Ref. Ares(2017)5324690 - 31/10/2017
Trade Sustainability Impact Assessment in Support of
Negotiations on a Plurilateral Trade in Services
Agreement (TiSA) : DIGITALEUROPE response to the draft
interim technical report
Brussels, January 2017
Introduction
Rapid advances in information and communications technology (ICT) have brought tremendous change to the
services and manufacturing sectors, enabling the electronic delivery of many services to markets around the
world and creating opportunities for connected global value chains, innovative services and new business
models.
The dynamic European services sector has benefited greatly from these developments by leveraging its
strengths in many high-value, knowledge-based services, including financial, insurance, business, professional,
technical, information and entertainment services, that can be delivered efficiently and conveniently over
global communication networks.
DIGITALEUROPE continues to fully support the negotiations for an ambitious Trade in Services Agreement (TISA)
and calls for its completion as soon as possible as it can serve as an important enabler to a wider WTO
agreement. Builduing upon the success of the expansion of the Information and Technology Agreement (ITA),
the WTO has a timely opportunity to address the next challenges for the ICT sector. The TiSA represents a
tremendous opportunity for the WTO to advance on Electronic commerce and Digital trade for the benefit of
every individual, business or Industry.
As the world’s largest exporter of services and leader on Digital trade, the European Union (EU) has much to
gain from a strong agreement that is focused on this vital sector of the economy. However, the EU also has
much to lose – from the rising threat of “digital protectionism” – if the TISA does not establish rules to enable
the global digital economy.
DIGITALEUROPE would like to seize the opportunity of the publication of the draft interim technical report on
TiSA to respond to some of the questions raised in the report, particularly on the need for digital trade rules
touching upon the areas of e-commerce and telecommunications, the recognition of the principle of the free
flow of data between TiSA parties and the respect at the same time of EU privacy standards, the challenges set
by the EU carve-out on new services, the establishment of a commercial presence and the temporary
movement of natural persons for business purposes.
DIGITALEUROPE
Rue de la Science, 14 - 1040 Brussels [Belgium]
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The Opportunity for Digital Trade
The EU data economy was valued at EUR 272 billion in 2015 with a year-on-year growth of 5.6% according to
recent studies1. Cross-border data flows are also the fastest growing component of international trade. The
easiest way to understand the potential for digital trade and how the services sector has changed is to look at
the amazing growth in the number of Internet users over the last two decades. In 1995, the year that the
General Agreement on Trade in Services (GATS) went into effect, there were only about 16 million Internet
users worldwide. In 2016 there were over 3.4 billion Internet users around the world, creating an enormous
potential market for European service providers. Clearly, a lot has changed since the GATS established the rules
under which services trade is conducted today, and it is time to update those rules to address issues for the
digital economy.
In their recent study ‘Digital Globalisation’2, McKinsey reports that global flows have raised world GDP by
roughly 10 percent over what would have resulted in a world in without any flows. In 2014 alone, they
generated roughly EUR 7.3 trillion in value. Flows of goods and FDI account for about half of this impact, while
data flows, the hallmark of 21st-century globalization, account for EUR 2.6 trillion.
According to UNCTAD data3, global B2C e-commerce is valued at about EUR 1,1 trillion. While considerably
smaller than business-to-business (B2B) e-commerce, valued at more than EUR 14,1 trillion, this segment is
growing faster, especially in developing countries. The number of Internet-connected devices has reached 12
billion while some studies expect around 75 billion of connected devices by 2020 and the total number of
devices connected to the Internet in some way estimated around 500 billion4.
All businesses with global operations rely on ICT infrastructure and cross-border data flows to operate, so these
issues are critical for the economy as a whole.
The Need for Digital Trade Rules
The promotion and preservation of internet openness and cross-border information flows must be actioned as
a matter of priority. Trade is no longer possible without the flow of data and digitally deliverable services.
Today’s world is entering in a new era of digital globalisation and innovation. The Internet is transforming how
the world trades whilst similtaneously, boosting trade growth.
1
European Data Market, SMART 2013/0063 D8 — Second Interim Report, IDC, 9 June 2016,
2
Digital Globalization : the new era of global flows, McKinsey, Executive Summary, March 2016, p.10, http://www.mckinsey.com/business-
functions/digital-mckinsey/our-insights/digital-globalization-the-new-era-of-global-flows
3
UNCTAD
designs
business-to-consumer
electronic-commerce
index,
UNCTAD
24
march
2015,
http://unctad.org/en/pages/PressRelease.aspx?OriginalVersionID=237
4 OECD Digital Economy Papers No.192, ‘Machine-to-Machine Communications: connecting billions of devices’, 30 January 2012, p.7,
http://www.oecd-ilibrary.org/docserver/download/5k9gsh2gp043-
en.pdf?expires=1484579898&id=id&accname=guest&checksum=B8B82A15B48379AE1D81B9BAB30FD3F5
DIGITALEUROPE
Rue de la Science, 14 - 1040 Brussels [Belgium]
T. +32 (0) 2 609 53 10 F. +32 (0) 2 431 04 89
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www.digitaleurope.org | xxxx@xxxxxxxxxxxxx.xxx | @DIGITALEUROPE
Transparency register member for the Commission: 64270747023-20
DIGITALEUROPE encourages DG Trade to build on the e-commerce principles developed in the EU Digital Single
Market (DSM) strategy and to scale them up at a global level: simplification and harmonisation of rules to
incentivise consumers and businesses to engage in cross-border e-commerce.
