Great Walls: restrictions to trade and the free flow of data

Digital technology has revolutionised modern trade and the products and services that we are able to sell to the world.

Blockchain Technology, Industrial Internet of Things (IOT) and electronic communication are all essential elements of a globally competitive industry. A common characteristic of all successful businesses is their ability to harness the benefits of digital technology to support their strategic goals.

Unfortunately, our multilateral rules bodies have not kept up with the changes to the digital landscape, particularly when faced with protectionist barriers.

Recent action taken by China to pass Cyber Security Laws is a good example of the way governments around the world are introducing restrictions to trade and the free flow of data. While the stated motivation might be security, these new laws are a significant protectionist measure that inhibits innovation and disadvantages small to medium sized businesses. Businesses most at risk will be those with special hardware and systems for network management.

The rules state that companies operating in China must provide the government with their anti-hacking proprietary security hardware and software, which could then be passed on to relevant Chinese firms. And having access to the hardware and software means firms would have access to the data as well.

The law also requires business information and data on Chinese citizens gathered within the country to be kept on domestic servers and not be transferred abroad without permission. This means that Australian businesses who sell network-enabled machines to China will need to share their intellectual property and establish their own servers in China.

This may seem to be an extreme example, and you may not be selling such machines to China, but stop and think for a minute about how you would travel across the region if you weren’t able to access cloud servers. Would you be able to email on the go? Would you be able to access company information or make cross border payments?

This fact sheet from the Asian Trade Centre gives a very good explanation of how data localisation laws can impact SMEs.

The Australian Government has trade experts who are highly skilled in 19th and 20th century trade issues such as anti-dumping, quotas and tariffs. To protect Australia’s future economic interests, Ai Group is calling for a greater effort to both recruit expertise in digital trade issues and develop internal talent within our Trade Negotiating teams.

We are signing Free Trade Agreements today that are setting trade rules for technology that hasn’t been invented yet.

To advance members’ interests in this area we are working with partner associations across Asia to survey businesses’ experience with e-commerce and digital usage across the region. It should only take 15 minutes to complete the questionnaire.

Your input will be presented to the country negotiators for the Regional Comprehensive Economic Partnership (RCEP). RCEP is an FTA that takes in the whole region and has the potential to support Australia’s existing and future supply chains.

Have you had any experience of restrictions to the free flow of data in your international trade endeavours? Share your experiences and ideas and start a conversation by leaving a comment below.

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Having joined Ai Group in 2000, Louise has managed a number of trade-related projects including trade missions, business matching and the development of export-related training programs. Since 2009 she has led Ai Group's service delivery to our smaller associations, providing governance, policy and business development support, and is Executive Officer of the Australia Saudi Business Council and the Australian Russian Dialogue.

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