Reproduced with permission from Electronic Commerce & Law Report, 21 ECLR 32, 8/17/16. Copyright � 2016 byThe Bureau of National Affairs, Inc. (800-372-1033) http://www.bna.com

Cross-Border Trade

Tech, Internet Groups Keep Up FightFor Trade Pact as Election Casts Shadow

BY ALEXIS KRAMER

A mid political debate over the Trans-Pacific Part-nership trade pact is an underlying dispute overwhether the accord is essential for digital trade

growth.There is also continuing uncertainty over the fate of

the deal itself. It has been approved by trade ministersfrom each of the 12 Pacific Rim countries, which repre-sent 40 percent of the world GDP, but it hasn’t yet beenratified.

The technology sector, including companies such asIBM Corp. and eBay Inc., believes the TPP’s electroniccommerce chapter in particular will have a beneficialimpact on companies and consumers by removing bar-riers to the free flow of information.

Meanwhile, some nonprofit groups have expressedconcern that the intellectual property chapter’s sectionon internet service providers isn’t sufficiently flexibleand that certain digital rights provisions may pose tech-nological barriers to people with disabilities.

A U.S. vote on the deal could likely depend on howthe presidential election plays out in November.

Software and mobile application industry sources, in-cluding BSA | The Software Alliance and ACT | TheApp Association, told Bloomberg BNA that the agree-ment’s data provisions are vital for digital trade andeconomic growth. The free flow of data across borderswould facilitate the exchange of new ideas, scientificdiscoveries and technological innovation, and a ban onlocalization rules—which require locally created data tobe stored on servers within the same country— wouldencourage business growth and competition, they said.

But critics argue the accord doesn’t give countriesenough flexibility in determining what framework toimplement for limiting the liability of ISPs that have in-fringing content on their networks. Under the TPP par-ties would be required to implement a ‘‘notice and take-down’’ system similar to that of the U.S., public interestgroups say. They also say the TPP’s digital rights pro-tection provisions could hinder the ability to makecopyrighted works accessible to the blind, deaf andhard of hearing.

The fate of the trade deal is uncertain. According tointernational trade experts, the lame-duck session maybe the best chance for Congress to ratify the agreement.After that, passage may depend on the composition ofCongress, they said. Democratic presidential nominee

Hillary Clinton and her GOP rival, Donald Trump, bothoppose the pact.

‘‘If it doesn’t happen this year, it’s questionable aboutwhether it’ll pass at all,’’ said David Glynn, an interna-tional trade lawyer and of counsel at Holland & HartLLP in Denver, Colo.

The tech sector has been actively pushing to movethe agreement forward. The Trade Benefits AmericaCoalition—whose members include eBay Inc., Mi-crosoft Corp. and IBM Corp.—has been ‘‘educatingMembers of Congress on the local benefits of trade andthe TPP through personal meetings, local opinionpieces, site visits and data releases,’’ a spokeswomanfor the coalition said.

BSA | The Software Alliance has participated in anopen letter to the presidential candidates in support ofthe TPP. The company has also met with members ofCongress all year to discuss the significance of theagreement, according to a BSA spokeswoman.

IBM’s Government and Regulatory Affairs ExecutiveDebra Marks said IBM will meet with legislators thismonth to present its case on the TPP, focusing on thepact’s electronic commerce chapter. The agreement isan ‘‘incredibly forward-looking agreement that ensuresthe openness of the internet and puts small businesseson a level playing field,’’ Marks said.

The e-commerce chapter of the TPP provides that sig-natory countries ‘‘shall allow the cross-border transferof information by electronic means, including personalinformation’’ when such transfer is for the conduct ofbusiness.

The chapter would ban countries from requiring theuse or location of computer servers within national bor-ders as a condition for conducting business there, re-ferred to as data localization.

The TPP’s intellectual property chapter provides a‘‘safe harbor’’ provision that protects ISPs from liabilityfor the infringing content posted by users, as long asthey promptly take the content down upon receivingnotice. The IP chapter also prohibits the circumventionof technological measures that control access to a pro-tected work.

World Without TPP? The development, implementa-tion and innovation of artificial intelligence, the internetof things and cloud computing all require the free flowof data, Carl Schonander, senior director for interna-tional public policy at the Software & Information In-dustry Association, said. ‘‘It would be more difficult toreap the full benefit of these technologies if you denycross-border data flows,’’ he said.

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Electronic Commerce & Law Report™

‘‘If we don’t have an agreement to secure the free

movement of trade, we really will miss out on a

growth of opportunities.’’

STEPHEN EZELL, INFORMATION TECHNOLOGY AND

INNOVATION FOUNDATION

The data flow and localization provisions within theTPP aren’t found in any other trade agreement, saidVictoria Espinel, president and chief executive officerof BSA. The TPP is the first international agreement tohave strong, enforceable rules on data, she said.

