USTR elaborates the Two Dozen Digital Rules of Club TPP

Posted by Anubha Sinha at Jul 29, 2016 07:55 AM |
Members of the recently concluded Trans-Pacific Partnership (TPP) are now scrounging the world to include more countries in its fold. The Digital 2 Dozen(D2D) is a bite-sized document which packs the TPP into 24 key tenets. The D2D, aggressively championed by the US as the path forward for the global digital economy poses some critical questions for India: first, how will India position itself against US pressure in the larger scheme of US-India foreign relations, and how much is it willing to concede its policies in the name of trade; second, how will reduced barriers and establishment of a level field for Indian and foreign IT and internet companies alike, hurt Indian consumers and businesses? This week, the Deputy US Trade Representative Ambassador Robert Holleyman discussed the Digital 2 Dozen document with Ambassador Shyam Saran (Chairman, RIS). The exchange was moderated by Samir Saran (Observer Research Foundation). I attended the discussion and this post is a summary of the key points.

For a background on the data protection and privacy aspects of the Trans-Pacific Partnership agreement and Digital 2 Dozen principles, please read CIS' piece here

Ambassador Robert Holleyman 

Ambassador Holleyman opened with stating that trade agreements are created to build a foundation for national policies. He added that the D2D is not merely a tech D2D, rather it is based on the premise that our economies have digitised to a large extent, and hence, the TPP contains provisions on agriculture as well. The TPP tries to combat barriers to the growth of digital economy, and the D2D provides the most modern and the highest standard of such provisions. The D2D tenets can be divided into three categories: 

1. Provisions to ensure the internet is open and safe, and an effective channel for trade and services.

2. Provisions to combat protectionist and restrictive provisions of member nations. The D2D talks about eliminating rules that seek to make foreign companies localise their data by building expensive data centers in every market they seek to serve. Further, TPP also seeks to prevent countries from 'forcing' foreign companies from transferring their technologies and production processes as a pre-condition for doing business there.

3. Provisions on IPRs to 'build a level playing field' in order to 'protect' innovators and creators in the digital space.  

“ ...The TPP rules on enforcement of IPRs are strong and balanced and embody the TRIPs standards. For instance, countries are required to to impose criminal penalties on trade-secret violations such as cyberhacking.”

He added:

“We believe these rules are the foundation for next 20 years of the digital economy. To make sure that India does not fall behind we want to work with India (for the adoption of these rules). We're encouraged by the new government's programmes and the PM's engagement with US and silicon valley leaders.

We encourage India to level the playing field. To that end the USTR is working with the Indian Ministries of Communications and IT, and Commerce and Industry to exchange practices for building open markets. We want to work together in eliminating localisation policies given that how a lot of IT companies have established investment heavy R&D centers in India, and they rely heavily on the free flow of cross border data. Imposition of localisation of data would be detrimental in this age of cloud-computing. We're aware that the Indian government is reviewing its policies on cloud-computing and encryption, and we encourage the government to consider the implications of the such policies carefully, for India is also a leader in global IT and would be a potential framework setter at that.”

The D2D also endorses elimination of custom duties on ICT products, and the Ambassador added that the US was very pleased to see India deposit their instrument of accession on the Trade Facilitation Agreement with the WTO.  The US has been pleased to see India's ratcheting up its norms for IPR protection. He mentioned that the two countries held a successful copyright workshop earlier this year, and later this year they plan to conduct a workshop on trade secret protection. The D2D also says that conformity assessment procedures are excessive and should be eliminated. This emerges from US' IT industries concerns on the compulsory registration of ICT products that required re-testing in Indian labs.

He made a case for opening up Indian markets by quoting a study which revealed that the Indian market for ICT products is worth 65bn dollars, while the global market stands at 2 trillion dollars. So while India could leverage its exports to meet the demand, the question remains if we want to foster a market based on openness. In his opinion, openness has enabled the IT sector in India to access other markets. However, he observed that countries were erecting barriers to this openness by restricting the cross-border free-flow of data, particularly and this is where the TPP assumes importance. The real challenge now is for the US and India to prepare their own version the the D2D.

