Trade Agreements Should Reflect Technological Realities, Deputy Assistant USTR Tells Lawyers

Trade negotiations have to adjust as Internet-enabled communication technologies develop, said Deputy Assistant U.S. Trade Representative for Telecommunications and Electronic Commerce Policy Jonathan McHale Monday. Speaking at an event hosted by the FCBA, McHale said the USTR is beginning to approach trade negotiations through the lens of emerging technology and is considering restarting World Trade Organization (WTO) negotiations with the same perspective.

Foreign market access opportunities for Internet-enabled services like Skype “have been way beyond what anybody had perceived,” McHale said. When most trade agreements were negotiated, he said, the U.S. expected “facility-based competitors,” like Verizon and AT&T, to enter foreign markets and put in place the physical infrastructure elements to build networks. This model “is not really borne out by the facts,” he said. Instead, companies like Skype, which “doesn’t build networks” and “doesn’t have to deal with collocation issues,” are seeing success in foreign markets, he said, but trade negotiations with those countries have “rules [that] obviously don’t correspond very well to the way technology is moving."

Trade negotiations need to better define these Internet-enabled services, McHale said, because they're currently being defined and divided according to an “outdated scheme.” Some countries’ governments and private companies use these poor definitions and blurred lines to refuse market access for these companies, including VoIP services and video content platforms, he said: “We certainly see the steps that some governments take to interfere with the opportunity” these companies have to reach customers abroad. These governments and companies are motivated by “a combination of privacy [concerns], security [concerns] and old-fashioned protectionism,” he said.

The solution would be “some sort of stable rule regime,” to enable the free flow of data across borders, McHale said, which USTR is hoping to establish during the Trans Pacific Partnership Agreement negotiations. Part of that regime could be the creation of voluntary “baseline privacy protections” for companies that sell their services for customers abroad, he said, like the Asia-Pacific Economic Cooperation’s Cross-Border Privacy Rules system. These baseline protections would be the “first step” in “interoperability of privacy,” McHale said, and would require participating countries to allow market access to the companies that meet those standards.

Currently, countries evaluate the companies based on the privacy and security laws of the countries that house their data centers, McHale said: “I don’t think that’s a very practical approach,” especially when many companies develop privacy and security policies to match the laws of their targeted market. Instead, he said, “it makes sense to attach the obligation” to protect a country’s users’ data “to the company, the guy that’s holding the data.” The USTR is hoping to use trade negotiations to ensure that companies are allowed access to foreign markets when they meet the appropriate privacy and security standards, he said.