‘‘It’s an unprecedented and historical opportunity,’’Espinel said.

Industry groups said if the TPP is not ratified, othercountries may take the lead in defining global standardsfor cross-border trade. Those standards may not in-clude the unique data rules that would benefit the digi-tal economy, they said.

‘‘Failure to secure the TPP would be disastrous forthe digital economy,’’ Stephen Ezell, director of globalinnovation policy at the Information Technology and In-novation Foundation in Washington, said. ‘‘If we don’t

have an agreement to secure the free movement oftrade, we really will miss out on a growth of opportuni-ties.’’

Ezell said that as the global digital economy contin-ues to rise, ensuring the free flow of cross-border datais as significant as ever. Half of all value in the globaleconomy will be created digitally by 2025, according toa report by TEKES, Finland’s Technology and Innova-tion Agency.

Schonander said that if the TPP doesn’t pass, othercountries, including China, will likely become more in-fluential in developing trade agreements that may nothave the same digital trade provisions. They may im-pose data localization rules or increase requirements tosee source code, he said.

Morgan Reed, executive director of ACT | The AppAssociation in Washington said the greatest concernwould be who picks up the lead in setting standards fordigital trade. The fear is that it might put a country likeChina ‘‘in the driver seat for defining what’s appropri-ate in the digital economy,’’ he said.

‘‘It behooves the U.S. to write the rules on how digi-tal trade moves forward,’’ Reed said.

But not everyone thinks the TPP is a make-or-breakdeal for the tech sector. Jeremy Malcolm, senior globalpolicy analyst at the Electronic Frontier Foundation inWashington, said there would be very little impact onthe tech sector if TPP doesn’t pass. ‘‘It would be more

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symbolic than anything that local hosting mandates arenot acceptable,’’ he said. ‘‘All tech companies lose isthat they wouldn’t have this statement of principle.’’

Free Flowing Data. Internet industry groups have adifferent view. Digital trade and the free flow of data isa critical component of insuring the internet industry isable to reach over 3 billion users, said Ari Giovenco, di-rector of trade and international policy at the InternetAssociation—whose members include Facebook Inc.,Google Inc. and Amazon.com Inc. ‘‘The TPP would be awin for the internet community as a whole,’’ he said.

The TPP’s provision on cross-border data flows isalso ‘‘absolutely critical’’ to the mobile application in-dustry, according to Reed. ‘‘Everything we do on oursmartphones is a cloud based service,’’ he said.

The TPP would ‘‘entrench existing U.S. law so that

we can’t improve it in the future.’’

JEREMY MALCOLM, ELECTRONIC FRONTIER FOUNDATION

Cross-border data flow affects more than the just thetech industry, though.

According to Espinel, predictive analytics software—which mines data to extract information and predicttrends for businesses and organizations—is more accu-rate with information from more than one region. In ad-dition, the location where data is collected and where itneeds to be analyzed isn’t always the same, she said.

An analysis of data on indicators of an increased riskof a form of cancer, for example, would be more accu-rate if more than one subset of data is available, Espinelsaid. In the healthcare industry, it would be much moreeffective for doctors and scientists if they could analyzedata from across the globe, she said.

Cross-border data flow is essential for using analyticssoftware to detect fraud, Espinel said. A credit cardowner may be located in one country, a purchase asso-ciated with the card may take place in another, and thecompany that can analyze the data may be located in athird country.

‘‘If the data can’t flow among those countries instan-taneously, it is not useful,’’ she said.

TPP Equals More Competition, Supporters Say. The banon data localization rules would better enable mobileapp companies to do business and be more competitivein foreign markets, according to Reed.

Data localization laws would force U.S. companieswishing to do business globally to build computer serv-ers in each country or buy the services of existing serv-ers there. According to Giovenco, setting up servers inevery market a company wishes to enter can be costly.

Reed said localization laws would make it difficult forbusinesses to operate internationally and therefore pre-vent global consumers from purchasing products thatcould benefit their own business.

For example, he said a U.S. developer of an agricul-tural app designed to help grow crops couldn’t offer theapp to farmers in countries with a localization law inplace without setting up a server there.

The localization ban would benefit any mobile appcompany, regardless of size, whose apps are globallyapplicable, Reed said. He said that companies offering

apps designed for just one locality would also benefitbecause they still store data on the cloud and highercompetition would lower the cost of cloud computingservices.

Digital Downside? Despite the benefits, some criticshave expressed concerns that the TPP could hinder theuse of technology to turn copyrighted works into moreaccessible formats for blind, deaf or hard of hearingpeople who may need descriptive audio or closed-captioning to enjoy them.

