How The USMCA Falls Short On Digital Trade, Data Protection And Privacy

from WaPo

The United States-Mexico-Canada Agreement (USMCA) is more than just an updated version of the North American Free Trade Agreement. With the inclusion of a digital trade chapter, the deal sets a new standard for e-commerce that seems likely to proliferate in similar agreements around the world. Negotiators have touted the benefits of addressing modern forms of commerce, but the reality is that the USMCA’s digital trade chapter raises many concerns, locking in rules that will hamstring online policies for decades by restricting privacy safeguards and hampering efforts to establish new regulation in the digital environment.

Digital trade provisions are a relatively recent addition to the free-trade world, but they have quickly coalesced around a common approach. Starting with the Trans-Pacific Partnership (since renamed the Comprehensive and Progressive Agreement for Trans Pacific Partnership with the U.S. exit last year), e-commerce or digital trade chapters have cropped up in large agreements such as the USMCA and little-known ones such as the recent Singapore-Sri Lanka trade agreement.

The chapters invariably include foundational principles such as certainty in electronic contracting, the validity of electronic signatures, nondiscriminatory treatment of digital services, and restrictions on imposing customs duties on digital products transmitted electronically. So long as the provisions foster greater certainty for online trade, the chapters reflect well-established conventions and should be embraced.

The more problematic provisions, however, focus on the rules associated with data, where much of the value in digital trade lies. For example, the USMCA includes rules that restrict data localization policies that can be used to require companies to store personal information within the local jurisdiction. Jurisdictions concerned about lost privacy in the online environment have increasingly turned to data localization to ensure their local laws apply. These include the Canadian provinces of British Columbia and Nova Scotia, which have data localization requirements to keep sensitive health information at home that may be jeopardized by the agreement.

The digital trade chapter also bans restrictions on data transfers across borders. That means countries cannot follow the European model of data protection that uses data transfer restrictions as a way to ensure that the information enjoys adequate legal protections. In fact, with the European Union adopting even higher standard privacy rules earlier this year, countries could find themselves caught in a global privacy battle in which Europe demands limits on data transfers while the USMCA prohibits them.

More here.

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  1. Surprised to see no responses under this article, even though you posted this on the 4th, professor.

    The USMCA represents a big step in Trump’s widespread, controversial project to renegotiate how the world trades with the United States of America. NAFTA is (or was) one of the world’s largest trade agreements. The trade between Canada, Mexico and the USA makes up $1.2 trillion annually. That’s a lot – like a historic amount. Trade between these three nations increased greatly following the creation of NAFTA in the 1990s. Now the NAFTA, and the billions in trade on the continent it oversees, is entering an uncertain, new chapter.

    In the heated press conference Trump gave announcing the deal on October 1st, the president outlined what he felt were the main advances made in the new agreement. These developments included increased portions of vehicle parts for finished cars coming from the USA, higher minimum wages for auto workers outside the USA and a clause to reevaluate the pact each six years (as inflation rolls on). The USMCA comes after over a year of “talk for a little, then walk away” type negotiations. For a while, the press seemed uncertain if Canada would make the require concessions for an agreement to be reached. Trump has flaunted the USMCA not only as a promise from his 2016 campaign that he had fulfilled, but also to set up what the NYT has called a “showdown with China”. In the same press conference, Trump spoke about trade talks with China almost apathetically.

    While there has been a lot of talk about cars and crops, there has not been a as much talk about digital trade. That is what this WP article focuses on, particularly problematic provisions set out in the USMCA agreement regarding data. One topic the article outlines is the restriction of data localization and data transfers. In the case mentioned where laws vary from the EU to the USMCA, we find an issue that has been brought up in our BLAW class. In such a dispute, which laws apply? The WP article argues that the USMCA may actually end up eroding data privacy by not working as European regulators are to establish higher standards.

    Other issues discussed in the treaty, including net neutrality, although specifically referenced seem to be addressed too vaguely. Furthermore, as the WP article points out, laws in Canada and elsewhere in the world establish better provisions, why are we not referencing them?

  2. The e-commerce chapter in the USMCA and in other major trade agreements could lead to a bad trend for nations worldwide who will create trading agreements related to e-commerce. The USMCA is one of the largest trade deals since the Trans-Pacific Partnership, and it provided a revision to NAFTA while adding an e-commerce chapter to the agreement. The agreement did not provide provisions related to online consumer protection or net neutrality, however, and it also prohibited data localization to be used in each of the countries. The USMCA therefore does not provide for data protection of consumers; on the contrary, it prohibits the localization of their data in their home country.

    This trading agreement, because it is one of the first and largest trading deals with an e-commerce provision, may be used as a template in other countries when they create their own trading agreements. Future trading agreements could be modeled after the USMCA, where there is an indifference toward net neutrality and restrictions on protection of data transfers and the localization of data. If this were to happen, consumers data would be able to flow freely, and protection of their data would be lost at the expense of these deals. Internet providers may also be able to abuse the relaxed net neutrality policies and take advantage of consumers by limiting access to certain consumers.

    There are other countries, however, that have mandated data localization and restricted companies from storing local data in foreign sources. India was one of these countries, mandating data localization two weeks ago (see attached article). Although the USMCA and other trade agreements are against data localization, there are countries who are seeking to keep their citizens’ data private. This could cause major conflicts for world policymakers on e-commerce, and could cause future trade issues between certain countries. The debate over data localization is fierce, and policymakers will have to take a stand on whether it protects the privacy of consumers or hinders the free flow of information.

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