Given the growing importance of the Internet as a delivery mechanism for trade in services, the right to move
data related to covered services must be made explicit in the TiSA. Promoting this principle would provide
greater clarity and certainty regarding coverage and would complement cross-border market access and
national treatment commitments.
In addition, the e-commerce chapter should also include a provision that opposes measures that require
companies to provide access to source code and/or encryption keys as a condition of doing business.
Further, the TiSA should prohibit to requiring the local storage or processing of data or the use of local facilities,
hardware, or services. As highlighted by the Swedish National Board of Trade5, restrictions on data flows
disrupt production, trade and business models. In an extremely competitive market, data barriers generate
both direct (compliance costs, extra labour costs and costs associated with separating data) and indirect (more
expensive and perhaps less effective local suppliers) costs for companies when they are prevented from
accessing global cloud or other digital services.
Data localisation has proven to have also a negative impact on the GDP (ranging from -0,8% to 1,3%) of the
country adopting such kind of measure, as estimated by European think tank ECIPE6.
This approach would not prevent TiSA parties from pursuing legitimate public policy objectives such as national
security, cybersecurity, consumer protection and privacy policies - as stated in the Article 14 of the General
Agreement on Trade in Services (GATS). The Industry is fully committed to ensure that data flows occur in
respect with data protection rules.
However, as rightfully stressed in a recent study7 written by two experts from the Melbourne Law School at the
University of Melbourne, relying solely on these overarching exceptions, without a recognition of the principle
of freedom of data in the first place, associated with some criterias of conditionality and propriortionality, may
have the effect of deferring international consensus on the appropriate regulation of data and data transfer, in
the meantime leaving much to the discretion of WTO panels and the Appelate body.
If we fully agree that data protection rules shouldn’t be negotiated in a trade agreement, it is also imperative
that the EU, as the top exporter of digitally deliverable services, is at the negotiating table when discussing
principles touching the digital economy, also to make sure that its red lines are respected.
5
Protectionism in the 21st Century, Swedish National Board of Trade, May 2016, p.47,
http://www.kommers.se/Documents/dokumentarkiv/publikationer/2016/Protectionism%20in%20the%2021st%20Century_webb.pdf
6
The
costs
of
data
localisation :
friendly
fire
on
economic
recovery,
ECIPE,
No3.2014,
p.2,
http://www.ecipe.org/app/uploads/2014/12/OCC32014__1.pdf
7
Don’t fence me in: reforming trade and investment law to better facilitate cross-border data transfer, Andrew D. Mitchell & Jarrod Hepburn,
September 2016, p.10.
DIGITALEUROPE
Rue de la Science, 14 - 1040 Brussels [Belgium]
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Transparency register member for the Commission: 64270747023-20
An ‘exporter’ perspective has to be included in the European Union’s strategy on digital. Unless new trade rules
are developed, the threat of digital protectionism will continue to undermine the value of cross-border services
commitments and the trade diplomacy promoted by the European Union around the globe.
We ask for this opinion to be reflected in section 3.4. ‘Fundamental Right to protection of personal data’
(currently pp. 80 & 81) of the European Commission draft interim technical report for the Trade Sustainability
Impact Assessment in Support of Negotiations on a Plurilateral Trade in Services Agreement (TiSA) published in
December 2016.
M arket Access and National Treatment Commitments in a Broad Range of Services
DIGITALEUROPE seeks full market access and national treatment commitments in computer and related
services and telecommunication services, which provide the infrastructure that supports the global digital
economy.
The issue of coverage for evolving IT services was discussed extensively in the “Friends of Computer Services”
group during the Doha Round negotiations. Some very useful work came out of this group, including scheduling
commitments at the two-digit level (CPC 84), as captured in the Understanding on Computer and Related
Services and in the Plurilateral Request on Computer and Related Services, which were endorsed by many TISA
participants. The TISA negotiators should build upon and update this work to ensure that evolving IT services
are covered and that the commitments will not become obsolete due to technological advances.
Therefore, DIGITALEUROPE also strongly discourages to maintain the EU carve-out on new services. Future-
proofing the scope of TiSA is essential for the rapidly evolving digital economy.
Including a future-proof approach will moreover make it more difficult for third countries, which might later join
the TiSA commitments, to favor domestic services by discriminating against European services.
Indeed, over the past, we have seen at WTO level many contentious classification issues arising with respect to
different forms of digital content that are frequently traded.
Finally, DIGITALEUROPE also supports the efforts to liberalise services in our customers’ sectors, including
financial, insurance, retail and wholesale distribution, express delivery, information, advertising, media and
entertainment, and energy and environmental services, among others. Many of these services can take
advantage of communication networks to reach global markets. DIGITALEUROPE’s members will benefit from
improved market access in all of these sectors as they provide ICT solutions to support the growth of their
customers around the world.
