The TPP and the Digital Economy: The Agreement’s Potential as a Benchmark for Future Rule-Making

I wrote this paper in November 2016 to explore a question that went beyond the immediate debate over the Trans-Pacific Partnership: could the rules negotiated by its twelve participants provide a useful starting point for governing the digital economy elsewhere?

What interested me was the diversity of the countries that had reached agreement. They had very different levels of development, regulatory traditions and approaches to the internet. If they could find common ground, their compromises might offer some indication of what other governments could eventually agree to, including countries that had never been part of the TPP negotiations.

Digital trade reaches across the agreement

One of the paper’s starting points was that the digital economy could not be understood simply by reading the electronic commerce chapter. Relevant rules also appeared in the provisions on services, telecommunications, technical barriers to trade and intellectual property. The same business could depend on several of these sets of rules at once.

I examined the treatment of electronic transmissions, cross-border information flows, requirements to locate computing facilities domestically, demands for access to software source code, and the compatibility of different privacy regimes. I also looked at the less conspicuous rules that make online transactions possible, from electronic signatures and consumer protection to the testing and certification of ICT equipment.

A benchmark, with qualifications

My conclusion was broadly positive. The TPP offered a plausible indication of where future negotiations might arrive. Countries outside the agreement faced many of the same questions about market access, regulation and the interests of their own businesses and consumers.

But agreement on a core obligation was only part of the story. Much depended on the exceptions attached to it, and on whether dispute settlement could meaningfully constrain a government that used those exceptions to exclude foreign competitors. I was particularly concerned about the breadth of the national security exception and argued for clearer safeguards against its use as a cover for protectionism.

The paper also questioned a simple division between developed-country exporters and developing-country regulators. Emerging economies had digital exporters of their own, while their consumers and smaller businesses could bear the costs of restrictions intended to favour domestic suppliers.

From working paper to book chapter

This research subsequently appeared as Chapter 23, pages 389–416, in Paradigm Shift in International Economic Law Rule-Making: TPP as a New Model for Trade Agreements?, edited by Julien Chaisse, Henry Gao and Chang-fa Lo and published by Springer in 2017. View the published chapter.

The version below is the 24-page November 2016 working paper. It captures my assessment of the negotiated TPP text and the prospects for wider agreement at that time.

Read the paper

The TPP and the Digital Economy: The Agreement’s Potential as a Benchmark for Future Rule-Making, Simon Lacey. Written on 30 November 2016; posted on SSRN on 31 May 2017.

Download the working paper (PDF) · View the paper on SSRN

Listing photograph: Fatih Turan / Pexels.

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