The Japan-U.S. digital trade agreement was approved by the House of Representatives on Tuesday seeks prevent nations from intervening in the transfer of data, such as by prohibiting governments from demanding companies disclose the encryption they place on personal computers and other devices.
In addition to serving as a check on China, which is strengthening its grip on data, the two nations hope the accord will serve as a model for international rules and allow them to take a leadership role in the process.
Duty free, in principle
Prime Minister Shinzo Abe and U.S. President Donald Trump reached a final agreement on the digital accord with a Japan-U.S. trade deal on Sept. 25. The government wants the deal to be approved in the current Diet session in order for it to go into effect on Jan. 1.
The digital trade agreement states that tariffs will not be imposed on data transactions that cross national borders, in principle. It also basically forbids governments from demanding that companies disclose confidential information such as the encryption they apply to personal computers to protect their technology. This covers things like algorithms for artificial intelligence and the source code for software. Digital rules are also part of the Trans-Pacific Partnership trade pact between Japan, Australia and nine other nations, but the prohibition against demanding that algorithms and encryption be revealed is a new addition.
Warning signs
One factor behind the accord is wariness over China's attempts to monopolize data. In a cybersecurity law enacted in June 2017, the Chinese government made it mandatory for foreign companies conducting business in China to store information collected within the country, such as personal or important data, on domestic servers. And when sending large amounts of data to areas outside of China, it would have to be screened by Chinese authorities in advance.
Some developing countries, such as Indonesia, have followed the Chinese approach and are creating systems to regulate the transmission of data across borders.
Japan and the United States devised an advanced bilateral accord to promote the free flow of data worldwide. In addition, they want their rules to be reflected in agreements adopted by the World Trade Organization, which counts China and many developing countries among its members, and to take the lead in debates over the issue. About 80 interested WTO member countries have already stepped up to start discussions on creating new rules.
"The question for the future is whether China, which is promoting data protectionism, and other developing countries that are not among these interested nations will be brought into the arena for making international rules," said Junichi Sugawara, a senior research officer at Mizuho Research Institute Ltd.
Explosive growth
Advancements in information technology are digitizing the flow of people, goods and money around the world, which has led to explosive growth in the volume of data crossing national borders. In one estimate, the amount of data in 2012 was 45 times that in 2002.
With data becoming ever more important, such as for e-commerce and autonomous driving, some analysts believe that digital trade will have a greater impact than automobiles and agricultural products.
The agreement also includes competition policies to prevent market monopolies, protections for personal information and exceptions for cases related to national security, such as terrorism. In Japan, systems are being designed to regulate the huge tech companies that are increasingly dominating the collection of huge amounts of personal information.
The focus of data-related discussions going forward will likely revolve around the issue of combining regulations to prevent monopolies with the benefits of technological innovation and convenience.
Read more from The Japan News at https://japannews.yomiuri.co.jp/
