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Trade Agreements to Promote Electronic Commerce II

A couple of years ago I wrote a column here about using trade agreements to promote laws among the contracting states that would promote electronic commerce. The example discussed was the Trans-Pacific Partnership, then in draft form.

There have been some developments since then that may be of interest.

CPTPP

The Trans-Pacific Partnership had a bit of a bumpy ride, as President Trump withdrew the United States from the agreement before it was signed. The other parties to the negotiation made some changes to the text then signed it under the name Comprehensive and Progressive Agreement for Trans-Pacific Partnership. Canada is a party.

Chapter 14 is still the place where e-commerce provisions are found. (The official text on the Government of Canada website is still the 2016 text, though the names of the parties and the table of contents no longer include the US and the side letters on the site relate to the new version of the agreement.)

Thus the provisions and limitations of the commitments mentioned in my earlier column still apply. One will note that some countries are given some time to comply with some provisions. For example, Chapter 14.18 provides that the dispute resolution provisions are not to be used against Malaysia for certain articles of the agreement for two years after it comes into force and against Vietnam for those and an additional article.

Canada has entered into a side agreement with Vietnam promising not to invoke the dispute resolution provisions with respect to two of those articles for five years rather than two. And while they are not part of the e-commerce chapter, Canada has made side agreements with several countries deferring dispute resolution on electronic payments provisions of Chapter 11 of the agreement.

ABA

The use of trade agreements to promote e-commerce caught the attention of the American Bar Association. Under the leadership of the Section of International Law, but with the participation of several other sections, in February, 2018, the ABA adopted Model Provisions for Electronic Commerce for International Trade Agreements.

The text of the Model Provisions is expressly taken from the TPP, with slight modifications. The statement in the accompanying report of the ABA suggests the mindset behind such provisions – including, possibly, that of the office of the US Trade Representative.

The existing legal framework for global trade through electronic means remains outdated and inadequate. The ability of companies and consumers to move data has become vital in promoting, fostering, and expanding commerce and services around the globe. Many countries have enacted rules that have the effect of reducing competition and disadvantaging entrepreneurs, by imposing regulatory measures that create barriers to trade or overly restrict the free flow of information. This Resolution supports liberalization and harmonization of the regulation of business data flows from one country to another country by adopting the [Model Provisions.]

The basic structure of the model provisions is the same as In the TPP – the same topics are covered in the same order, and in about 90% of the same language. So the TPP provisions are still the state of the art in such matters.

Here are a few of the differences in the ABA text from Chapter 14 of the TPP:

  • Financial services are not excluded, at least not in the definition of ‘covered person’. Otherwise the definitions and the scope of the provisions are the same.
  • That said, some of the provisions in the TPP are said to be subject to other provisions of the whole agreement. The ABA was working with free-standing provisions.
  • The ABA allows less of an opt-out from the duty in article 1.11 to allow cross-border transfer of information by electronic means. The TPP allows inconsistent measures ‘to achieve a legitimate public policy objective’, but only on the usual conditions (in trade agreements) that the inconsistency is not arbitrary or a disguised restriction on trade and is not more restrictive than necessary to achieve the objective. The ABA does, however, say the permission is “subject to … laws and regulations of the Parties”, which might come to the same thing in practice.
  • The ABA also allows no opt out from the ban against a party requiring a business to locate its computing facilities in its country as a condition for carrying on business there. Location requirements are controversial. Businesses do not want the extra expense of multiplying their servers and staff, and the risk of being physically regulated. Host countries do not want personal information of their citizens going offshore and financial records, not to mention enforceable assets, possibly being out of their reach as well. The TPP would have allowed exceptions for legitimate public policy objectives, as with cross-border transfers just discussed, on the same standard trade law conditions.
  • The ABA has a tighter restriction against a party requiring the transfer of source code, or access to it, as a condition for operating in its territory. The TPP allows an exception for non-mass-market code, notably that used in critical infrastructure. It would also allow parties to require the modification of source code for it to comply with laws or regulations which are not inconsistent with the agreement. The ABA does not support that exception.

The full Report accompanying the ABA Model Provisions is a detailed explanation of the reasoning behind them, which may be useful in understanding them in their newest manifestation: the USMCA.

USMCA

The most recent version of e-commerce provisions in a trade agreement are in the United States – Mexico – Canada Agreement that will, if ratified, replace NAFTA, which contained no similar provisions. (The only full text of the USMCA at time of writing is on the US Trade Representative’s website. Government of Canada sites link to it. The current online text is “subject to legal review for accuracy, clarity and consistency” and to “language authentication.”)

Chapter 19 on Digital Trade is quite similar to the TPP text. The sub-headings are almost identical and appear in the same order. All three countries had agreed on that text as part of the TPP negotiations, so it is not surprising that they did not start from scratch. Some of the points of difference may be of interest.

