More Nuanced Approach Needed on International E-Commerce Trade Rules, USTR Officials Say

Governments need to move away from blunt mechanisms like the “Great Firewall of China” as they consider how to regulate the international flow of data and other aspects of e-commerce, said Jonathan McHale, deputy assistant U.S. Trade Representative (USTR)-Telecom and Electronic Commerce Policy, during a Brookings Institution event Tuesday. Brookings published a report Monday that some governments are restricting the Internet “in ways that reduce the ability of businesses and entrepreneurs to use the Internet as a place for international commerce and limits the access of consumers to goods and services” (http://bit.ly/XW2mLH).

The Internet’s reputation for being “notoriously resistant” to borders has made it difficult for governments to impose anything other than such blunt mechanisms, but they are “a very inefficient way of being able to participate in what’s obviously an enormously innovative and economically important sector,” McHale said. “We have to rethink what are reasonable rules that will allow governments to have an impact on what happens to data, despite the fact that they don’t have jurisdiction over necessarily where the data is located or where the servers are.” The worst thing that could happen is a repeat of the “balkanized” telecommunications network that resulted from governments nationalizing their portions of the global telegraph network for strategic reasons, McHale said.

All governments have the sovereign right to regulate activities within their borders, but international trade rules like those being negotiated in the Trans-Pacific Partnership (TPP) should hold foreign governments accountable for those regulations, McHale said. In one recent case, USTR successfully negotiated with the Chinese government to lift its block on a U.S. software company’s cloud collaborative software development tool, he said. While the U.S. and China can agree to disagree over what are legitimate grounds for blocking data traffic, “at least they were held accountable in that case to not, in my view, impede legitimate commerce,” McHale said. “The trick here, though, was that was at their discretion. They had no necessary obligation to listen to me and to take action."

USTR approached intellectual property rules during TPP negotiations with the underlying belief that they wanted to ensure that vehicles for monetizing the information economy are available in the countries where U.S. companies do business, said Stan McCoy, assistant USTR-Intellectual Property and Innovation. There’s certainly been alarm in the context of TPP negotiations since there’s a “strain in the public discourse around the Internet that abhors any kind of restriction, even if it’s a restriction for a property right that wouldn’t bother us at all if we were talking about the same thing in the environment of physical property,” McCoy said.

The public and stakeholders are less likely to trust trade negotiations that involve IP issues if they aren’t transparent, said Allan Friedman, research director at the Brookings Institution’s Center for Technology Innovation. There was a public perception that TPP and the Anti-Counterfeiting Trade Agreement lacked much transparency, he said. “You can’t have an information economy without intellectual property,” he said. “The challenge is how do we do this in a transparent, democratic fashion?"

USTR has tried to facilitate stakeholder involvement in the TPP negotiations, though “that’s not to say there aren’t still challenges. But TPP negotiations have involved a degree of stakeholder involvement that has “never been present in any previous trade negotiation that I've been affiliated with,” McCoy said. Improving public understanding on these issues is important because it allows additional space to ensure IP rights are effectively protected, he said.