The intellectual property chapter of the TPP prohib-its people from bypassing technological security mea-sures that restrict unauthorized access to copyrighteddigital media and other products. The chapter allowscountries to include exceptions to the anti-circumvention ban to enable non-infringing uses, butthose exceptions aren’t mandatory, according to Mal-colm.

‘‘This makes it more difficult to make even non-profitadaptations of copyrighted works in accessible formats,or to make tools available to those making such adapta-tions,’’ Malcolm said. Passage of the TPP wouldn’t af-fect the current state of accessibility but it would ‘‘en-trench existing U.S. law so that we can’t improve it inthe future,’’ he said.

‘‘It behooves the U.S. to write the rules on how

digital trade moves forward.’’

MORGAN REED, ACT | THE APP ASSOCIATION

Krista Cox, director of public policy initiatives at theAssociation of Research Libraries in Washington, saidthe exceptions language in the anti-circumvention pro-vision was a ‘‘welcome development,’’ but that it couldbe stronger.

‘‘It’s a shame that language around rights for rightsholders is much stronger than rights for users, but hav-ing this language on limitations and exceptions in theTPP is a step forward,’’ she said.

Carolina Rossini, vice president of internationalpolicy and strategy at Public Knowledge in Washington,disagreed that the TPP would present barriers to webaccessibility. The agreement provides flexibility in de-termining the appropriate scope of anti-circumventionprohibitions as well as exceptions to those prohibitions,she said.

This flexibility gives ‘‘a good amount of space forcountries to design good law and policy that would dealwith accessibility issues for the blind,’’ Rossini said.

Cox said the TPP doesn’t present flexibility, however,within its internet service provider ‘‘safe harbor’’ provi-sion. The IP chapter contains a safe harbor similar tothe U.S.’s notice and takedown system under the Digi-tal Millennium Copyright Act, which protects ISPs fromliability for the infringing acts of their users as long asthey remove the content upon receiving notice.

Annex 18-E to the chapter provides that the noticeand takedown framework doesn’t apply to a party that,as of the date of agreement of the TPP, has insteadimplemented a system for forwarding notices to the al-leged infringer. Canada is exempt from the notice andtakedown framework under this annex because it has a

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‘‘notice and notice’’ system, in which the recipient ofthe notice is responsible for determining whether thecontent is infringing.

Cox said that the Canadian system may be betterthan the notice and takedown system, and that signato-ries should be allowed to choose which one to imple-ment. Notice and notice is ‘‘a newer system, so time willtell on its effectiveness, but the point is that the TPPshould preserve these flexibilities rather than prohibit-ing them,’’ Cox said.

Uncertainty Lies Ahead. As the presidential electionnears, U.S. ratification of the TPP is far from certain. In-ternational trade experts have considered the possiblescenarios.

Ezell said that chances in the near term for the TPPare much better in the lame duck than after the nextpresident takes office. ‘‘Near-term prospects for pas-sage of the TPP are far greater under President Obamathan they are under a President Clinton or PresidentTrump,’’ he said.

Clinton campaign chairman John Podesta said July27 at the Democratic National Convention that Clintonis opposed to the TPP and isn’t interested in renegotiat-ing it. ‘‘She is against it before the election and after theelection,’’ Podesta said.

Trump expressly said he would withdraw the U.S.from the TPP in an economic policy speech delivered inJune.

Meanwhile, Obama has reaffirmed his commitmentto the TPP. ‘‘This is an opportunity to grow our econo-mies and write the rules for trade in the 21st century ina way that’s equitable,’’ Obama said in an Aug. 2 pressconference.

David Olave, director of international trade and gov-ernment relations at Sandler Travis & Rosenberg PA,said that passage during lame duck is unlikely, but thatthe likelihood is greater if Clinton wins.

‘‘Trump is running on such a strong anti-trade plat-form that if he wins there will be no way that Congressvotes on this before he is president,’’ Olave said. But ifClinton wins, and depending on the outcome of theCongressional elections, Republicans in the currentCongress may decide it is better to sign the deal beforeClinton makes changes to it, he said.

Glynn said that after the election there is a goodchance Obama will introduce the TPP during the lameduck Congress. Once the new president takes office,passage appears unlikely, he said. Both candidates areagainst the TPP, and even if Republicans, who generallysupport free trade, take over Congress, the presidentcould still veto the agreement, he said.

The 12 signatories to the TPP are Australia, Brunei,Canada, Chile, Japan, Malaysia, Mexico, New Zealand,Peru, Singapore, the U.S. and Vietnam.

To contact the reporter on this story: Alexis Kramerin Washington at akramer@bna.com

To contact the editor responsible for this story: KeithPerine at kperine@bna.com

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