following the adoption of the European Strategy for Data last winter, the EU will continue to address the restrictions to bilateral and multilateral data flows both in free trade agreements (FTAs) and within the WTO. However, the speaker remarked, trade is only one piece of the puzzle and the real challenge is to continue to foster trade liberalisation while dealing with privacy and security concerns. Mr Kiener agreed with the previous speakers on the fact that the best way forward is to achieve an international solution to this set of questions through the finalisation of a comprehensive multilateral agreement.
Addressing the representatives of the private sector, and in particular Mr MacDougall, the moderator asked for their opinions, considering the uncertainty that sometimes characterises the sector and the multiple rules that affect data flows.
Mr Robert MacDougall started his reply by explaining that Vodafone provides mainly electronic communication services to consumers and businesses, but that it also has a significant interest in connecting ‘Internet of Things’ devices that go beyond basic connectivity. These devices can be used in a variety of industrial sectors. He specified that, given the intrinsically international nature of the business, it is crucial to harmonise and reduce undue restrictions on the movement of data, including non-personal data. Achieving this objective, however, poses a series of challenges, given that restrictions on the movement of data can be found in telecommunication regulations, licences and also horizontal data protection and security legislation. He also underlined that one of the emerging challenges lies in the new trend of specific sector regulations relevant to data flows, which restricts digital service provision in that given industrial sector. This trend, the speaker explained, threatens economic efficiency and in the end, has negative effects for customers. Mr MacDougall then pointed out the necessity of having a clear delineation between personal and non-personal data. Reinforcing this distinction, he explained, would make the use of non-personal data easier across the supply chain and would support economic growth. As an example, the speaker referred to agriculture and manufacturing, as connected devices in these sectors would typically generate non-personal data. Indeed, Mr MacDougall remarked, a study previously commissioned by Vodafone demonstrated that in agriculture alone there would be economic benefits of 35 billion euro by 2027, based on the sharing of non-personal data across the supply chain. To conclude his remarks, Mr MacDougall highlighted three policy recommendations in this area. First of all, the European free flow of data Regulation and the principles that underpin this Regulation should also be discussed on the international stage; secondly, the inclusion of data in the context of free trade agreements; last, but not least, a clear classification of personal and non-personal data at the international level, encouraging the OECD to consider issuing guidance on the topic.
Mr Kevin Rogers took the floor by specifying that he was also representing Panasonic Avionics, a branch of the company that provides mobile connectivity in aircraft and an industry leader in the provision of inflight entertainment systems in the commercial aviation sector. This sector, he said, is exemplary, as it aims to provide means of communication to international travelling customers. However, he specified, it is not exempted from several challenges. He explained that these challenges become evident if we consider the different origins of passengers in a commercial flight when it comes to providing connectivity. Mr Rogers continued that the differences in approach of legislations are indeed facts that have to be taken into account when regulating the flow of data for passengers coming from different countries, as this phenomenon represents an important barrier to the provision of these essential connectivity services. The issue of connectivity is relevant for other reasons as well, he added. In fact, Mr Rogers specified, following the measures to fight the pandemic, many countries have ensured a way to allow smart working. However, in developing countries like Brazil, Mexico or the Philippines, where smart working is less viable, there is the intention to propose an internet tax. In his opinion, if this legislation is finalised another unnecessary barrier will be built. Mr Rogers then raised other similar issues, by stating that, despite the growing interest in data flow, e-commerce and connectivity in developing countries, they are showing an inclination to adopt protectionist measures. This trend, the speaker explained, is also reflected in the intention of some countries to tax data flow. Mr Rogers also expressed his concern about this trend, as it may affect the way data is shared and poses further barriers to delivering data across different industries and countries. To conclude his reply, Mr Rogers highlighted the urgency in avoiding barriers across borders for data flow, to reduce the complexity and burdens on companies and industries by providing more predictability in the sector. He also urged both private and public stakeholders across the globe to find common solutions within the WTO and reduce potential obstacles, particularly in developing countries, in order to harness the true potential of data and to drive economic growth.
The moderator proceeded in kicking off the second round of comments by posing a question to Ms Stylianou. He asked if the European approach, which allows the free flow of data with third countries, could be a viable model to apply to international negotiations in general, and in the WTO more specifically.
Ms Stylianou began by noting that there were a number of models for addressing the uncertainty. One model was for a global approach of a set of rules and exceptions in an international agreement. It would then be up to each party to implement its international obligations domestically and regulate accordingly. As an example, the CPTPP actually required each party to have a privacy framework as well as allow for free flows of data and prohibit data localisation. She stressed the need for a global standard of rules to provide businesses with certainty and a level playing field while creating trust for consumers. She concluded by highlighting that while bilateral and regional agreements were positive steps toward addressing the uncertainty, they were not substitutes for a multilateral outcome. A multilateral framework would be the fairest and most trustworthy.
