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G-20 can harness data flow by backing Abe push for digital rules

Japan's welcome initiative could revive multilateral cooperation and boost WTO

| Japan
Abe said, in his speech at Davos, "I would like Osaka G-20 to be remembered as the summit that started worldwide data governance."   © Reuters

Attention at the Osaka Group of 20 summit on June 28-29 will understandably focus on the planned trade talks between U.S. President Donald Trump and Chinese President Xi Jinping.

But whatever the outcome of those bilateral discussions, this gathering could bring progress on a key multilateral issue -- the governance of the world's rapidly expanding data flows.

Japanese Prime Minister Shinzo Abe, who is hosting the meeting, will use his power as chair to press his proposal for "Data Free Flow with Trust," or DFFT, which would relieve a problem of growing significance for the international economy. It could also, if it succeeds, reinvigorate the World Trade Organization, a much-maligned body currently in need of a boost.

Real progress on DFFT would give the G-20 a tangible achievement when the organization is struggling to maintain a consensus in light of the strains between the U.S. and China. As occurred last year, the final communique is likely to again omit what were once standard pledges to "fight protectionism" and "promote free and fair trade." There will be concern over the state of the global economy, vague promises to ensure there are no crises, pledges to promote equality and calls for action to combat climate change and the spread of microplastics -- a new cause celebre.

With all this in mind, Abe is right to prioritize digital commerce, a topic that has moved to the center of policymaking in an increasingly interconnected world. Data is the new oil, the lubricant of modern society. It is estimated that 2.5 quintillion bytes of data are generated daily, and the pace of creation is accelerating: 90% of all data in the world was created in the past two years.

Governments are concerned about the generation, control and security of data to protect individual citizens as well as national security, intellectual property and government revenues. The chief task is agreeing on ways to facilitate the dissemination of data so that the benefits of connectivity -- health care, education, commerce, and safety, to name just four -- are realized while privacy is respected and national security ensured.

Abe wants the G-20 meeting to be "remembered as the summit that started worldwide data governance." His guiding principle for data governance is Data Free Flow with Trust: a world in which data crosses national borders freely among countries with high levels of privacy protection, data security and intellectual property rights. The specific standards that will enable this exchange will be established in "the Osaka track" -- a proposed new negotiating framework -- under the roof of the WTO.

While the details of DFFT are still to be worked out, key principles are emerging. Japan wants to "allow cross-border transfer of information by electronic means, including personal information, when this activity is [for] conduct of the business of a person of members."

Tokyo also supports the principle that businesses should not be required to use or locate computing facilities in a country as a condition for doing business there. The G-20 trade ministers, meeting in Tsukuba, Japan, in early June, backed the DFFT concept in general terms. After the meeting, the European Union announced its support and called for cooperation on the convergence of regional and national digital frameworks. The U.S. is also on board.

Developing countries are hesitating, however, determined to protect the value of their data, fearful that it will be exploited by more developed economies and worried about the fiscal impact of potential revenue losses. Indian Commerce Minister Piyush Goyal hedged his bets and split the difference in Tsukuba, reiterating New Delhi's opposition to DFFT as a specific proposal, while allowing the ministerial statement to support the principle of DFFT and recognize that "the free flow of data raises certain challenges."

That is a tightrope Indian Prime Minister Narendra Modi may not be able to walk in Osaka.

Beijing's participation is critical to the success of any global plan. China's e-commerce industries are exploding, generating massive amounts of data, AI algorithms to sort it, and the profits that result from those efforts. Their activities are setting standards by default -- credit the sheer size of China's market -- and those are being extended beyond China's borders through the Belt and Road Initiative. China has demanded the localization of data; reaching a compromise between Beijing's position and Tokyo's will be a real challenge.

Chinese support for international standards of data oversight provides a starting point for negotiations. China's voice must be heard as institutional debates begin; failure to include it risks the Balkanization of the internet and the creation of rival digital orders.

Siting this effort under the aegis of the WTO is a shrewd move, as it helps tie China into the process. The organization is coming under mounting pressure for its failure to adjust to new realities of the global economy. It continues to focus on goods even as data and intangibles assume an ever more vital role in international exchange, and the organization's inability to adapt has overshadowed its successes. The WTO must develop meaningful rules for digital commerce, among other things, if it is to retain its relevance. The Osaka track offers the opportunity to do just that.

Abe has his work cut out for him at Osaka. Fortunately, significant groundwork has been done. He has been pushing the DFFT concept since he unveiled it at the World Economic Forum Davos meeting in January. Agreement on this issue and launch of the Osaka track would ensure that this week's G-20 meeting is a genuine success.

Brad Glosserman is deputy director of and visiting professor at the Center for Rule Making Strategies at Tama University and senior adviser at Pacific Forum International in Honolulu. He is the author of Peak Japan (Georgetown University Press, 2019).

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