USTR elaborates the Two Dozen Digital Rules of Club TPP

For a background on the data protectionand privacy aspects of the Trans-Pacific Partnership agreement andDigital 2 Dozen principles, please read CIS’ piece here. 

Ambassador RobertHolleyman

Ambassador Holleymanopened with stating that trade agreements are created to build afoundation for national policies. He added that the D2D is not merelya tech D2D, rather it is based on the premise that our economies havedigitised to a large extent, and hence, the TPP contains provisions onagriculture as well. The TPP tries to combat barriers to the growth ofdigital economy, and the D2D provides the most modern and thehighest standard of such provisions. The D2D tenets can be dividedinto three categories: 

1. Provisions to ensurethe internet is open and safe, and an effective channel for trade andservices.

2. Provisions to combatprotectionist and restrictive provisions of member nations. The D2Dtalks about eliminating rules that seek to make foreign companieslocalise their data by building expensive data centers in everymarket they seek to serve. Further, TPP also seeksto prevent countries from ‘forcing’ foreign companies from transferring theirtechnologies and production processes as a pre-condition for doingbusiness there.

3. Provisions on IPRs to’build a level playing field’ in order to ‘protect’ innovators andcreators in the digital space.

“ …The TPP rules onenforcement of IPRs are strong and balanced and embody the TRIPsstandards. For instance, countries are required to to impose criminalpenalties on trade-secret violations such as cyberhacking.”

He added:

“We believe these rules are the foundation for next 20 years of the digital economy. To make sure that India does not fall behind we want to work with India (for the adoption of these rules). We’re encouraged by the new government’s programmes and the PM’s engagement with US and silicon valley leaders.
We encourage India to level the playing field. To that end the USTR is working with the Indian Ministries of Communications and IT, and Commerce and Industry to exchange practices for building open markets. We want to work together in eliminating localisation policies given that how a lot of IT companies have established investment heavy R&D centers in India, and they rely heavily on the free flow of cross border data. Imposition of localisation of data would be detrimental in this age of cloud-computing. We’re aware that the Indian government is reviewing its policies on cloud-computing and encryption, and we encourage the government to consider the implications of the such policies carefully, for India is also a leader in global IT and would be a potential framework setter at that.”

The D2D also endorseselimination of custom duties on ICT products, and the Ambassadoradded that the US was very pleased to see India deposit theirinstrument of accession on the Trade Facilitation Agreement with theWTO. The US has been pleasedto see India’s ratcheting up its norms for IPR protection. Hementioned that the two countries held a successful copyright workshopearlier this year, and later this year they plan to conduct aworkshop on trade secret protection. The D2D also says thatconformity assessment procedures are excessive and should beeliminated. This emerges from US’ IT industries concerns on thecompulsory registration of ICT products that required re-testing inIndian labs.

He made a case foropening up Indian markets by quoting a study which revealed that theIndian market for ICT products is worth 65bn dollars, while theglobal market stands at 2 trillion dollars. So while India couldleverage its exports to meet the demand, the question remains if wewant to foster a market based on openness. In his opinion, opennesshas enabled the IT sector in India to access other markets. However,he observed that countries were erecting barriers to this openness byrestricting the cross-border free-flow of data, particularly and thisis where the TPP assumes importance. The real challenge now is forthe US and India to prepare their own version the the D2D.

On the route of D2D, theAmbassador was largely optimistic:

“The TPP has Obama’sbacking and the US Congress should ratify the deal before theelections. Other TPP members have already initiated steps to ratifythe deal in their countries. For phase II, 13 non-member countrieshave already approached the US to be a part of TPP since the deal wasconcluded.”

Ambassador Shyam Saran

He began by stating thatthe India-US engagement on digital economy would become an area ofclose cooperation for US-India relationship. A few years ago the USpharma was unhappy with Indian generics, and this tussle left a badtaste between the countries, and also spilled over into the politicalside. Disagreements on several issues such as IPR, WTO subjects, etcstill persist, despite some developments reflecting mutual trust andconfidence (for instance the counter-terrorism initiative).

He welcomed potentialcooperation in the digital field, because that would dispel thenegativity and prevailing perception of India and US not being on thesame page. The one area that has been a shaky pillar is the trade andeconomic relationship. In his frank opinion, the Indian establishmentperceives USTR’s outlook on trade issues as quite adversarial. He was mindful of adeveloping India’s unique needs and priorities:

“In regard to thedifferences between India and US on trade and economic issues, it isnot surprising because we must also be mindful of the reality- we area developing country, wheras the US is highly developed andtechnologically advances – thus, we need different lenses for each.This is something we need to address, (remember how we acknowledgedand fixed this in our defence relationship re the nuclear deal). Thelesson that I draw is that here is an area critical to bothcountries’ growth, and we need to address this differentialaspect…”

According to him, rightnow India has an ambiguous position on the TPP. Holleyman hadmentioned that the deal was based on an open platform, and Shyampointed out that it was in fact conceived through closed doornegotiations. It is common knowledge that rules at TPP were arrivedat through complex negotiations between 13 countries, which surelywas a process of complex give and takes. At this stage, it was notpossible for India to look at one chapter and agree to meet the “goldstandards” set in it.

According to him, D2D wasimportant to the US solely in terms of trade benefits for its ownbusinesses. He said that to convince the Indian government, the USTRwill have to first convince the Indian IT industry the D2D benefits-which he was skeptical of. The reason was that this ‘opportunity’comes across as a clear case of double-standards when the US talksabout lowering barriers in India, and on the other hand is increasingbarriers on its own shores (several pending bills in the US Congressindicate this). Similarly, immigration troubles for the Indian talentpool have only gone up. The other aspect heraised was on localisation and IPRs. He said that while stands onthese issues were being formulated, it should also be expected thatthe government will take into account concerns of privacy andsecurity. In the US itself, the US treasury has said in regard tobanking and financial transactions localisation may be necessary.

He closed by offering analternative route to the US – one of working with India as apartner in the Digital Economy instead of fixating on barriers and/ornitpicking on Indian legislations. This would be a more sustainableway to capitalise on India’s growth potential and align with itsdigital future.

Samir Saran

Samir responded tothe discussants by offering his thoughts (and questions) on D2D andthe digital economy, broadly:

“…Can the digitalspace be a new space for a partnership? Three stories are importantin the context of a trade document: First is dominated byaccess – India is seeing 6 million new internet users every monthand most of them are on low-cost mobile devices. Can a tradingnormative process allow to continue this phenomenon as it is?Second is opportunity –India is already responding to investment flows. In terms of privacyand security – if India believes that it can become the digitalinfrastructure hub, it will need to develop world-class encryptiontools. Similarly in terms offree-flow of information, when Obama and PM met they endorsed thesame. So it is a step back from localisation, anyway. So you seeIndia changing positions to make the atmosphere more businessconducive.Third is security – Howcan you make free-flow of data uni-directional? Why is it that youwant data to flow unfettered when it creates value, but you arecreating barriers for giving data for security purposes?…

…Further, in a phasewhen the mood worldwide is in favour of de-globalisation, willhyperglobalisation through FTAs work?…”

Finally, Holleymanacknowledged that historically India and US have had differences, butwith the digital economy perhaps they can forge some approaches. Heaccepted that some of the points were written squarely for the UStech sector, but he hoped that the other 11 partners of the TPP willcome out with what the D2D means to them.