Following up on my earlier posts about exceptions in digital trade chapters/agreements, here's another issue in this same area (thanks to Thomas Streinz for bringing it to my attention). This is the USMCA cross-border transformation of information by electronic means obligation and exception:
Article 19.11: Cross-Border Transfer of Information by Electronic Means
1. No Party shall prohibit or restrict the cross-border transfer of information, including personal information, by electronic means if this activity is for the conduct of the business of a covered person.
2. This Article does not prevent a Party from adopting or maintaining a measure inconsistent with paragraph 1 that is necessary to achieve a legitimate public policy objective, provided that the measure:
(a) is not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination or a disguised restriction on trade; and
(b) does not impose restrictions on transfers of information greater than are necessary to achieve the objective.55 A measure does not meet the conditions of this paragraph if it accords different treatment to data transfers solely on the basis that they are cross-border in a manner that modifies the conditions of competition to the detriment of service suppliers of another Party.
Article 11 of the U.S. - Japan Digital Trade Agreement has practically the same wording.
The obligation in paragraph 1 is clear enough. And the exceptions language in sub-paragraphs (a) and (b) of paragraph 2 all seems familiar from trade in goods/services agreements. But what exactly is footnote 5 about? Sub-paragraphs (a) and (b) would seem to set out sufficient conditions to prevent the paragraph 2 exception from being abused. But then footnote 5 does something extra, and I can't figure out what. Is there a measure that would be disqualified under footnote 5 but not under sub-paragraphs (a) and (b)? Does footnote 5 offer more specific wording to help illustrate how sub-paragraphs (a) and (b) apply? And more broadly, what is the relationship between the following three phrases: (1) a means of arbitrary or unjustifiable discrimination or a disguised restriction on trade; (2) restrictions on transfers of information greater than are necessary to achieve the objective; and (3) modifies the conditions of competition to the detriment of service suppliers of another Party? Do the negotiators have a sense of the precise contours of each?
Over the years, trade agreements have become controversial when the application of specific provisions through dispute settlement has intruded too much into domestic policy-making. GATT Articles III/XX and TBT Agreement Articles 2.1/2.2 are good examples of this. Digital governance policy is particularly sensitive, and it would be nice to have a sense of what exactly the international obligations in this area mean before they start to apply broadly.
