House Subcommittee Members, Witnesses Underline Importance of Free Flow of Data Internationally

Addressing digital trade barriers from foreign countries is of critical importance to the growth of businesses in the U.S., members of the House Intellectual Property Subcommittee and witnesses said during a hearing Tuesday. Witnesses backed a global framework to address issues of digital trade and the way data moves across borders, and pointed to last month's European Court of Justice ruling invalidating the EU safe harbor agreement as a cause of uncertainty for the legality of data transfers. That ECJ ruling was the subject of a separate hearing Tuesday (see 1511030034).

"As our companies look to operate globally, they face new and novel nontariff trade barriers that could make it costly or near-impossible to operate overseas," said House Judiciary Committee Chairman Bob Goodlatte, R-Va. The rules of the road that are considered for digital trade and data flows will either promote or impede the growth of the Internet, Goodlatte said, and certain barriers to digital trade employed by foreign nations are even defeating the purpose of certain technologies, such as cloud computing. "Undue restrictions" on cross-border data flows could affect the production and effectiveness of IoT devices, and could harm the productivity of U.S. companies, he said. "For global diversified technology and manufacturing companies, they would face the absurd situation of not being able to move their own research and development data from country to country."

"The trade barriers being used to restrict cross-border data flows are simply nontariff trade barriers," subcommittee Chairman Darrell Issa said. "By any other name it is protectionism, and it hurts U.S. competitiveness. It hurts the very countries" that are implementing these protectionist agreements and ultimately it will hurt global trading with all parties that depend on the free flow of data, he said. Issa also warned of the harmful effects digital trade barriers could have on IoT development and on connected technologies currently in place today. "No one owns data in a global environment exclusively," Issa said. "Digital trade helps drive the modern economy."

Witnesses also touted the positive effects of cross-border data flows, but urged a new safe harbor framework as soon as to possible to prevent harm to the current path of data transfers to and from European nations. "If a workable new safe harbor framework is not put in place soon, the [trans-Atlantic] data flows that fuel the world’s largest trading and investment relationship could be at risk," said Mark MacCarthy, Software and Information Industry Association senior vice president-public policy, in a prepared statement. MacCarthy said the loss of the safe harbor framework has created legal uncertainty, and that in the long run, there is a need for the legal certainty that can be provided by a modernized safe harbor framework.

Information Technology and Innovation Foundation President Robert Atkinson said global free trade is under serious threat. "Many nations, for a variety of motivations -- some related to privacy and security concerns, many related to naked protectionism -- are putting in place policies to balkanize the data economy by limiting cross-border data flows," he said. Atkinson asked policymakers to continue to build on the progress of the Trans-Pacific Partnership and to embrace "needed reforms" in certain areas, including law enforcement and national security. "The U.S. cannot allow other countries to levy what is effectively a privacy tariff on companies in nations that do not adopt their rules," Atkinson said. He suggested the U.S. negotiate strong cross-border data transfer protections in new trade agreements, address European concerns about privacy protections for their citizen's data, and partner with Europe to essentially craft a "Geneva Convention" on the status of data.

Computer and Communications Industry Association CEO Ed Black said eliminating digital trade barriers isn't an "us-versus-them issue," and breaking down those barriers would be a "win-win outcome." Internet services don't get the same protections as do other items imported from other countries, Black said. "Countries can far more easily block bits than bananas at the border, and that’s a huge problem when much of our exports are bits." BSA|The Software Alliance CEO Victoria Espinel said there's a need for a "good, global framework" for how data is transferred across borders. MacCarthy agreed a global framework is necessary but said it should be narrowly crafted and restricted to trade, and should continue to allow countries to enforce privacy and consumer protection laws.