Ref. Ares(2020)1097523 - 20/02/2020
Masters of Digital 2020
Musées royaux des Beaux-Arts de Belgique
(Auditorium)
A Digitally Transformed
Place du Musée, 1000 Bruxelles
European Society
6 February, 11:00 – 11:30am
Scene Setter
You are the keynote speaker at the Masters of Digital 2020 event. After your
speech there will be a short ‘fireside’ chat with DIGITALEUROPE Director-
General (seated with hand-held microphone/head-set).
This “Masters of Digital 2020” event will gather circa 400+ executive
representatives from private and public sector and from 35 countries, and has
become the “Davos of digital policy and economy”. It is organised by
DIGITALEUROPE which is the voice of high-tech/digital industries, ranging
across various manufacturing (telecom equipment/5G, computers, printers,
TVs, etc,) and services (cloud, software, etc.) sectors. Its wide membership
covers 71 corporate members of various origins (EU: Nokia, Ericsson, Siemens,
Bosch, Philipps, SAP; US: Apple, Facebook, Cisco, HP, Intel, etc.; Japan:
Panasonic, Kyocera, Hitachi; Korea: LG, Samsung; China: Huawei) and 40
national trade associations from EU Member States and the wider Europe.
While DIGITALEUROPE is actively monitoring all trade related issues for its
members, its diverse membership does not always allow it to take clear positions
on the numerous sensitive trade issues surrounding the technology sector,
whether US-China, 5G, US restriction on Huawei, or other issues. Therefore, its
contributions are often limited to technical inputs on issues of general concern
for its business community, such as cybersecurity or export control related
legislation in China. It has submitted specific comments on China’s new draft
Export Control Law or the draft Encryption Law – the latter of which has now
entered into force (with comments not taken into account.) Certain
BusinessEurope members (Nokia, Ericsson) have also shown interest in the
ongoing EU WTO case against India on excessive tariffs on telecom/ICT
products.
Participants will certainly be interested to her your views on:
-
The new EU trade policy priorities
-
EU policy on digital trade
-
The latest state of play as regards on WTO e-commerce negotiations
-
EU trade policy and 5G
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On
5G please note that there are two separate issues of key importance for
DigitalEurope: 1) EU market access for Digital Europe members Nokia and
Ericsson to China and third countries, while tackling trade distortions in the
sector, and 2) the EU 5G security framework. Concerning 5G market access,
we suggest you underline our key messages that the EU expects reciprocal,
fair and open market access to third countries (both in terms of tendering, as
well as access to standardization bodies or research programs) – with
Huawei’s presence as DigitalEurope member, we expect that this message
will be a strong signal to Beijing, considering the sharply deteriorating
situation of EU players in the Chinese market (50% in 3G, 25% in early 4G,
now around 12-15%, with 5G first results showing an even bleaker picture –
with up to 92.5% of Phase 0 installations going to Huawei). It is important to
highlight the need for the EU’s strategic autonomy and digital sovereignty in
this key sector, where EU players have been the incumbents and continue to
provide the most up-to-date technology.
Art. 4.1 (b)
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First key messages
On trade policy’s new priorities
The international environment in which EU trade policy operates
has been the object of dramatic changes in recent years. Trade
policy is now used by major players, and especially by the US
and China in their rivalry for technological supremacy, as an
instrument to achieve geopolitical objectives.
The rules based international trading system is a collateral victim
of this evolution.
In addition, some general mega trends such as digitalisation and
rapid technological advances, climate change, demographic
shifts and an increasingly multi-polar world are also having a
profound impact. Trade policy is more and more solicited to
contribute to these other goals and challenges.
All this calls for the EU to adapt to this new environment and for
the Commission to become a truly geopolitical actor as President
von der Leyen announced in her political guidelines.
As announced in my mission letter Trade will therefore need to
focus on the following new priorities
1) Preserving
a
stable,
predictable
and
rules-based
international trading environment. Importance of trade as a
tool in uncertain times to push for rules
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a. WTO reform: status quo is not an option
b. Current crisis has deeper roots/multiple sources but a lot is
linked to underlying concern that the system is not adapted to
deal with forms of state-capitalism that lead to very significant
distortions in trade and affect the rights and balances of the
WTO agreement.
c. While we appreciate if the US and China find ways to de-
escalate their trade tensions (which are benefiting no one), our
goal is to convince both to strive for a more structural, rules-
based solution within the WTO.
d. For the Appellate Body: Interim arrangements for AB/multi
party approach (now supported by 17 WTO members), but not to
confuse with goal of reforming the system (incl. with the US).
