Japan and US to Propose WTO Rules Countering Chinese Regime’s Data Transfer Law

The-sun-rises-at-the-World-Trade-Organization-headquarters-in-Geneva-Switzerland-on-July-21-2008
The sun rises at the World Trade Organization headquarters in Geneva, Switzerland, on July 21, 2008. (Fabrice Coffrini/AFP/Getty Images)

By Annie Wu

Last June, a new internet regulation took effect in China that sent foreign firms into a panic: all domestic and foreign firms would be required to store their data on servers within China, and be subject to security checks by Chinese authorities.

Companies grew concerned that this would allow the Chinese regime access to sensitive information and conduct espionage.

In September, the United States sent a document to the World Trade Organization (WTO), urging China not to implement the new law, citing concerns that it would disrupt global trade.

“The impact of the measures would fall disproportionately on foreign service suppliers operating in China, as these suppliers must routinely transfer data back to headquarters and other affiliates [located outside of China],” the U.S. document read.

Ahead of the WTO’s upcoming meeting in Geneva on April 18, where 80 member countries are expected to attend, news has emerged that Japan, partnering with the United States, will take China to task for its data policies and propose international standards for cross-country data flows.

Nikkei Asian Review, a Japanese publication, broke the news on April 12.

According to Nikkei, Japan and the United States propose to ban domestic server requirements such as those set up in China, and prohibit countries from pressuring foreign firms to transfer their proprietary technology.

The proposal will also push the Chinese regime to allow some data from China to be transferred outside the country, such as “customer data from e-commerce transactions.”

In recent months, the United States has made forced technology transfers and intellectual property theft the foremost issue in addressing the U.S.-China trade imbalance—including by proposing $50 billion worth of punitive tariffs on Chinese imports.

The Japanese government has also grown concerned. Citing sources from the Japan External Trade Organization (JETRO), a trade organization under the country’s Ministry of Economy, Trade and Industry, Voice of America (VOA) reported that JETRO had began work on the proposal since last October, as a countermeasure against China’s new law. The trade organization felt China’s control of foreign data would obstruct free trade.

Japan’s-Prime-Minister-Shinzo-Abe-(L)-shakes-hands-with-Chinese-leader-Xi-Jinping-during-their-meeting-at-the-Great-Hall-of-the-People-in-Beijing-China-on-November-10-2014
Japan’s Prime Minister Shinzo Abe (L) shakes hands with Chinese leader Xi Jinping during their meeting at the Great Hall of the People, in Beijing, China, on November 10, 2014. (Kim Kyung-Hoon-Pool/Getty Images)

In the latter half of last year, Japan began discussing with the United States how to confront China’s “cyber sovereignty” principle, an idea the regime has tried to export to other repressive governments: that each country has the right to monitor and control the internet in their country according to their own rules.

The Japanese have plans to discuss the proposed WTO rules with Canada in the coming year, according to VOA.

Meanwhile, Nikkei Asian Review reported that Japan and the United States are aiming for a deal on this issue to be signed at the next WTO ministerial conference in 2019. The Shinzo Abe government has hopes that by partnering with Washington on such a high-priority issue, the latter will ease the pressure on Japan to lessen its trade surplus with the United States, according to the Nikkei Shimbun newspaper.

Reuters contributed to this report.

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