Japan’s Data Governance Reforms Face Challenges across the G20

By Mayaz Alam —

Prime Minister Shinzo Abe of Japan hosting the G20 Osaka Summit on June 29. 2019. Source: GovernmentZA’s flickr photostream, used under a creative commons license.

Global economic growth “is fueled no longer by gasoline, but more and more by digital data,”  Prime Minister Shinzo Abe of Japan declared during his keynote speech at the World Economic Forum at  Davos in January. Citing the integral role that technology plays in the modern economy, he announced that he wanted this year’s Group of 20 (G20) in Osaka to be “remembered as the summit that started world-wide data governance.” In doing so, Prime Minister Abe is trying to assert global leadership on a critical issue.

Despite Prime Minister Abe’s best efforts, however, only 17 of the G20 members signed onto the Osaka Declaration on Digital Economy. The “Osaka Track” for global data governance must now address a host of challenges ranging from digital protectionists across the G20 to gridlock at the World Trade Organization (WTO).

What is the Osaka Track?

Data gathering is an unavoidable part of modern life. Individuals generate data with their activities, which companies and governments then use to provide users and citizens services. With technological advances in artificial intelligence and the internet of things potentially adding trillions to the world economy, data governance has taken on new importance. The Osaka Track aims to address a global issue with a global solution to avoid a patchwork of regimes, which would inhibit economic activity and create different privacy standards.

At Davos, Prime Minister Abe identified two key pillars that formed his Data Free Flow with Trust (DFFT) initiative. First, he said that personal data, intellectual property, and data related to national security must be kept “under careful protection.” Then he identified “medical, industrial, traffic” data among the types of information that should be freely transmitted across borders to enable economic growth. Trust is the operative word in DFFT because it acknowledges that individual rights, most notably privacy, need to be part of any discussion on data governance.

Prime Minister Abe also identified the WTO as the avenue through which discussions and regulations on data governance should advance beyond this year’s G20 Summit. In doing so, he called on WTO members to think about trade beyond goods and specifically agriculture. Nearly half of the WTO’s 164 members have been working together to develop e-commerce rules in an attempt to modernize the body’s regulations, which were codified in 1995.

Obstacles to reform within the G20

Japan faces significant barriers to cooperation in ensuring that the DFFT regime is adopted by the rest of the G20 by the June 2020 WTO Ministerial Conference, the Osaka Declaration’s stated deadline. Even though China supported the Declaration on Digital Economy it has been the G20’s most noteworthy digital protectionist. The world’s second largest economy limits cross-border data flows and actively filters or censors websites that pose a threat to the Chinese Communist Party, including Google and Facebook. China also requires foreign companies providing cloud computing services to transfer technology and intellectual property to a Chinese partner before market entry.

China is far from the only G20 member that has demonstrated reservations with the principles of DFFT. India, South Africa, and Indonesia refused to endorse the Osaka Declaration. India has proposed a far-reaching e-commerce law that would require personal data deemed to be critical be processed and stored in the country. India’s central bank also requires foreign payment service companies to host all data on Indian citizens in India. It has also thus far declined to join ongoing WTO e-commerce talks while China has agreed with the caveat that rules need to be “subject to the precondition of security.” Furthermore, Indonesia has data localization requirements and has even passed regulations that would allow it to impose tariffs on “intangible goods” such as software.

Although Saudi Arabia and Turkey endorsed the declaration, they too have data localization requirements. South Korea, which also supported the document, places restrictions against the use of certain geographical data by foreign companies, a restriction stemming from national security concerns. That leaves Japan as the only Asian G20 country without a notable barrier against free data flows.

The Osaka Track beyond Osaka

Questions remain about whether the Osaka Track will have the requisite momentum to after this year’s summit. France’s upcoming G7 Summit in Biarritz appears to be a clear candidate to carry forward the issue because of President Emmanuel Macron’s previous efforts to demonstrate leadership in broader internet governance. Currently, however, France’s stated priorities for the Biarritz Summit do not include DFFT, despite Prime Minister Abe urging President Macron to help set global e-commerce rules.

At the G20 level, Saudi Arabia will take the baton from Japan and host next year’s summit in Riyadh. Its presidency is unlikely to prioritize the DFFT regime, particularly the trust principle that Prime Minister Abe championed. For example, Saudi Arabia’s 2018 Cloud Computing Regulatory Framework established regulatory powers that would require digital service powers to “install government filtering software.”

Multilateral progress through the WTO, the body which Prime Minister Abe called on to advance reforms beyond Osaka, may prove futile as well. The organization has notoriously been mired in its Doha Round of negotiations since 2001 and continues to struggle to reform its core functions, despite e-commerce proposals by the United States, the European Union, and others to break through the stalemate.

Global data governance will only become more important as the digital economy continues to complement and supplant the traditional goods-based economy. The Osaka Leaders’ Declaration  affirmed “the role of data for development” but acknowledged that free data flows raise challenges for “privacy, data protection, intellectual property rights, and security.”

When Minister of Economy, Trade, and Industry Hiroshige Seko of Japan, spoke to reporters about DFFT he said “there were differences in what element of trust each country values.” Prime Minister Abe sought to make it a priority in Osaka but discussions on the topic were ultimately relegated to a side-event. As long as countries continue to have different conceptions of trust, and data governance is treated as a secondary issue, reaching multilateral consensus on DFFT through the G20 and WTO may continue to be an intractable problem.

Mr. Mayaz Alam is a research intern with the Simon Chair in Political Economy at CSIS.


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