The Thursday November 5 release of the Transpacific Partnership (TPP) agreement text shows that the 11 negotiating countries got the data flow provisions right. The 21^st century electronic commerce chapter provisions will benefit many sectors beyond the software and information industries that SIIA represents.

Moreover, while every trade agreement is different and has its own logic, the TPP will serve as a reference point for the data flow provisions being negotiated in, for instance, the Trade in Service Agreement (TISA) and the Transatlantic Trade and Investment Partnership (TTIP).  Having attended meetings in Beijing last week with Chinese officials and think tankers, it is also clear to me that China is reviewing the TPP carefully.   Without overstating the impact of TPP, it is clearly a new factor China will have to at least consider even if it continues to roll out what are in effect industrial ICT policies that often have consequences beyond the ICT sector.

Article 14.11 on “Cross-Border Transfer of Information by Electronic Means” is perhaps the core element in the new digital trade architecture forged by TPP.  Paragraph 2 in the Article states: “Each Party shall allow the cross-border transfer of information by electronic means, including personal information…”  This gets to the heart of what the TPP negotiators have achieved.  The provision is groundbreaking in trade terms.  Countries can still adopt a measure to achieve “a legitimate public policy objective, provided that the measure:

(a) is not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination or a disguised restriction on trade; and

(b) does not impose restrictions on transfers of information greater than are required to achieve the objective.

Article 14.13 on “Location of Computing Facilities” is another crucial provision.  While Parties may have their own regulations, “No Party shall require a covered person to use or locate computing facilities in that Party’s territory as a condition for conducting business in that territory.”  The appearance of the verb “use” gets to the prohibition against mandating data storage in-country, another critical element in realizing the full benefits of the global digital economy.  Again, exceptions are possible, but they are disciplined – they cannot be disguised restrictions on trade and they must be least restrictive on data flows

Clearly, negotiators took great care with Article 14.8 on “Personal Information Protection.”  Each Party “shall” have a legal framework that protects personal information.  It is important to understand in his context that the TPP does not mandate what kind of privacy system a country should have.  Footnote 6 makes it explicit that “comprehensive,” as well as “sectoral” privacy protection systems are possible.  The U.S. privacy regime clearly qualifies.

The crucial point is as the United States Trade Representative says, the TPP promotes interoperability between diverse legal regimes.  Given that countries quite legitimately have distinct privacy and other subject matter regimes, it is critical for companies that need to transfer data from one country to another to have access to mechanisms that allow them to move that data and at the same time comply with the laws in the country from which the data is transferred.

There are many other positive aspects of the digital rules in TPP from a business standpoint.  Article 14.4 on “Non-Discriminatory Treatment of Digital Products” is one such provision.  Article 14.17 on “Source Code,” which prohibits requirements to reveal source code is highly welcome.

In sum, the TPP goes a long a way in ensuring that TPP countries can maximize the potential of the digital economy.    We salute the United States Trade Representative and the trade negotiators from the other TPP countries for this breakthrough, and we look forward to building on the TPP in other agreements and bilateral negotiations.

Carl Schonander is Senior Vice President for Global Public Policy.