Enforcement regulation to deal with current deadlock.
2) Managing our key relationships (bilaterally)
US: Need to continue positive engagement/political re-set and to
manage our divergences.
China: Communication in March this year: More differentiated
and nuanced relationship. Preference here as well for bilaterally
agreed solutions: CAI (but China will need to show more
ambition to ensure it is worth signing for EU) and rules on
subsidies, tech transfer. But if no agreement, will need to look
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how to secure the EU‘s interests and undistorted competition on
our market through our own measures.
Diversification of our trading relationships. Very successful
recently (Canada, Japan, Singapore, Vietnam, Mercosur…)
o not to the detriment of multilateral system butbuilding
blocks for future rules (and support for WTO reform)
o Ready to consider new agreements where beneficial
Maximising the potential of existing relationships: focus on
implementation and enforcement, role of CTEO.
3) Contributing to other policy fields and overarching topics
issues that matter for Europe
A geopolitical Commission: much more integrated approach,
enhancing effectiveness of our policies and increasing leverage –
Green Deal, EU fit for Digital age and promoting our values and
standards globally.
Climate: need to see where trade policy instruments can further
enhance our climate policy (e.g. facilitating green trade and
production and including Paris Agreement commitments in our
FTAs, for the future even explicitly as essential element); And
where trade instruments are needed to ensure the effectiveness of
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our climate goals (prism through which we look at Carbon
Border Adjustment mechanism)
Sutstainable development more generally – trade policy, and
in particular our trade agreements are a vehicle to promote and
enforce international standards – not only on environment but
also on labour, human rights and other issues like anti-
corruption, gender etc.)
Similar nexus between trade and any future
industrial policy.
Trade and technology/security: increasingly interlinked.
Difficult for the EU but it is changing (FDI screening, reform of
dual use…)
4)
Level Playing Field: Promoting our standards and protecting
EU companies and workers from unfair competition
Leverage our Single Market – it encompasses more than 500
million people with a nominal GDP of over 17 trillion EUR
Fly the flag for open, rules-based fair trade, counter
protectionism
Be more assertive in defending our interests
- (Continue) Making effective use of TDIs
- Update of the Enforcement Regulation
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- Advancing with the IPI (International Procurement Instrument)
- Reflecting on possible new instruments to address the distortive
effects of foreign subsidies in the internal market (for investments but
also procurement). (White Book in March)
- Focus on enforcement and creation of CTEO (Chief Trade
Enforcement Officer)
On the EU digital trade policy
The
global e-commerce market was worth
$29 trillion in 2017
and continues to grow at a fast pace, with around
1.3 billion
people already doing some shopping online. The EU is the
world’s largest exporter of services and is therefore in a strong
position to benefit from the opportunities of digital trade.
Modern trade is to a very high extent enabled by digital
technologies. For example, banks rely heavily on the
international transfer of data, agricultural commodity traders use
e-signatures to conclude international purchases and European
manufacturers can track the performance of their machines
across the planet thanks to electronic data transfers.
Software-related services depending on data transfers represent
an increasing share of European companies’ revenues, and this
trend is set to continue. The "Internet of Things" is all about
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capturing the opportunities created by combining sensors and
internet-enabled devices, large datasets, and high performing
computing capabilities. In this digital revolution, data is key.
Digital trade is therefore a priority for a variety of European
industries. However, looking beyond Europe, digital trade is
increasingly seen as a key priority cutting
across all sectors and
geographies.
At the same time, in recent years, we can observe an
increasingly alarming trend of digital protectionism. Certain
governments impose obligations on companies to store and
process personal and industrial data in their territory, keep
computing facilities there, or simply prohibit or make cross-
border data transfers extremely difficult. Some governments ask
foreign companies to provide access to their source code, as a
condition of being granted a licence and then pass it on to the
local competitors.
These
protectionist measures impose significant costs on
businesses involved in cross-border trade, which can be
detrimental, in particular for SMEs. For example, EU businesses
have to duplicate or multiply their data processing or storage
facilities, which does not only entail high costs but is disruptive
to a number of business models. They usually hit foreign-owned
business, while hardly affecting domestic ones.
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Therefore, the
EU – but also other WTO Members - have an
interest in shaping the global rules on digital trade, including
through bilateral trade agreements and in the World Trade
Organisation.
In our bilateral agreements, we are proposing an
ambitious
Digital Trade title suited to respond to the challenges of the
digital economy.
