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10/29/15

When trade and tech collide: What policymakers need to know

Today, AEI has published Claude Barfield’s working paper “When Trade and Tech Collide: Digital Policy Challenges and Solutions for 2016 and Beyond.” This paper is part of AEI’s Global Internet Strategy project. In his report, Barfield covers key issues and outlines potential policy solutions that will ensure the continued advancement of the Internet and other technologies that can empower citizens, enable entrepreneurs, and promote prosperity.

Included below is a selection of Barfield’s key conclusions and recommendations. To read the paper in full, click here.

  • On barriers to data flows:
    Requiring local data storage, a local partner, or the transfer of cutting-edge technology is detrimental in a digital and globalized economy. While current actions by the US government to combat cross-border data restrictions are commendable, it is time for both the president and Congress to take steps to raise digital trade issues to the highest priority. These digital strategies must become the top goals in ongoing trade negotiations as well as today’s myriad international organizations and diplomatic and commercial fora.
  • On the EU striking down the Safe Harbor agreement:
    The ECJ ruling will have enormous disruptive effects on data flows between the United States and Europe. In light of the gravity of the economic consequences of failure, the White House should make it clear to top European officials that it expects the already-underway re-negotiations of the agreement to be both expeditious and flexible. Ultimately, the best long-term solution might well be to include provisions regarding safe harbor in the proposed US-EU free trade agreement, whose chapters will be legally binding.
  • On the “Right to be Forgotten”:
    Thus far, the Obama administration has been conspicuously silent on issues of privacy and international relations. That should end. Europe’s “right to be forgotten” directly flouts principles of free trade in data, as well as in other goods and services. US TTIP negotiators should introduce this issue into the ongoing talks, with the stipulation that, at a minimum, Europe’s attempt to force a worldwide de-listing of information would not be allowed. The Obama administration should also immediately initiate bilateral negotiations on this issue.
  • On encryption:
    The encryption debate forces a careful balancing of privacy and security. As matters now stand, the balance tilts in favor of the proponents of end-to-end encryption. There are two reasons for this result. First, according to all leading experts and cryptographers, there is at present no way to comply with demands for backdoors or source keys without introducing grave weaknesses into the system. Second, there is the international dimension: as worldwide competitors, Apple, Google and other US companies cannot discriminate among markets and customers. Handing over duplicate keys to US government agencies will inevitably lead to understandable demands from foreign governments.
  • On crafting responses to cyberattacks:
    The US faces the challenge of devising proportional counteractions to a variety of potential incursions from individual states, state-backed hackers, and private operatives. The president’s April Executive Order and the September summit agreement represent a reasonable foundation for future US responses. The administration, however, would be well advised to reiterate and underscore that, in the future, destruction of public or private data – from whatever source – will be met with retaliation.
  • On dealing with economic espionage:
    With regard to the complex issues presented by economic espionage, the US should stick to its guns when it comes to responses to the theft of intellectual property and/or trade secrets. Negotiations in the World Trade Organization (WTO) have introduced IP and trade secrets obligations into the global trade regime, and the US is thus on solid ground when defending technologies that are fundamental to its international competitiveness. For the foreseeable future, however, the US will have to turn to its own domestic IP and trade secrets legal framework, and to its criminal justice system to enforce that framework. There are also legal tactics that the United States should avoid. Most particularly, future US indictments should not conflate charges that include the theft of intellectual property and trade secrets and material related to pending trade remedy cases. As this report shows, the US itself has strongly defended surveillance and data collection by US intelligence agencies that involves trade negotiations, as well as trade infractions relating to US or WTO law. Continuing down this road in future indictments will open America up to valid charges of hypocrisy.
  • On the ongoing trade negotiations:
    Recently, European trade officials have complained that the United States is dragging its feet, leaving the talks “not even halfway complete” after almost three years of negotiations. Though it will further complicate matters, the recommendation in this report is to use the more comprehensive TTIP negotiations to settle important, looming questions and potential conflicts regarding the Internet. The United States should aggressively press forward with its stated digital trade policy goals in all fora. This means pinning down the priorities listed above first in the TPP negotiations, followed hopefully by a successful conclusion of the TISA and TTIP negotiations within the next several years. Down the road, rules for digital trade should become a central element of the next WTO round of negotiations.

For more research and analysis on this topic, including information on how the Internet has impacted national economies and global trade, the Snowden effect, and what to do about China’s hardening stance on digital trade and cybersecurity, read the working paper in full here.



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