On the route of D2D, the Ambassador was largely optimistic:

“The TPP has Obama's backing and the US Congress should ratify the deal before the elections. Other TPP members have already initiated steps to ratify the deal in their countries. For phase II, 13 non-member countries have already approached the US to be a part of TPP since the deal was concluded.”

Ambassador Shyam Saran 

He began by stating that the India-US engagement on digital economy would become an area of close cooperation for US-India relationship. A few years ago the US pharma was unhappy with Indian generics, and this tussle left a bad taste between the countries, and also spilled over into the political side. Disagreements on several issues such as IPR, WTO subjects, etc still persist, despite some developments reflecting mutual trust and confidence (for instance the counter-terrorism initiative).

He welcomed potential cooperation in the digital field, because that would dispel the negativity and prevailing perception of India and US not being on the same page. The one area that has been a shaky pillar is the trade and economic relationship. In his frank opinion, the Indian establishment perceives USTR's outlook on trade issues as quite adversarial.  He was mindful of a developing India's unique needs and priorities: 

“In regard to the differences between India and US on trade and economic issues, it is not surprising because we must also be mindful of the reality- we are a developing country, wheras the US is highly developed and technologically advances - thus, we need different lenses for each. This is something we need to address, (remember how we acknowledged and fixed this in our defence relationship re the nuclear deal). The lesson that I draw is that here is an area critical to both countries' growth, and we need to address this differential aspect...”

According to him, right now India has an ambiguous position on the TPP. Holleyman had mentioned that the deal was based on an open platform, and Shyam pointed out that it was in fact conceived through closed door negotiations. It is common knowledge that rules at TPP were arrived at through complex negotiations between 13 countries, which surely was a process of complex give and takes. At this stage, it was not possible for India to look at one chapter and agree to meet the “gold standards” set in it.

According to him, D2D was important to the US solely in terms of trade benefits for its own businesses. He said that to convince the Indian government, the USTR will have to first convince the Indian IT industry the D2D benefits- which he was skeptical of. The reason was that this 'opportunity' comes across as a clear case of double-standards when the US talks about lowering barriers in India, and on the other hand is increasing barriers on its own shores (several pending bills in the US Congress indicate this). Similarly, immigration troubles for the Indian talent pool have only gone up. The other aspect he raised was on localisation and IPRs. He said that while stands on these issues were being formulated, it should also be expected that the government will take into account concerns of privacy and security. In the US itself, the US treasury has said in regard to banking and financial transactions localisation may be necessary.  

He closed by offering an alternative route to the US – one of working with India as a partner in the Digital Economy instead of fixating on barriers and/or nitpicking on Indian legislations. This would be a more sustainable way to capitalise on India's growth potential and align with its digital future. 

Samir Saran 

Samir  responded to the discussants by offering his thoughts (and questions) on D2D and the digital economy, broadly: 

“...Can the digital space be a new space for a partnership? Three stories are important in the context of a trade document: 
First is dominated by access – India is seeing 6 million new internet users every month and most of them are on low-cost mobile devices. Can a trading normative process allow to continue this phenomenon as it is?
Second is opportunity – India is already responding to investment flows. In terms of privacy and security – if India believes that it can become the digital infrastructure hub, it will need to develop world-class encryption tools. Similarly in terms of free-flow of information, when Obama and PM met they endorsed the same. So it is a step back from localisation, anyway. So you see India changing positions to make the atmosphere more business conducive.
Third is security – How can you make free-flow of data uni-directional? Why is it that you want data to flow unfettered when it creates value, but you are creating barriers for giving data for security purposes?...

...Further, in a phase when the mood worldwide is in favour of de-globalisation, will hyperglobalisation through FTAs work?...”

Finally, Holleyman acknowledged that historically India and US have had differences, but with the digital economy perhaps they can forge some approaches. He accepted that some of the points were written squarely for the US tech sector, but he hoped that the other 11 partners of the TPP will come out with what the D2D means to them.