Ignoring data-flows is disastrous for Europe’s economy

DISCLAIMER: All opinions in this column reflect the views of the author(s), not of EURACTIV.COM Ltd.

The UK should urgently begin talks with the EU on obtaining a data adequacy decision, say MPs. [kentoh/Shutterstock]

The EU must come to the negotiating table on cross-border data flows or risk harming its economy and its reputation as a good place to do business, write Dean Garfield and John Higgins.

Dean Garfield is President and CEO of ITI, a Washington-based global trade group representing over 60 of the world’s leading technology companies. John Higgins is Director General of Digital Europe, a trade group representing the digital technology industry in Europe.

The modern global economy runs online, and it depends on the constant movement of digital information across borders to power industries and create opportunities for growth around the world. Europeans benefit as much as anyone from cross-border data flows, and it is in Europe’s interest to make sure it has a seat at the table in writing data-related rules for global trade.

European businesses are using data every day to save and improve our lives. Airbus uses embedded sensors to transmit and evaluate flight data in order to improve aircraft safety and performance, Unilever deploys “global data warehouses” to optimise its operations and lower prices on its products, and Volvo analyses diagnostic data sent from its vehicles to warn drivers when repairs are needed. European firms such as these depend on transferring data across borders to compete overseas and support jobs at home. In 2014, EU firms exported almost $570 billion in technology-enabled services – not including the countless other ways that European companies rely on the movement of data across borders, according to a recent US Department of Commerce study.

Considering the extent to which our economy is powered by data, and the benefits it provides for all of us, it is puzzling that the European Commission is again asking whether to include cross-border data flows in future trade agreements such as the Transatlantic Trade and Investment Partnership (TTIP) and the Trade in Services Agreement (TiSA). The global tech sector is aware of the Commission’s concerns regarding the implications of doing so for its internal regime. However, we respectfully ask the European Commission to continue working in parallel on a discipline at international level for cross-border data flows and to hold open discussions with stakeholders on how to address EU priorities without harming European companies and citizens.

Some background on how we have arrived at this precarious spot may help: as economic activity has become by nature both more global and more digital, many governments have recognised the importance of cross-border data flows in trade agreements. For example, the 2007 free trade agreement between the Republic of Korea and the United States included commitments by both countries to “endeavour to refrain from” restricting data flows. Another milestone was reached in the recently concluded Trans-Pacific Partnership (TPP) agreement, which covers 40% of the global economy, when governments agreed to a binding legal obligation to “allow the cross-border transfer of information by electronic means”.

What makes the TPP agreement particularly important is that it prioritises the movement of digital information across borders, while guaranteeing the ability of governments to control that movement for legitimate public policy reasons. The TPP clarifies that an economy “may have its own regulatory requirements concerning the transfer of information by electronic means” and that it may limit cross-border data flows “to achieve a legitimate public policy objective”, as long as it does so in as narrow a way as possible and without seeking to restrict trade.

Europe, too, could include measures to protect its privacy and data protection laws – if it comes to the table. For the Commission to decide not to even discuss cross-border data flows in its trade agreements would be deeply harmful economically – both around the world and across the Atlantic – but perhaps most acutely in Europe itself. Such a decision would send a message to the international community that the EU is not prepared to support innovation in the same way that historically less open, less advanced economies such as Malaysia, Mexico, Peru, and Vietnam are. For companies thinking of investing in Europe, it would create uncertainty that operating a business there will become more difficult in the future. And it could limit the competitiveness of European companies – above all Europe’s start-ups and other small businesses – as suppliers or partners in global markets.

The global tech sector has deep respect for the EU’s legal framework for privacy and data protection, and we understand the EU’s interest in ensuring that it retains the ability to enforce its laws. But simply refusing to discuss such issues in its trade negotiations is not the right way to achieve this goal.

The EU can achieve as much protection for its laws – if not more – by working with its negotiating partners to design trade agreements that provide such protections. Doing so would ensure the EU safeguards its data protection laws, while also giving its entrepreneurs and firms the best opportunities to build their businesses, create jobs, and contribute to European innovation and economic growth.

Equally important, it would also help solidify Europe’s role, along with the United States, as a global leader in creating international economic policies that embrace openness, shun protectionism, and support innovation.

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