We have recently agreed it with Mexico and are now negotiating
similarly
ambitious provisions with Australia, New Zealand,
Chile, Indonesia and Tunisia.
The Digital Trade title the EU proposes in bilateral negotiations
aims
to remove unjustified barriers;
bring legal certainly for
companies;
ensure a secure online environment for consumers
and, more generally,
non-discrimination between online and
offline business activities.
In terms of
specific provisions, the EU proposes ambitious rules
to prohibit mandatory source code disclosure; facilitate online
transactions such as electronic trust services, electronic
contracts, disciplines on unsolicited communications (i.e. spam),
and ensure consumer protection in the online environment to
build consumer confidence in the digital economy.
In addition, the EU proposes
a straightforward prohibition of
all measures requiring the
localisation of data or servers in the
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territory of another country. This is the biggest trade barrier to
the free flow of data and a very serious concern for the EU.
At the same time, importantly, our approach to data flows
ensures that trade agreements allow countries to cater for an
important policy area, which is the protection of personal data
and privacy. Protecting personal data is a condition for stable,
secure and competitive global commercial flows.
The EU’s proposed Digital Trade title is
as ambitious as, or in
some aspects even more ambitious than, those found in recent
FTAs concluded by our
most advanced trading partners,
including the USA and Japan.
For instance,
going beyond Japanese and USA practices, the
EU proposes that Parties commit to treating online and offline
services equally in licensing procedures, accepting e-trust
services (which include a range of modern digital services, such
as e-signatures, encryption services and digital time stamp
services) and introducing ambitious rules on consumer
protection and spam.
On WTO e-commerce negotiations
The
EU attaches great importance to the WTO negotiations
on e-commerce and has been
very actively involved in the
discussions from their start. We dearly need a successful
outcome of the talks for
strategic reasons. Digital trade has
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become
central for the economic development of our
countries and its importance is increasing in an exponential
manner.
Digital competitiveness is becoming vital for the
sustainability of our economic development.
Moreover, a successful conclusion of these negotiations will be
the
best response we can bring to the current crisis of the
WTO’s negotiating function. It will be key to demonstrate that
plurilateral processes hold the biggest promise of revitalising our
global rule setting ability.
We have already made substantive progress in the negotiations.
The EU is highly appreciative of both the very efficient steering
of the negotiations by Australia and its co-conveners, Japan and
Singapore, and of the continued positive engagement by the
participating Members.
Hence, during a dedicated Ministerial meeting held in Davos two
weeks ago,
the EU called on WTO Members to continue their
active and constructive engagement in the negotiations. The
EU stands ready to contribute to the collective effort, which will
be required for this negotiation to succeed.
The EU also
calls on industry to actively engage in this
process. Businesses have a key role to play in keeping policy-
makers informed of the latest developments, challenges and
needs of industry. The
voice of industry will be fundamental in
reaching out to governments to highlight the importance of these
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negotiations and help them bridge the gaps between positions
and reach agreement on global rules.
The EU supports strengthening our efforts towards presenting a
consolidated and streamlined text at MC12. Together with a
positive progress report, this would constitute a good basis for
the next step in the negotiations.
Finally, let me stress that the EU remains a firm believer in the
value of anchoring any future agreement on e-commerce in the
WTO framework, for the benefit of both developing and
developed countries.
On 5G
5G is a key sector which will define the technological
sovereignty of the EU.
Internally, we have an open market. Everybody who complies
with the rules can access it. We have rules in place which
address these issues. We have EU procurement rules in place,
and we have the investment screening legislation to protect
European interests.
Externally, the EU is also following very closely the 5G
commercial tendering process worldwide, notably in China,
where Phase 0 results were disappointing for EU vendors.
In the spirit of reciprocal openness and good cooperation in
telecom networks, the EU expects that commitments of fair and
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open market access are effectively implemented in all stages of
the process, in a way that reflects the competitive strength of EU
companies. The ongoing Phase 1 of the commercial tendering
will be a major test of openness.
NB: EU toolbox concerning 5G security will be published on
29 January. A reference could be added.
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Second key messages (defensive points)
What does the EU Digital Trade Title include?
