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Japan is attempting to bring together a "digital TPP," intended to unite members under one set of rules -- and to ease the deepening distrust between the U.S. and China. (Illustration by Eric Chow)
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How to avoid a technology cold war

Behind the scenes, TPP members coax China to play by digital rules

TOKYO -- What can be done to loosen China's authoritarian grip on technology, and prevent a "digital iron curtain" from dividing the world? Japanese Prime Minister Shinzo Abe and his team have an idea. It's an initiative for new technology rules, aimed at easing the distrust between the U.S. and China that has boiled over in recent weeks over Huawei Technologies.

The Japanese government plans to launch the initiative, named "Data Free Flow with Trust," or the DFFT, at the Group of 20 summit in Osaka later this month. The core ideas of Abe's proposal stem from the Trans-Pacific Partnership, the 2016 agreement that was aimed at cutting tariffs and setting trade standards among 12 Pacific Rim countries.

Following U.S. President Donald Trump's abrupt withdrawal from the TPP, the Abe administration took the initiative in persuading the remaining 11 countries to bring a slightly modified version of the pact into effect on Dec. 30, 2018. Trump had declared that he preferred bilateral deals -- but Michael Froman, who led Washington's negotiations under President Barack Obama, suggested in an interview with the Nikkei Asian Review at Davos in January that the TPP's biggest aim was not to "contain" China, but to "invite" it to the world of multilateral trade rules, particularly in the digital field.

Abe's aim in Osaka is to create an expanded version of the TPP's digital trade chapter, under the wider scope of the World Trade Organization. Gathered under the Japan-led initiative, 76 countries have met in Geneva to discuss the DFFT since March 2018. A high-ranking WTO official, who wished to remain anonymous, revealed that Chinese representatives are the most vocal group of participants at the meetings -- despite not being an official member.

If a set of international rules is to be formulated for the digital sector, China will want to be involved in the process. Member states have had a number of technical discussions, aiming to agree by 2020. The Leaders' Declaration at the G-20 Osaka Summit is likely to refer to the DFFT.

The U.S., Japan, Singapore, the EU, New Zealand and China have submitted reports that could provide a springboard for talks for a new treaty. The core principles include the "free cross-border transfer of data," "prohibition of data localization" and "due process in government access to privacy and industry data."

China retains a cautious view toward the free flow of data, according to its proposal paper obtained by NAR. "In light of [the] complexity and sensitivity [of the issues], as well as the vastly divergent views among the members, more exploratory discussions are needed," the paper says. The demand to step back from localization is controversial: China, as well as India and Europe, have already passed laws requiring that citizens' data not be held in servers overseas.

In the unlikely event that companies are allowed to provide cloud services to Chinese users through data centers set up outside the country, investments like the $1 billion data center that Apple is building in Guizhou Province would become useless. Beijing's wary stance toward the digital industry is summarized in the paper: "It is necessary that the data flow [be] orderly in compliance with Members' respective laws and regulations."

In his speech at Davos, Abe said, "I would like Osaka G-20 to be long remembered as the summit that started worldwide data governance." To make his dream a reality, Abe will need to persuade China that participating in the DFFT would be more attractive -- and advantageous -- than building a rule set for the digital world on its own.

And, if China can be convinced that it has more to gain by complying with multilateral rules, rather than being pressed by Trump to accept his bilateral trade demands, then the world may be able to avoid a U.S.-China technology cold war.

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