Australia should push for relaxed data sovereignty rules, report says

Benefits in reducing barriers to cross-border data flows, Productivity Commission research report says

The Australian government should work through international forums such as APEC and trade negotiations to remove unnecessary restrictions on the flow of data between nations, according to a new Productivity Commission research report.

The PC report on barriers to growth in service exports says the government should work to make sure that measures restricting cross-border data flows are the least restrictive necessary to address privacy and security objectives, and are only applied where other remedies cannot achieve the same result.

The report is dated November 2015 but was made publicly available yesterday.

The report recommends the government push for consistent international standards and regulations on the cross-border movement of data.

Countries including Australia have data localisation (data sovereignty) rules for certain types of information, the report notes. However, data localisation measures are sometimes used as a form of protectionism, it adds.

“Restrictions on cross-border data flows are particularly costly for financial service providers that use a ‘hub’ strategy where data are stored centrally to improve efficiency, and users of cloud computing services (cloud computing is now common practice for service exporters),” the report states.

Treasury and Standards Australia are currently involved in an APEC Small and Medium Enterprises Working Group that is focused on harmonising standards to facilitate cross-border data flows.

“The APEC cross-border data flows project is an opportunity for the Australian Government to help ensure that rules and regulations governing the flow of data (including those that apply in Australia) are developed in a consistent — and least restrictive — way,” the PC report states.

“Given the technical focus of this project, additional efforts from governments will be needed to encourage the removal of measures that unnecessarily restrict cross-border data flows, such as data localisation requirements.”

The recently finalised text of the Trans-Pacific Partnership agreement states that a nation that is party to the TPP “shall allow the cross-border transfer of information by electronic means, including personal information”.

The agreement allows governments to implement measures contrary to this commitment if they are intended to “achieve a legitimate public policy objective” as long they are “not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination or a disguised restriction on trade” and do not “impose restrictions on transfers of information greater than are required to achieve the objective”.

The agreement recognises that each signatory nation “may have its own regulatory requirements concerning the transfer of information by electronic means”.

The PC report states that the South Korea-Australia trade agreement led to the removal of rules in South Korea that required onshore data processing by financial institutions.

The Australian government is participating in negotiations around the proposed 23-party Trade in Services Agreement (TiSA), which could lead to a radical rewrite of data sovereignty rules.

Warning on intellectual property rules

The PC report also states that Australia should be wary of signing up to agreements that extend protections for intellectual property.

The PC is currently conducting an inquiry into Australia’s IP regime. A previous PC research report (PDF) argued that Australia should assess the value of IP provisions in bilateral and regional trade agreements.

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“[A]ny IP provisions that are proposed for a particular agreement should only be included after an economic assessment of the impacts, including on consumers, in Australia and partner countries," that report stated.

The government recently rejected recommendations along those lines made in the Competition Policy Review (the Harper Review).

“While some Australian service providers would benefit if IP rights were recognised and enforced in overseas jurisdictions, this should not be considered justification for extending the coverage of IP in negotiations beyond that required under the Trade-Related Aspects of Intellectual Property Rights (TRIPS),” the new PC report argues.

“Two of Australia’s bilateral trade agreements (with Chile and the United States) involved an increase in protections for IP beyond the levels required by the TRIPS and other bilateral trade agreements. For example, the term of copyright protection under the Australia–United States trade agreement was extended to the life of the author plus 70 years and compares with life plus 50 years under TRIPS. As a net importer of IP, this extension is likely to have imposed net costs on Australia.”

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