USA, Japan sign Digital Trade Agreement, stand against data localisation

In their Digital Trade Agreement, USA and Japan have renewed their stance in favour of cross-border data flows and against data localisation. The trade agreement also allows for open access to government data. US Trade Representative Robert Lighthizer and Japanese Ambassador to the US Shinsuke J. Sugiyama signed the agreement on October 7, along with the US-Japan Trade Agreement.

Key features of the agreement:

• No data localisation requirements on either country’s people (Article 12) or financial service providers as long as the financial regulatory authorities have access to, for regulatory and supervisory purposes, information stored in servers located outside the country (Article 13)
• Free cross-border data flows: No prohibition or restriction of electronic cross-border transfer of information, including personal information (Article 11)
• No custom duties on digital products, including content (e-books, videos, music, software, etc.), transmitted electronically (Article 7)
• Online Consumer Protection:
  • Adopt or maintain consumer protection laws to proscribe fraudulent online commercial activities that adversely affect customers (Article 14)
  • Both countries have to have legal framework(s), interoperable with different regimes, to protect personal information of digital users so that people have legal recourse in case of problem (Article 15)
  • Both countries will have measures so that recipients can prevent reception of unsolicited commercial electronic messages, or senders of such messages must seek consent. (Article 16)
• Sharing source code can’t be a condition for sale of software: Except for reasons of a specific investigation or judicial proceeding, the two countries cannot mandate the transfer of or access to source code as a condition for the import, distribution, sale or use of that software (Article 17)
• Interactive computer service provider is not an information content provider and thus cannot be held liable for “harms related to information stored, processed, transmitted, distributed, or made available by the service, except to the extent the supplier or user has, in whole or in part, created or developed the information” (Article 18)
• Open access to government data (Article 20)

This emphasis on free flow of data across borders is not new. Japanese Prime Minister Shinzo Abe had first proposed the concept of Data Free Flow with Trust (DFFT) at the World Economic Forum earlier this year. It aims to eliminate restrictions on cross-border transfer of information by electronic means, including personal information, and storing data in foreign servers. DFFT was the key feature of the Osaka Declaration on Digital Economy, nicknamed Osaka Track, at the G20. The agreement sought to promote cross-border data flows with enhanced protections. However, India, South Africa and Indonesia had refused to sign the agreement.