Most Favoured Nation: Reject All Cookies?
Take that, GDPR. And gerbils, ISDS and censorship.
While I was on holiday the British Culture secretary announced that the UK will move away from annoying EU data privacy rules. This could potentially mean the end of those annoying cookie pop ups. To which I say, thank the lord.
But it’s pretty difficult to know what to make of this type of UK government announcement. It’s all well and good announcing that you want to diverge from EU rules, but that doesn’t necessarily mean substantive divergence is actually going to take place (just look at what happened earlier this year when the government announced its intention to scrap the EU labour protections only to quietly change their mind once they discovered people like labour protections.)
And, to be fair, the not actually diverging doesn’t really matter so long as you get the positive headlines (at least in the papers you care about) for saying you want to diverge. Which leaves me in two minds about the UK’s intentions on data.
The first thing to say is that, at least with respect to trade policy, the UK already has diverged from EU norms. In its trade deal with Japan, the UK made stronger commitments to allow the cross-border flow of data, and refrain from forcing companies to store personal data locally, than the EU has in its equivalent FTA.
But in truth these commitments are more of a signalling exercise than actual divergence, in that signing up to these digital provisions (as the UK will do again in its trade deal with Australia, New Zealand, the digital agreement with Singapore and when it accedes to CPTPP) hasn’t actually required the UK to change anything vis-a-vis its domestic law or approach. And GDPR, and its inbuilt personal data localisation requirements, is evidently already compliant with these trade commitments, or at least covered by the exceptions.
So will the UK actually change its approach to data or just say it will change its approach to data? I think it will maybe change it a little bit. (And if it can get rid of the annoying cookie popup then please do!) But I’m not expecting anything significant. Particularly because (as my CER colleague Camino and I have argued in the past) the UK is walking a tightrope: any significant shift away from the EU approach to data could see the UK lose its EU adequacy decision … which would make it more difficult from UK-located firms to store and process the data of European citizens. Which would be bad.
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… the Brussels effect?
While on the topic of data localisation requirements, law professor Henry Gao (who is also quite funny, and someone you should follow on twitter) has been providing updates on the development of China’s version of GDPR (which comes into effect from November 1st), and the potential impact on foreign firms that operate there:
For those of you that don’t understand Mandarin (me), the good people of Stanford’s DigiChina Cyber Policy Center have helpfully translated the new Personal Information Protection Law of the People's Republic of China into English, and you can read it here.
There’s lots to discuss, including restrictions on AI-powered differentiation pricing, but from an international perspective it will be interesting to see how the rules making cross-border data transfers to specific firms outside of China contingent on Chinese international agreements with the host countries play out in practice. Henry seems to think it means that, for example, countries party to the RCEP trade agreement would be considered okay (although then the firms themselves would still need to prove themselves compliant with Chinese rules), but Hosuk Lee-Makiyama (another must follow for all things digital and trade) isn’t so sure.
No context tweet of the summer
The international sheep dog society (ISDS)
If a government takes a company from a foreign investor, the investor should be appropriately compensated. Pretty uncontroversial. But what if a government regulates in a way that leads to the foreign investor making less money than they expected to? Should the investor be compensated then? And if the foreign investor is compensated, should it also be compensated for the loss of earning they would have otherwise had if the regulation had not come into force? Perhaps it depends on the purpose of the regulation? Perhaps it doesn’t? Was the foreign foreign treated fairly and equitably throughout the process? Or did it face discrimination?
If you thought the Brexit trade debates were polarising, you’re going to love the very rarely nuanced arguments over the legitimacy and necessity of investor-state dispute settlement (ISDS). These provisions, usually included in bilateral investment treaties [although weirdly not in the DOA EU-China investment treaty] and sometimes in trade deals [although close observers will have noticed that many countries, including the UK, have been ducking the issue as of late)] allow for foreign investors to bring claims against host governments in the event of direct, or indirect (see the list of questions above), expropriation. The lawyers are expensive and the payouts can be big. It is pretty controversial.
Libertarians argue ISDS just means taxpayers end up underwriting the investments of big multinationals, environmentalists point to examples of ISDS being used to challenge pro-climate measures, development charities despair over the billions being paid out by poor companies to maligned investors, and occasionally your average citizen gets concerned about regulatory chill in the face of cigarette companies challenging plain packaging measures.
As such, reform of the ISDS system is underway, in many different forums. One current reform focal point centres on the efforts to update the Energy Charter Treaty (ECT). With 53 signatories, the ECT includes the ISDS provisions responsible for some of the more politically sensitive disputes, including a claim against Russia by former Yukos shareholders, which resulted in a $57 billion award; claims against Spain for retracting measures designed to incentivise investment in renewable energy; and Vatenfall’s dispute relating to Germany’s post-Fukushima nuclear phase out (which indirectly helped torpedo the EU-US TTIP negotiations). Anyway, as noticed by pretty much no one because they sent the letter in August when everyone is on holiday, the UK Labour party sent this letter to the UK government, asking it to clarify its position on the ECT renegotiations:
The interesting thing, at least to me, here is that Labour isn’t actually calling for ISDS to be stripped out of the ECT … which is what I’d expect them to say. Rather, they want the ISDS protections to only apply to green energy investments, and not fossil fuel. Is this an outbreak of … nuance in the ISDS debate I spot? How quaint.
Censorship and trade
In terms of modern trade issues, the use of censorship as a means of protectionism is one of the most fascinating. MFN fan favourite Nigel Cory has written a lot on the subject, and his submission to the USITC is well worth reading in full.
I’m particularly interested in his attempts to quantify the economic impact of countries banning or restricting access to apps for censorship reasons. One illustrative approach he uses is to look at the usage of popular VPNs (tools that allow web users to dodge government restrictions) before and after restrictions come into place. Here’s what happened in India following its 2019 effective ban on using TikTok:
Cool, right? A pretty clear indication that the domestic demand for the product exists … even if the government makes using it more tricky.
Opening up new pork markets
Rejoice ye pig slaughterers. British pork can now be exported to Mexico:
Today’s development follows over four years of negotiations and inspections. The Mexican National Department for Health, Safety and Agricultural and Food Quality (SENASICA) inspected numerous premises throughout the UK during a visit which occurred in February 2020, which led to a decision to approve four processing facilities and four associated cold stores in England and Wales.
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As ever, do let me know if you have any questions or comments.
Best,
Sam