Data at the Docks: Modernizing International Trade Law for the Digital Economy

Andrew D. Mitchell, Neha Mishra • 20 Vand. J. Ent. & Tech. 1073

Abstract

The World Trade Organization (WTO) has been slow so far in responding to the various challenges arising from the integration of electronic commerce into cross-border trading activities. This slow response in the multilateral system is largely attributable to the complex, multifaceted nature of digital trade or electronic commerce, coupled with the conflict among countries on issues of Internet regulation and digital development. Nonetheless, international trade agreements, particularly at the WTO, play an important role in the creation of a secure, predictable, and trustworthy global regulatory framework for digital trade, and therefore, need to be reformed in a timely and meaningful manner to support the growth of the digital economy. Accordingly, this Article focuses on the limitations of the General Agreement on Trade in Services (GATS) in liberalizing the digital sector, eliminating new types of barriers to digital trade such as data localization, as well as addressing “new” regulatory issues pertaining to digital trade such as cross-border data flows, data protection, cybersecurity, and online consumer protection. Further, the introduction of comprehensive provisions on such issues in Electronic Commerce Chapters of Preferential Trade Agreements (PTAs) in recent years increases the possibility of a potential discord between PTA rules and the GATS. Moreover, since rules on digital trade are heterogeneous and often conflict across different PTAs, this discord can potentially fragment and disrupt the global framework for digital trade in the long run. Therefore, in the Authors’ view, WTO law should take a central role in facilitating a secure and stable legal regulatory environment for cross-border electronic commerce while undercutting the current upswing in digital protectionism.

To address the above deficiencies in the GATS, the Authors recommend extensive reforms within the existing multilateral framework rather than simply relying on WTO tribunals to creatively interpret existing rules. The Authors believe three broad areas of reform are necessary in the multilateral framework to promote the digital economy in a holistic and balanced manner—improving market access, addressing regulatory barriers in digital trade, and supporting developing countries to integrate faster into the digital economy. Several of the Member proposals on electronic commerce placed before the WTO Work Programme on Electronic Commerce in recent months provide a useful starting point for constructive dialogue and negotiations at the WTO, particularly in facilitating a sound regulatory framework for cross-border data flows, while enhancing consumer confidence and promoting interests of developing countries and small and medium-sized enterprises (SMEs). These reforms can be supported through incremental changes within the GATS framework (such as adoption of domestic regulations under GATS Article VI or development of a Reference Paper or Annex on Electronic Commerce) or through the adoption of a new WTO agreement. In the Authors’ view, although the second route is politically more challenging, it is better suited to address the cross-cutting nature of issues in digital trade, as well as to overcome the various challenges arising from the antiquated structure of the GATS. Irrespective of which route is taken for initiating these reforms, the WTO needs to creatively engage with the broader network of institutions dealing with digital trade and internet governance, including multistakeholder institutions, to contribute meaningfully to the formation of a coherent framework for digital trade.