DIGITALEUROPE
Rue de la Science, 14 - 1040 Brussels [Belgium]
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www.digitaleurope.org | xxxx@xxxxxxxxxxxxx.xxx | @DIGITALEUROPE
Transparency register member for the Commission: 64270747023-20
Establishment of a commercial presence and the temporary movem ent of natural persons for
business purposes
Growth of European ICT companies is hampered by limitations on the participation of foreign capital in terms of
maximum percentage limit on foreign shareholding or the total value of individual or aggregate foreign
investment. Those barriers exist among TISA negotiating parties.
Other obstacles that should be tackled in the scope of the negotiations are residency requirements for senior
management or board of directors, difficulties in obtaining a license or authorization, treatment by state-owned
enterprises.
Restrictions of temporary movement of natural persons for business purposes are also complicating trade in ICT
services. European digital technology companies point at difficulties in obtaining work permits and visas, as well
as requirement to hire or train local workers.
We insist also on the need for a discipline in trade agreements for a fair and equal access to public
procurements for EU operators in partnering countries.
Conclusion
DIGITALEUROPE asks the European Commission to take an active leadership and to ensure that the TISA will
establish strong 21st century rules to promote the continued growth of the global digital and data economy - in
line with the principles developed in the Digital Single Market strategy.
We look forward to continue working with the Commission to achieve this important goal.
--
For more information please contact:
Diane Mievis, Senior Policy Manager on Global Economic Affairs at DIGITALEUROPE
+32 2 609 53 23 or xxxxx.xxxxxx@xxxxxxxxxxxxx.xxx
DIGITALEUROPE
Rue de la Science, 14 - 1040 Brussels [Belgium]
T. +32 (0) 2 609 53 10 F. +32 (0) 2 431 04 89
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www.digitaleurope.org | xxxx@xxxxxxxxxxxxx.xxx | @DIGITALEUROPE
Transparency register member for the Commission: 64270747023-20
ABOUT DIGITALEUROPE
DIGITALEUROPE represents the digital technology industry in Europe. Our members include some of the world's largest IT,
telecoms and consumer electronics companies and national associations from every part of Europe. DIGITALEUROPE wants
European businesses and citizens to benefit fully from digital technologies and for Europe to grow, attract and sustain the
world's best digital technology companies.
DIGITALEUROPE ensures industry participation in the development and implementation of EU policies. DIGITALEUROPE’s
members include 62 corporate members and 37 national trade associations from across Europe. Our website provides
further information on our recent news and activities: http://www.digitaleurope.org
DIGITALEUROPE MEMBERSHIP
Corporate Members
Airbus, Amazon Web Services, AMD, Apple, BlackBerry, Bose, Brother, CA Technologies, Canon, Cisco, Dell, Dropbox,
Epson, Ericsson, Fujitsu, Google, Hewlett Packard Enterprise, Hitachi, HP Inc., Huawei, IBM, Ingram Micro, Intel, iQor, JVC
Kenwood Group, Konica Minolta, Kyocera, Lenovo, Lexmark, LG Electronics, Loewe, Microsoft, Mitsubishi Electric Europe,
Motorola Solutions, NEC, Nokia, Nvidia Ltd., Océ, Oki, Oracle, Panasonic Europe, Philips, Pioneer, Qualcomm, Ricoh Europe
PLC, Samsung, SAP, SAS, Schneider Electric IT Corporation, Sharp Electronics, Siemens, Sony, Swatch Group, Technicolor,
Texas Instruments, Toshiba, TP Vision, VMware, Western Digital, Xerox, Zebra Technologies, ZTE Corporation.
National Trade Associations
Austria: IOÖ
Greece: SEPE
Spain: AMETIC
Belarus: INFOPARK
Hungary: IVSZ
Sweden: Foreningen
Belgium: AGORIA
Ireland: ICT IRELAND
Teknikföretagen i Sverige,
Bulgaria: BAIT
Italy: ANITEC
IT&Telekomföretagen
Cyprus: CITEA
Lithuania: INFOBALT
Switzerland: SWICO
Denmark: DI Digital, IT-BRANCHEN
Netherlands: Nederland ICT, FIAR
Turkey: Digital Turkey Platform,
Estonia: ITL
Poland: KIGEIT, PIIT, ZIPSEE
ECID
Finland: FFTI
Portugal: AGEFE
Ukraine: IT UKRAINE
France: AFNUM, Force Numérique,
Romania: ANIS, APDETIC
United Kingdom: techUK
Tech in France
Slovakia: ITAS
Germany: BITKOM, ZVEI
Slovenia: GZS
DIGITALEUROPE
Rue de la Science, 14 - 1040 Brussels [Belgium]
T. +32 (0) 2 609 53 10 F. +32 (0) 2 431 04 89
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www.digitaleurope.org | xxxx@xxxxxxxxxxxxx.xxx | @DIGITALEUROPE
Transparency register member for the Commission: 64270747023-20