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1 1 (September 7, 2017)

handle is hein.crs/govcdxr0001 and id is 1 raw text is: FF. ' riES- - $r h ,. , TPP: Digital Trade Provisions - n'a', mm mppm qq\ , q I aS 11LULANJILiN, Updated September 7, 2017 On January 24, 2017, President Trump withdrew the United States from the Trans-Pacific Partnership (TPP). The TPP was a proposed free trade agreement (FTA) among 12 countries in the Asia-Pacific region, including the United States. The Obama Administration cast TPP as a comprehensive and high standard agreement with economic and strategic significance for the United States. Some U.S. stakeholders argue the TPP withdrawal coupled with ongoing FTA negotiations that do not involve the United States may negatively affect U.S. export competitiveness and leadership in establishing new trade disciplines. The remaining 11 parties may move forward to ratify the TPP without U.S. participation (TPP- 11). The proposed TPP, as negotiated by the United States, includes new commitments to address barriers to digital trade (see text box). Digital trade, a growing part of the U.S. and global economy, includes not only end-products such as movies or video games, but also is a means to facilitate economic activity, potentially enhancing productivity and overall competitiveness. Examples of digital trade include online shopping; transmission of information needed by manufacturers to manage global value chains; communication channels from email to voice over internet protocol (VoIP); and financial services used in e-commerce or electronic trading. A U.S. International Trade Commission study estimated the U.S. digital economy was $711 billion of U.S. GDP in 2011. In 2014, the United States exported $400 billion in digitally-deliverable services and imported $241 billion, creating a surplus of $159 billion, and comprising over half of all U.S. services trade. Global cross-border data flows grew 45 times from 2005-2014, according to the McKinsey Global Institute. Figure I. Growth in Global Data Flows Fim-ince 2014 Source: McKinsey Global Institute, Digital Globalization: The New Era of Global Flows, March 2016. Congress noted the importance of digital trade and the Internet as a trading platform in setting U.S. trade negotiating objectives in the June 2015 Trade Promotion Authority (TPA) legislation (P.L. 114-26). TPP includes provisions addressing principal U.S. trade negotiating objectives to prohibit data localization requirements and protect cross-border data flows. Despite the U.S. withdrawal, TPP's digital trade provisions may continue to influence U.S. trade policy. Members of Congress and Trump Administration officials have expressed interest in drawing from the TPP commitments, particularly on digital trade, in future U.S. negotiations, including the NAFTA renegotiation. Overall, the agreement aims to promote digital trade, the free flow of information, and ensure an open internet. Provisions related to digital trade are found in chapters on electronic commerce, financial services, investment, telecommunications, intellectual property rights (IPR), and technical barriers to trade (TBT). In general, technology companies, telecommunications firms, and industry groups continue to support the TPP digital trade provisions. Several stakeholders raise concerns over exceptions to the cross-border data-flows and localization provisions. Other stakeholders believe that the current provisions go too far and may limit a government's flexibility to adopt strict e-commerce privacy laws. Cross-border data flows. TPP would guarantee the cross- border transfer of information and would prohibit computing facility localization requirements for all sectors, except financial services and government procurement (see below). These provisions would protect a firm's ability to provide and use cloud services and function more efficiently, and would block localization requirements that could require firms to have in-country servers and data centers to store data. Specific exceptions are included for achieving legitimate public policy objectives to allow governments to regulate the transfer and storage of certain data, such as health records, provided such measures are not arbitrary or a disguised restriction on trade. Regulators may view local data storage as a potentially necessary defense to maintain safety, security, or privacy. The tension between industry and cautious regulators represents differing priorities between companies seeking growth in new markets and innovation, as opposed to those responsible for establishing regulations and oversight. While data localization requirements are not currently in place in TPP countries, observers note that Malaysia and Vietnam are considering imposing them, which TPP would prohibit, apart from the exceptions noted above. In addition, some stakeholders note concern about potential future TPP 'O 'T

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