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International relations

Japan and US to propose digital trade rule to counter China

Nations plan to join forces at World Trade Organization meeting

A server in Singapore. China essentially requires foreign companies to maintain servers within the country, which can be costly.   © Reuters

TOKYO -- Japan plans to join with the U.S. to propose international rules to promote freer cross-border data flows, looking to counter digital protectionism in China and elsewhere.

Tokyo will bring up the issue at a voluntary World Trade Organization meeting in Geneva next Wednesday, expected to be attended by about 80 members, including the European Union and China. Japan will seek a framework with the high degree of liberalization seen in the Trans-Pacific Partnership's digital trade provisions, with the U.S. likely to stake out a similar position.

The aim is to address protectionist digital trade policies in some countries, particularly China, where forced technology transfers and other alleged violations of intellectual property rights have soured relations with the U.S. Cybersecurity legislation that took effect last year bars companies from sending customer data collected in China overseas without permission, essentially forcing foreign businesses to maintain servers within the country. Vietnam also closely monitors cyberspace within its borders.

Japan and the U.S. will push Beijing to allow use of Chinese data outside the country, such as analyzing customer data from e-commerce transactions and managing construction machinery equipped with GPS or telecommunications systems.

The proposal will also seek to ban domestic server requirements like China's, which can require massive outlays that risk harming companies' international competitiveness. Countries would also be barred from demanding that foreign companies turn over source code. Other measures include eliminating tariffs on digital content such as music and video as well as promoting use of digital signatures.

The U.S. has criticized the WTO's failure to adapt to developments in fast-changing areas like digital trade. As for Japan, new data rules would encourage companies there to expand abroad as well as help to maintain and expand the free trade system. Tokyo also hopes that getting on board with Washington will ease American pressure to reduce the bilateral trade imbalance.

The two countries will look to set a direction for reform this year with an eye toward signing a deal at the next WTO ministerial conference in 2019. They will discuss the issue at voluntary meetings before then in hopes of reaching an understanding with countries with different views, including China as well as the EU, which is more concerned about personal data protections.

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