The EU has an ambitious approach to digital trade in trade agreements,
which responds to the challenges of the digital economy. A few concrete
examples:
o Prohibition of mandatory source code disclosure/transfer - contains a
general prohibition for Parties to ask for the transfer of a source code
of software, unless through measures necessary to achieve legitimate
public policy objectives. The industry confirmed that the EU rules are
much better for them than the CPTPP model.
o Online consumer trust - transparent and effective consumer protection
rules in the online environment to build consumer confidence and trust
as well as cooperation between competent authorities in charge of
consumer protection.
o Unsolicited commercial electronic messages – it clarifies that the
consumers must be able to opt-out from spam if they wish so.
Consumers must give their consent to receive such messages; spam
must be clearly identifiable etc.
o The conclusion of contracts by electronic means confirms the legal
validity and effect of electronic contracts. The US includes a similar
provision in its FTAs.
o Electronic authentication and electronic trust services - it confirms the
validity of electronic signatures, time stamps, electronic registered
delivery and eliminates barriers for companies from determining the
method of authentication used for their electronic transaction. Other
trading partners (like the US) usually focus only on e-signatures.
What does the EU proposal in the WTO e-commerce negotiations include?
The EU has proposed horizontal rules relating to e-commerce/digital
trade, rules applying to telecommunication services and market access
requests.
The EU proposal is to negotiate MFN-based disciplines, which would be
attached to the individual schedules of Members under existing WTO
agreements. This ultimately means that existing definitions under GATS
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and GATT as well as scope, exceptions and the WTO dispute settlement
would apply.
The EU has proposed:
o a set of WTO disciplines aimed to facilitate on-line transactions
(legal guarantees on acceptance of e-contracts and e-signatures).
o rules aiming to enhance consumer trust in on-line environment
o a permanent ban on customs duties on electronic transmissions
(digital cross-border transmission of e.g. videos, music, software)
o a ban on mandatory software source code transfer
o a provision on cross-border transfer of data (with a focus on
banning all known forced data localisation requirements) while at
the same time ensuring protection of personal data
o a best endeavour provision suggesting that Members should ensure
that consumers and businesses can access and use the internet under
fair and non-discriminatory conditions in order to carry out their
activities.
o a revision of the WTO Reference Paper on Telecommunications
Services (e.g. to cover the internet)
o detailed
market
access
requests
on
computer
and
telecommunication services and a request that all participating
Members commit to the Information Technology Agreement and its
product expansion (ITA & ITA2).
What is the EU position on data flows?
The EU attaches great importance to addressing protectionist measures
related to data flows and data localisation. We are very concerned about the
increasingly alarming trend of new obligations that force companies, for
example, to store and process personal and industrial data in a given country.
WTO negotiations on e-commerce provide us with a unique opportunity to
tackle these challenges at the global level and we look forward to working
with other Members to develop a language that could be acceptable to as
many participating Members as possible.
In this respect, the EU has tabled a text proposal that aims to facilitate data
flows and ban all forms of data localisation requirements (by far the most
common protectionist barrier when it comes to data flows). Our proposed
text also ensures that Members retain the right to safeguard the protection of
personal data and privacy, which are fundamental rights in the EU.
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It is clear that data flows/data protection will be one of the most sensitive and
difficult issues in these negotiations, which are likely to require some time.
Nevertheless, the EU wants these issues to be part of the package in these
negotiations.
Do you envisage adding rules on AI or blockchain to the EU Digital Trade
Title or the EU proposal in the e-commerce negotiations?
We cooperate with our technology and digital experts on a daily basis
(TRADE works closely with CNECT). Of course, we need to think about
whether and how any such new development needs to (or can) be translated
into trade rules.
For example, there could be developments on international standards relating
to artificial intelligence or blockchain. We would not consider adding such
rules in trade agreements mainly as these areas mostly focus on technical
standards that fall outside the more general scope of trade liberalisation.
Moreover, due to their highly technical and fast pace nature, such areas are
likely to evolve under a time-frame that is shorter than the life of a trade
agreement. If we included such provisions in a trade agreement we would
risk jeopardising the "future-proof" approach that we seek to maintain.
The WTO Moratorium on customs duties on electronic transmissions
The EU remains strongly attached to the continuous application of the WTO
Moratorium on customs duties on electronic transmissions. Our preferred
approach would be to render the Moratorium permanent. This would bring
the benefit of certainty and predictability to businesses and consumers.
There is significant support by Members for taking a decision at the General
Council in December to extend the Moratorium until MC12. The EU and BR
have asked for an extension until MC13, but this does not seem feasible at
this stage in the light of the continuous opposition by India and South Africa.