  • While the terms defined in both documents use the same language, USMCA has additional definitions.
    • “Electronic signature” is defined in the language of the UN Model Law on Electronic Signatures. While the UN has improved on this language in subsequent documents, Mexico has implemented this Model Law and may have been comfortable with it. It is not likely to do any harm in practice.
    • “Government information” is non-proprietary information, including data, held by the central government, but not by state or provincial governments. The agreement has a provision on this topic that is not in TPP.
    • “Interactive computer service” is a system or service that enables access by multiple users. USMCA has detailed provisions (discussed below) not in TPP to protect such bodies from liability, as distinct from the “Information content provider”.
  • USMCA doubles down on the ban on “customs duties” to ensure it applies to “fees or other charges on or in connection with the importation or exportation of digital products”.
  • The assurance of non-discriminatory treatment of digital products applies to broadcasting, contrary to the TPP’s rule, and is not expressly subject to the Intellectual Property chapter.
  • The TPP encourages its parties to maintain a general e-commerce legal framework based on the UN Model Law on Electronic Commerce or the UN Electronic Communications Convention. The USMCA mentions only the Model Law. While none of the parties to USMCA have implemented the Convention (some other members of the TPP have done so), it is for a number of reasons a better text than the older instrument. The Uniform Law Conference of Canada has adopted legislation to implement it, passed to date by Ontario and Saskatchewan. The ABA has recommended its ratification by the US. It is regrettable that USMCA does not at least hold it out as a desirable option.
    • However, the following article on authentication builds into the USMCA a provision of the Convention not in the TPP, to ensure that parties to contracts can attempt to prove authentication in practice. For reasons beyond the scope of this column, I find the language less helpful than that of the Convention, but it shows a desire for useful flexibility in such matters.
  • The TPP requires parties to make available “trade administration documents” to the public. The USMCA (and ABA) do not, though all three texts make the parties “endeavor … to accept trade administration documents submitted electronically as the legal equivalent of the paper version of those documents.”
  • The TPP provides that a supplier seeking an international Internet connection may negotiate with suppliers of another Party. USMCA does not have such a provision. It may be that the right to negotiate was thought to go without saying. It may also be that the TPP’s supplementary sentence on compensation for the establishment and operation of facilities might contemplate requirements to locate those facilities in the territory of another state. USMCA has a much more stringent ban on local establishment facilities than the TPP. It gives no recognition to a party’s desire for security and confidentiality of communications, and – like the ABA – it admits of no “legitimate public policy objective” that the TPP allowed to justify an exception.
  • The parties to both official texts agree to cooperation on a number of matters. USMCA does not mention working together to help small and medium enterprises (SMEs) to “overcome obstacles” to the use of e-communications. It does mention, as the TPP does not, promoting access for persons with disabilities to information and communications technologies. The rest of the articles essentially come to the same thing.
  • USMCA has more detailed provisions on cybersecurity than TPP or ABA, both as to parties’ own capabilities to resist cyberattacks and to use and encourage the use of risk-based approaches and standards to this end.
  • The provision on source code in USMCA is not limited to mass-market software as in the TPP. However, USCMA does contemplate requiring access to source code for judicial or regulatory proceedings.
  • USCMA contains a very detailed set of provisions to avoid civil liability of interactive computer services (such as an Internet Service Provider or a content platform like Facebook) for content that people access through them. It is essentially a reproduction of the protections of section 230 of the Communications Decency Act of 1996. This is a major new provision for Canadian and Mexican law. (Mexico has three years to put it into practice; Canada does not.)
    • The article goes on to prohibit liability based on the intermediary’s attempts to take down or restrict access to material on the ground that it is “harmful or objectionable”. In other words, trying to deal with problematic material will not get the intermediary into trouble. (Otherwise the intermediary could have an incentive to turn a blind eye to harmful content.)
    • However, the article does not prevent any measures on liability for infringement of intellectual property. One sees the US working to preserve measures in its Digital Millennium Copyright Act that it tends to impose on its trading partners. IP is dealt with in a separate chapter of the agreement that deserves independent treatment. (It is 63 pages long.)
  • The final “new” provision of USMCA’s chapter on digital trade is an exhortation to the parties to make government information available to the public in machine-readable form and open format that can be “searched, retrieved, used, reused and redistributed.”
  • As in the TPP (and ABA), all parties are to “adopt or maintain” their own laws to achieve broad ends – consumer protection, privacy, spam – though the USMCA does not mention, as does the TPP and the ABA, measures that “otherwise provide for the minimization of unsolicited commercial messages.” USMCA also speaks of measures “that enable consumers to reduce or prevent [spam] sent other than to an electronic mail address.”

Similar provisions

While this note and its predecessor have focused on international agreements of most relevance to and visibility in Canada, regional trade agreements (RTAs) are increasingly dealing with e-commerce. A recent article reviews 275 RTAs for such provisions, but does not appear to find global trends, yet.

Several members of the TPP are also members of the Association of Southeast Asian Nations (ASEAN), which itself has an RTA on the use of information and communications technology.

Conclusion

E-commerce promotion seems to be here to stay in trade agreements. The TPP set down basic provisions that describe what is still the state of the art in such matters.

One suspects that USMCA may be more specific than the TPP in its provisions at times because only three countries’ laws are involved, and these laws may be more precise and modern than some of the ones in force among the other parties to the TPP.

In other cases, the provisions reflect the US view of the trading world, notably in e-commerce. The US had the bargaining power in replacing NAFTA, and one imagines after the big issues were settled, neither Mexico nor Canada had much fight left in them for this chapter. That said, Canadian businesses and consumers will not likely suffer any serious harm from the provisions as agreed.

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