Mr Kiener began his reply by agreeing with Ms Stylianou and by stating that it is unlikely that a one-size-fits-all approach will be found for the entire international stage, as it would result in a dangerous oversimplification. To clarify his statement, he explained that ensuring a stable privacy regime for Europe and finding a global consensus are two different, but complementary, aspects of the same topic. Indeed, the adequacy regime, namely whether a country outside the EU offers an adequate level of data protection, is fundamental for ensuring that privacy rules are enforced and applied for data flow outside the Union. He subsequently pointed out that, while this policy approach can be a useful tool during negotiations with countries with similar regimes, such as Japan, this is often not the case for other countries. Nevertheless, he specified, with regard to countries such as Australia, the impossibility of applying adequacy decisions does not prevent the exchange of data under other conditions. Furthermore, the speaker highlighted that privacy regimes are not a barrier to preventing protectionist tendencies all over the world. Going further into detail, the speaker stated that, despite the existence of either adequacy decisions or binding corporate laws, it is important that they are all coupled with trade rules. This approach, the speaker said, describes what the EU has been seeking to achieve, both in bilateral agreements and in the WTO joint statement on e-commerce. On the topic of the effects of the Coronacrisis, Mr Kiener expressed his confidence on the fact that the current crisis will increase international cooperation, as it has been proven that fostering nation-states’ sovereignty is not achievable through closing borders and relying on their own resources. Instead, the speaker explained, a larger degree of national control is achieved by maintaining a steady supply chain. Indeed, the speaker remarked, these aspects of the current international context call for further efforts in international cooperation. In his final remarks, the speaker provided an overview on how to achieve a global consensus. In particular, he stressed the fact that the European model was developed after intensive consultation with businesses, institutions, NGOs and civil society, which resulted in the incorporation of privacy as a fundamental European value. However, this feature of EU data policy does not automatically exclude the possibility of contracting free trade agreements with other actors. Furthermore, Mr Kiener said that imposing the EU model, which is notably the result of a specific supranational process, would likely result in very few achievements in a purely intergovernmental setting. The speaker also remarked that the multilateral approach requires a lengthy time to reach consensus, compared to bilateral agreements. However, the speaker remarked, these two approaches must be seen as complementary and not mutually exclusive.
Mr Newman then turned to Mr Gonzales asking him whether there is a parallel approach to adequacy regimes and free trade agreements and what could be the best model to find a global consensus on data flow.
Mr Gonzales started the second part of his comments by pointing out that it is common to treat data as a monolithic entity. This perception, he continued, can be misleading, as not only are there many different types of data, such as personal, non-personal and health-related, but they also encompass different regulatory domains. With regard to the possibility of finding a global model of reference, the speaker expressed some reservations. Indeed, he specified that on top of unilateral and bilateral legal instruments and trade agreements, there are also multilateral references, such as the OECD non-binding privacy guidelines. Furthermore, he added, there has been an increase in the use of “sandboxes”, which enable specific kinds of data sharing according to the type of data. Mr Gonzales subsequently stated that, while there are several valuable routes to take in reaching a deeper global understanding, there is no “silver bullet” to find a global consensus. As far as developing countries are concerned, Mr Gonzales said that they have an interest in engaging with the global dialogue, as digitalisation is proven to increment economic growth and trade volumes, regardless of the level of development of a given country. Furthermore, he added, developing countries are particularly susceptible to the benefits of digitalisation as, on the one hand, digital technologies allow better access to global markets and, on the other hand, several studies have demonstrated that despite these countries having initial disadvantages and higher costs, digitalisation is always beneficial to them. The speaker also elaborated on the benefits to be reaped from a more convergent global environment and how this process is even more important for developing countries. Finally, he stated that there is a strong will at the global level to find a multilateral agreement and that the Coronacrisis may have slowed negotiations for the moment, but it also made clear the importance of digitalisation, regardless of sector and geographical location.
The Q&A session covered the following issues: the use of bilateral agreements instead of multilateralism; what kind of new international rules are still needed to foster an open, competitive, rules-based global digital economy; how is it possible to make rules to promote cross-border data flows that could be accepted on a global level; how to integrate the interests of developing countries in the WTO; how the health crisis will impact the problems with data flow; the benefits of the free flow of data for SMEs; what kind of model can be adopted on a global scale; how the European model is likely to assume global relevance; how has the free flow of non-personal data increased competition within the EU Digital Single Market; how can the EU enhance its democratic values without appearing too restrictive, making it less attractive in the future; what could structural assistance for developing countries look like, in order for them to take economic advantage of the free flow of non-personal data on a global level; the ways that the COVID-19 crisis will impact the free flow of non-personal data in the future.
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