The Group of Seven (G7) countries recently reached an agreement on shared principles governing cross-border data usage and digital trade. This landmark decision is viewed as the initial step towards eliminating trade barriers and could pave the way for a standard rulebook on digital trade. Additionally, India participated in the 47th G7 Summit as a guest country.
Understanding Digital Trade
Digital trade encompasses a broad range of commercial activities that are either delivered or enabled digitally, from distributing films and TV to offering professional services. It’s a rapidly growing sector that necessitates clear guidelines and regulations.
G7 Digital Trade Principles
The G7’s digital trade principles stress the importance of open digital markets, which should be competitive, transparent, fair, and accessible to international trade and investment. They also highlight the necessity for data to flow seamlessly across borders, fostering the digital economy and supporting the trade of goods and services.
However, this must be done in a way that engenders trust from both individuals and businesses. The principles call for labor protections for workers involved in digital trade, proposing the digitization of trade-related documents to streamline operations and cut red tape. Additionally, the G7 advocates for common rules at the World Trade Organization (WTO) that benefit developed and developing economies alike, while respecting each country’s right to regulate for public policy objectives.
Significance and Concerns
Striking a balance between the rigid data protection regulations used in European countries and the more liberal approach of the U.S., the deal signifies the removal of unjustified obstacles to cross-border data flows. However, it also continues to address issues of privacy, data protection, intellectual property rights, and security. Successful implementation of this agreement can liberate hundreds of billions of dollars of digital trade.
The G7 nations also expressed concerns about data localization requirements being used discriminately and for protectionist reasons. India, for one, has been considering measures for data localization.
About Data Localisation
Data localization is the practice of storing data on a device that resides within the borders of the country where the data originated. Currently, much of this data is stored in a cloud outside India. Data localization stipulates that companies collecting critical consumer data must store and process it within the country’s borders.
Advantages include securing citizens’ data privacy and data sovereignty from foreign surveillance. Unrestricted supervisory access to data could also aid Indian law enforcement in better monitoring. However, disadvantages include the potential for significant infrastructure investments and higher costs for global corporations, and the risk of a ‘splinternet’ or fractured internet due to escalating protectionist policies.
India’s Stance
The Reserve Bank of India (RBI) recently barred three foreign card payment network companies from acquiring new clients due to issues of data storage within India. The country is contemplating passing the Personal Data Protection Bill, 2019, which would require notification of categories of personal data that can only be processed in a server or data centre located in India.
Despite these developments, India remains resistant to any global deal on e-commerce. Notably, the Prime Minister refused to sign the Osaka Track promoting cross-border data flow at the recent G-20 summit.
The Way Forward
Regulatory frameworks addressing privacy and cybersecurity are crucial, and alongside digital trade negotiations, a global cybersecurity framework should be established. To fully leverage the benefits of digital trade, bureaucratic red tape, restricted cross-border data flows, and imbalanced copyright regulations need to be confronted.
Given the circumstances, there exists an opportunity for India to not only spearhead these proposed changes domestically but also to advocate for conducive digital trade rules in its numerous bilateral and multilateral trade discussions.
