Should Data Flow Freely Across Borders?

By Richard Hill

The principle that data should flow freely across borders is a policy decision that has profound effects. This is based on the idea that data is a commodity that should be traded sans restrictions.

But the idea that data should flow freely does not actually follow logically from the idea that data is a commodity. The benefits of free data flows have been overstated: indeed they are likely to exacerbate inequalily and contradict fundamental human rights.

There is no obvious justification for policies favoring the free flow of data other than to allow dominant internet companies to continue accumulating huge profits (often monopoly profits) by extracting and refining data. 

Without paying taxes and without compensating the users who produce the data in the first place.As a consequence, there should be a moratorium on negotiations regarding the free flow of data.

Should data flow freely

Image Courtesy: Prakriti Bakshi

Data as a commodity

A propensity by some to advocate in favor of the principle of the free flow of data was clearly illustrated in the workshop on Data Localization and Barriers to Cross-Border Data Flows held at the 2017 World Summit on the Information Society (WSIS) Forum.

The workshop stated that it would “consider whether normative approaches involving monitoring and reporting could help to ensure that data policies do not involve arbitrary discrimination or disguised digital protectionism, and do not impose restrictions greater than what is required to achieve legitimate public policy objectives”.

Who is to decide the legitimacy of public policy objectives? During the workshop, it was made clear that the legitimacy of restrictions, and of public policies themselves, would be made by arbitration panels under the World Trade Organization (WTO) or related agreements. The intent is to subordinate decisions made by national parliaments and national governments to the opinion of a panel of international jurists regarding the provisions of free trade agreements (FTAs).

But why should trade agreements be given primacy over other international instruments, in particular those regarding human rights? Perhaps trade is not the only, or even the pre-eminent matter to be considered.

Indeed, if data is considered to be a commodity, subject to trade facilitation rules, then why isn’t it considered a commodity, also from the point of view of taxation? And why aren’t the producers of the raw material (the end-users who provide the data) fairly compensated for their production?

Data in this context has often been  compared to oil. Nobody expects the owners of the ground with the crude oil/ in which there is crude oil, to provide it freely to the companies that refine it, add value to it, and finally sell products derived from the crude oil. Nobody expects the flow of oil to escape taxation.

If data should be treated as a commodity, because it is valuable when it is combined with other data, it cannot simultaneously be argued that it cannot be taxed and that end-users should provide their personal data without adequate compensation.

So there is a fundamental inconsistency here: if data should be treated as a commodity, because it is valuable when it is combined with other data, it cannot simultaneously be argued that it cannot be taxed and that end-users should provide their personal data without adequate compensation.

Of course users are, at present, compensated for their data because they receive so-called ‘free’ services, such as social networks (Facebook), search engines (Google), etc. But the value of those services is far less than the value of the data, as can be seen from the fact that the dominant Internet platforms/service providers are extremely profitable: in fact, far more profitable than other extractive industries. Thus, users do not receive adequate compensation for the raw material that they provide: their personal data.

Is data really a commodity?

Personal data is not a commodity like any other commodity. This data is a collection of a person’s ordinary and extraordinary, behaviors, habits, social exchanges and expressions. It is related to their private life and thus, to their human rights.

The Universal Declaration of Human Rights provides in its Article 12: No one shall be subjected to arbitrary interference with his privacy, family, home or correspondence, nor to attacks upon his honour and reputation. Everyone has the right to the protection of the law against such interference or attacks.

It is up to the law (meaning national law) to define what is an “arbitrary” interference with a person’s privacy. Many states, in particular in Europe, have enacted, and enforced laws regarding the protection of personal data, such as the EU General Data Protection Regulations (GDPR).

Consequently, data is not a commodity like oil, because data can only be processed in accordance with laws that protect personal data, and the human right to privacy of the people to whom the data relates.

Further, the Universal Declaration of Human Rights provides in its Article 22: Everyone, as a member of society, has the right to social security and is entitled to realization, through national effort and international co-operation and in accordance with the organization and resources of each State, of the economic, social and cultural rights indispensable for his dignity and the free development of his personality.

As noted above, data is a valuable resource. And dominant Internet platforms and service providers derive their profits from extracting and refining it.

People have the right to realize the economic rights needed for their dignity and the free development of their personality. That right includes the right to be adequately compensated for the value of the data that is provided to internet platforms and service providers, both individually, and as residents of a state, through taxation of data flows

People's economic rights includes the right to be adequately compensated for the value of the data that is provided to internet platforms and service providers, both individually, and as residents of a state, through taxation of data flows.

Trade negotiations

Past and current trade negotiations have resulted (or are likely to result) in agreement on provisions that place restrictions on the ability of states to tax or restrict data flows. For instance, Article 19.8 of the US-Mexico-Canada Free Trade Agreement (USMCA) states:

  • No Party shall impose customs duties, fees, or other charges on or in connection with the importation or exportation of digital products transmitted electronically, between a person of one Party and a person of another Party.
  • For greater certainty, paragraph 1 does not preclude a Party from imposing internal taxes, fees, or other charges on a digital product transmitted electronically, provided that those taxes, fees, or charges are imposed in a manner consistent with this Agreement.

What will prevent a state from arguing that taxation of data is a disguised restriction on trade, which is not imposed in a manner consistent with the Agreement?

Further, Article 19.8 of the USMCA purports to provide for the protection of personal information, but includes a footnote stating: “For greater certainty, a Party may comply with the obligation in this paragraph by adopting or maintaining measures such as a comprehensive privacy, personal information or personal data protection laws, sector-specific laws covering privacy, or laws that provide for the enforcement of voluntary undertakings by enterprises relating to privacy. “

The underlined provisions are a transparent means of ensuring that the US need not change its current regime in which personal data has little or no protection.

Sub-paragraph 3 of the cited Article 19.8 includes this language: “The Parties also recognize the importance of ensuring compliance with measures to protect personal information and ensuring that any restrictions on cross-border flows of personal information are necessary and proportionate to the risks presented.”

What prevents a state from arguing that any particular restriction on cross-border data flow, thought to be necessary to protect personal information, is not necessary and proportionate to the risks presented?

Indeed, the scope of protection of personal information is restricted by Article 19.11 of the USMCA, which states :

  • 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.
  • 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.

(b) does not impose restrictions on transfers of information greater than are necessary to achieve the objective.

What prevents a state from arguing that any particular data protection measure is an arbitrary or justifiable discrimination, or a disguised restriction on trade?

Article 19.12 goes even further: “No Party shall require a covered person to use or locate computing facilities in that Party’s territory as a condition for conducting business in that territory.”

Recall that disputes regarding the interpretation and implementation of trade agreements are not decided by national courts. They are decided by arbitration panels composed of international jurists. Thus, national measures regarding data flows can be overturned even if they have been democratically decided by a national parliament.

National measures regarding data flows can be overturned even if they have been democratically decided by a national parliament.

This appears to be a violation of the human right to take part in the conduct of public affairs, as provided in Article 25 of the International Covenant on Civil and Political Rights (and also in Article 22 of the Universal Declaration of Human Rights).

This must stop. As Renata Avilia and Burcu Kilic discuss:

If we are not vigilant, we will rapidly consolidate this digital colonization, a neo-feudal regime where all the rules are dictated by the technology giants, to be obeyed by the rest of us.

If we are not vigilant, we will rapidly consolidate this digital colonization, a neo-feudal regime where all the rules are dictated by the technology giants, to be obeyed by the rest of us.

 
 
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An independent digital media space, Bot Populi examines the digital from a social justice and global south perspective 
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