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By Len Bracken
May 25 — The Treasury Department, a group of U.S. financial services companies and lawmakers have worked out an agreement to address financial companies' concerns about data requirements in the 12-nation trans-Pacific trade pact, officials told Bloomberg BNA May 25.
The proposal wouldn't apply to the Trans-Pacific Partnership (TPP), but it would apply to future trade deals, with a “broad prohibition on data localization requirements” covering ongoing and future trade agreements, according to a summary of the proposal.
At issue is the exclusion of financial services, but no other sectors, from provisions in the electronic commerce chapter of the TPP agreement that prohibit countries from requiring companies to maintain local data servers.
The proposal includes a new data localization obligation that broadly prevents a party from requiring companies to use or locate computing facilities in its territory when the party's financial regulators have access to information stored abroad.
“We believe we have made progress in addressing concerns as we seek to eliminate protectionist and trade-distorting data localization measures imposed by foreign governments in the financial services sector, while also ensuring that U.S. financial regulators have access to the information they need for regulatory and supervisory purposes,” a Treasury spokesman said in a statement.
While the TPP would not be covered by the proposal, U.S. trade officials plan to work with the two most worrisome countries—Vietnam and Malaysia—to ensure that through implementation work these countries meet the commitments in the proposal.
The companies involved in the talks include JPMorgan, Citigroup, Liberty Mutual and MetLife, an industry source told Bloomberg BNA. The early reaction from other companies and from lawmakers who were not involved in the talks has been positive, the source said.
“This is an important, collaborative solution that will help build momentum for reaching consensus in other areas of TPP. It shows that when we dig into the details with stakeholders and members of Congress we can find common ground approaches that satisfy a range of priorities,” U.S. Trade Representative Michael Froman said in a statement. “[W]e expect the already strong support for TPP to continue to grow.”
Two months ago, House Foreign Affairs Committee Chairman Ed Royce (R-Calif.) told Bloomberg BNA that addressing the local server issue in the TPP could boost support for the pact in Congress (57 ITD, 3/24/16).
The proposal adds a new movement of information obligation, “clarifying that a party may not prevent the cross-border transfer of information for the conduct of business within the scope of a financial services license.”
The proposal summary said the U.S. also would require a party to:
The U.S. intends to have these provisions enforced though the “state-to-state” dispute settlement mechanism, the proposal summary said, meaning the U.S. government would be able to take other governments to international tribunals.
The U.S. would seek these provisions in the following ongoing negotiations: the Transatlantic Trade and Investment Partnership with the EU, the Trade in Services Agreement and the U.S.-China Bilateral Investment Treaty talks, according to the proposal summary.
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