China economy

China, US set to join groundbreaking talks at WTO aimed at limiting government snooping on private data

  • Experts are sceptical about how far China is willing to go with any proposal that would have it fall in line with global standards
  • Australia, Japan and Singapore expected to make proposal this month that is likely to be negotiated within a small group of World Trade Organisation members
PUBLISHED : Friday, 04 January, 2019, 12:02am
UPDATED : Friday, 04 January, 2019, 11:53am

China and the United States are to take part in groundbreaking talks on restricting government surveillance of private companies’ e-commerce data.

A proposal to this effect will be introduced by Australia, Japan and Singapore this month, according to the Nikkei Asia Review.

The proposed ruling, which has been in the works for some years, would make it illegal for governments to force companies to reveal proprietary secrets such as source codes and algorithms, the Japanese publication reported.

The European Union is also involved in an initiative that is likely to be negotiated within a small group of World Trade Organisation (WTO) members, due to widespread opposition from many developing countries, which are said to be suspicious of the influence of big technology companies on issues involving e-commerce.

Talks are to begin at the World Economic Forum meeting in Davos, Switzerland, this month, with China’s presence raising the question of whether it is truly prepared to relax strict laws on data storage and cybersecurity. Beijing has also been heavily criticised for alleged intellectual property theft and forced technology transfers.

Experts are sceptical as to how far China is willing to go with any proposal that would have it fall in line with global standards.

“China appears to be on board with this, or at least wants a seat at the table. But when we get to the details, I suspect it will want to water down any real strong proposals that are out there,” said Bryan Mercurio, a professor of international economic law at the Chinese University of Hong Kong.

A negotiating agenda is to be set over the course of 2019, with talks kicking off in earnest at the next WTO ministerial conference in June 2020, according to Stuart Harbinson, a trade policy expert who spent much of his career in senior roles with the intergovernmental organisation.

IP and tech control will continue to inflame US-China relations, whatever the outcome of the trade talks

Harbinson said that data transfer was just one of the possible topics for discussion, and that while the nascent initiative had “broad traction and attracted good support”, it faced opposition from some emerging-market countries, notably India and South Africa, which are thought to be keen to pursue discussions on more fundamental issues such as agriculture.

“I understand that China is following the subject closely and is positive on some aspects, but very cautious on others,” Harbinson said in an email.

“The potential WTO agenda on e-commerce is very broad and there is still a long way to go before negotiations can start. This is one to watch, but immediate action is not on the cards.”

I understand that China is following the subject closely and is positive on some aspects, but very cautious on others
Stuart Harbinson, trade policy expert

Still, in what is a troubled time for global trade, and in an era when the relevance of the WTO has been questioned by US President Donald Trump, trade wonks have welcomed a rare glimmer of potential progress within the Geneva-based organisation.

“This is a step along the journey, not the end of it. However, political agreement in Davos, which provides a mandate for detailed technical work to begin, would be a huge breakthrough in a previously deadlocked area of WTO negotiations,” Dmitry Grozoubinski, a former trade negotiator for the Australian government at the WTO, said in an interview.

Grozoubinski said that China’s presence was encouraging, but also understandable given the pressure its economy is facing.

The nature of these initial negotiations will be plurilateral, or involving only some WTO members. Should an agreement be reached, countries that are perceived to have favourable data laws will be seen as potential destinations for hi-tech investment. It may at that point progress to multilateral talks.

China is quickly losing favour as a hub for hi-tech companies. Not only are production costs rising, the issues of forced technology transfers and intellectual property theft are frequently in the news and are among the primary concerns to have been raised by US negotiators, as the world’s two economic superpowers try to thrash out an agreement that would end their trade war.

China drafts law protecting foreign intellectual property and prohibiting forced technology transfer

“It’s better with China in than out. You want the world’s second-largest economy at the table and committed to implementing the outcome,” said Grozoubinski.

“There are incentives from China’s perspective, too. They’re already losing investment to Southeast Asian competitors, they’re potentially facing an economic slowdown and concerns about their treatment of foreign intellectual property persist. This is a great time to send the signal, ‘we are a good home for investment’, especially in the hi-tech sectors China is nurturing.”

The talks will seek to establish some sort of consensus on data flows among the world’s most significant economies.

China has come in for much criticism for what are perceived to be draconian and costly laws for private companies, while the EU’s GDPR law, which seeks to protect personal user data, came into effect last year at great cost to private enterprises.

Meanwhile, in 2016 the US technology giant Apple became embroiled in a battle with the FBI over access to data in an iPhone used by the perpetrator of a mass shooting in San Bernardino, California.

Data is, thus, viewed as an important issue at the WTO, particularly with the growing importance of e-commerce to global trade and the proliferation of social media and private internet usage.

In the third quarter of 2018, Facebook had 2.27 billion monthly active users. In 2017, online sales accounted for 10.2 per cent of all global retail. This figure is expected to rise to 17.5 per cent by 2021.

For governments, it is becoming more difficult to strike a balance between protecting personal data and easing commercial data flows, said Elliot Papageorgiou, a Shanghai-based intellectual property partner at law firm Clyde & Co.

“There is a danger of the balance tipping towards over-restrictive, burdensome regulation of commercial data flows. In this context, it is high time for developing international consensus on the regulation of such data flows. And the WTO initiative presents an opportunity to do just that,” he said.

If this small but powerful group of countries comes to an agreement, it is likely to place pressure on others to fall in line.

How China’s rampant intellectual property theft, long overlooked by US, sparked trade war

Regardless of the outcome of initial talks in Davos this month, expectations should surely be managed carefully. The WTO moves at a famously glacial pace. Its consensus-based voting mechanism means all members have an equal say in any changes to its rules.

The Doha Round of talks, which sought to establish a global free trade deal and which began in 2001, was notoriously abandoned in 2015 after 14 years of stalemate.

These structural issues have come in for scathing abuse from Trump, who has threatened to pull the US out of the WTO on several occasions. “If they don’t shape up, I would withdraw from the WTO,” he told Bloomberg last year.

However, the fact that the US is set to participate in the e-commerce talks indicates, at least at some level of the government, that an appetite for multilateralism remains.

The WTO declined to comment on the proposal when contacted by the South China Morning Post.