5G
Various references or formulations in the report on EU coordinated risk
assessment on 5G cybersecurity seems to point to China- at least implicitly- as
a major source of threat for 5G networks. Why is this not expressed more
explicitly? Are Member States afraid of potential geopolitical consequences?
The Report deliberately does not contain any references- explicit or implicit- to
individual countries or suppliers., It follows an objective approach and identifies
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a number of strategic risks, which will help define appropriate mitigation
measures.
The report highlights the importance of individual suppliers’ risk profiles.
Based on the criteria mentioned in the report, some of the key suppliers, who
have a strong presence in the EU market, may be considered ‘risky suppliers’
in the future, does this not mean that they should be excluded upfront?
The Report identifies a number of key risks and security challenges. In certain
circumstances, Member States have found that these risks may be related to the
characteristics of individual suppliers, coupled with their particular role and
involvement in 5G networks. The toolbox of mitigation measures to be
developed by the end of the year will aim to address all identified risks and risk
factors. There are several ways, in which this may be done. This work will be
completed by the end of the year.
Several numbers evaluating the potential cost of excluding Huawei from EU
networks have been recently put forward. How will potential economic
impacts of the toolbox be taken into account?
As underlined in the Recommendation, the toolbox should consist of
appropriate, effective and proportionate possible risk management measures.
Member States are well placed to ensure that the economic dimension is
appropriately taken into account in this work. In addition, BEREC- the body
bringing together EU telecoms regulators- will also provide input for the
toolbox.
On 16 May, United States President Donald Trump signed an executive order
escalating his administration's campaign against Chinese telecoms giant
Huawei, raising. Do you feel pressured to follow suit in banning the company
from their 5G and other networks?
The European Union has regular policy dialogues in place with the United States
on cybersecurity and information security.
During this type of dialogue, we are discussing the increasing need for global
coordination and cooperation, in order to safeguard an open, stable and secure
cyberspace.
For this reason, the European Commission is setting in place a number of policy
and legislative measures and procedures to safeguard the integrity of 5G
networks.
It is up to each Member State to evaluate and assess the risks connected to every
proposal ensuring the national, but also European security.
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We encourage everyone to take these security concerns seriously.
What about consumers who are concerned their phones will no longer work?
For the time being, it is not clear what impact Google’s decision to stop
providing updates to Huawei phones operating with Android software would
have on European consumers.
In general, Huawei, like all companies operating in Europe, has to ensure
compliance with EU consumer legislation. This relates in particular to the EU
directive on sales of goods and guarantees and the unfair commercial practices
directive. Traders need to ensure that a product sold remains operational during
a reasonable period of time.
These questions will be raised to the attention of consumer authorities and
product safety authorities.
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Background
The WTO started working on electronic commerce back in 1998, when it established a
dedicated Work Programme. After failing to advance multilateral rulemaking in the area for
many years, 82 WTO Members are now engaged in plurilateral negotiations on e-commerce
(further to a Joint Statement adopted by Ministers on 25 January 2019 in Davos).
Negotiations are taking place among a broad and diverse group of Members, including the
EU, US, China, Japan, Brazil, Russia, Nigeria, Saudi Arabia and Laos. Since the start of
negotiations on 6 March, Benin, Saudi Arabia, Kenya, Cote d’Ivoire, Indonesia and
Cameroon have officially joined the talks, bringing the number of participants up to 82. The
negotiations are chaired by Australia, with Japan and Singapore acting as co-conveners.
A first series of detailed discussions took place from May to July 2019. A second round of
text-based negotiations started in September based on a streamlined text prepared by the
Chairs, with the aim of eliminating repetitions and minor differences between the various
proposals. There were also rounds in October and in November.
There is a wide range of issues on the table i.a. in the areas of trade facilitation, cross-border
data flows, consumer protection, the facilitation of electronic transactions, the protection of
computer source code and market access both in goods and services. Participating Members
continue to put new submissions on the table.
The discussions so far have remained constructive and largely non-political with active
engagement by the EU, CN, US, JP, BR, RU, several ASEAN, African and Latin American
countries, but divergent positions are appearing on some sensitive issues, thus making
progress more difficult in some areas (such as data flows and privacy).
Members have not yet decided on the possible flexibilities or on the legal form of the future
outcome of the negotiations.
Among the co-conveners, Australia takes the lead in organising the negotiations, with great
success so far. The EU has excellent cooperation with the Chairs. The co-conveners plan three
more rounds in February, March and April 2020. The objective is to present a detailed
progress report and a consolidated negotiating text at MC12.
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Document Outline