Global Trade and Customs Journal

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Author Guide

[A] Aim of the Journal

Global Trade and Customs Journal provides readers with new ideas, fresh insights, and expert views on critical practical issues affectinginternational trade, including export controls, trade remedies, and customs compliance, with a growing focus on international investmentregulation. Written for practitioners by practitioners, the journal offers practical analysis, reliable guidance, and experienced advice to supportprofessionals in protecting their clients’ or organization’s compliance interests.

[B] Contact Details

Manuscripts should be submitted to the General Editor, Jeff Snyder. E-mail: jsnyder@crowell.com

[C] Submission Guidelines

[1] Manuscripts should be submitted electronically, in Word format, via e-mail. [2] Submitted manuscripts are understood to be final versions. They must not have been published or submitted for publication elsewhere.[3] Articles should not exceed 7,500 words. [4] Only articles in English will be considered for publication. Manuscripts should be written in standard English, while using ‘ize’ and ‘ization’ instead of ‘ise’ and ‘isation’. Preferred reference source is the Oxford English Dictionary. However, in case of quotations the original spelling should be maintained. In case the complete article is written by an American author, US spelling may also be used. [5] The article should contain an abstract, a short summary of about 100 words. This abstract will also be added to the free search zone of the Kluwer Online database.[6] A brief biographical note, including both the current affiliation as well as the e-mail address of the author(s), should be provided in the first footnote of the manuscript.[7] An article title should be concise, preferably with a maximum of 70 characters.[8] Special attention should be paid to quotations, footnotes, and references. All citations and quotations must be verified before submission of the manuscript. The accuracy of the contribution is the responsibility of the author. The journal has adopted the Association of Legal Writing Directors (ALWD) legal citation style to ensure uniformity. Citations should not appear in the text but in the footnotes. Footnotes should be numbered consecutively, using the footnote function in Word so that if any footnotes are added or deleted the others are automatically renumbered. [9] Tables should be self-explanatory and their content should not be repeated in the text. Do not tabulate unnecessarily. Tables should be numbered and should include concise titles. [10] Heading levels should be clearly indicated.

For further information on style, see the House Style Guide on the website: www.kluwerlaw.com/ContactUs/

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[1] Before submitting to the publisher, manuscripts will be reviewed by the General Editor and may be returned to author for revision. [2] The journal’s policy is to provide an initial assessment of the submission within thirty days of receiving the posted submission. In cases where the article is externally referred for review, this period may be extended.[3] The editor reserves the right to make alterations as to style, punctuation, grammar etc.[4] The author will also receive PDF proofs of the article, and any corrections should be returned within the scheduled dates.

[E] Copyright

[1] Publication in the journal is subject to authors signing a ‘Consent to Publish and Transfer of Copyright’ form. [2] The following rights remain reserved to the author: the right to make copies and distribute copies (including via e-mail) of the contribution for own personal use, including for own classroom teaching use and to research colleagues, for personal use by such colleagues, and the right to present the contribution at meetings or conferences and to distribute copies of the contribution to the delegates attending the meeting; the right to post the contribution on the author’s personal or institutional web site or server, provided acknowledgement is given to the original source of publication; for the author’s employer, if the contribution is a ‘work for hire’, made within the scope of the author’s employment, the right to use all or part of the contribution for other intra-company use (e.g. training), including by posting the contribution on secure, internal corporate intranets; and the right to use the contribution for his/her further career by including the contribution in other publications such as a dissertation and/or a collection of articles provided acknowledgement is given to the original source of publication.[3] The author shall receive for the rights granted a free copy of the issue of the journal in which the article is published, plus a PDF file of his/her article.

Editorial Board

Edwin Vermulst, VVGB Advocaten, Brussels, Belgium, Immediate Past General EditorJohn P. Barker, Arnold & Porter, Washington, DCLourdes Catrain, Hogan Lovells, Brussels, BelgiumPatricio Diaz Gavier, Sidley Austin LLP, Brussels, BelgiumLaura Fraedrich, Kirkland & Ellis, Washington, DCGary Horlick, Law Offices of Gary N. Horlick, Washington, DCArnaud Idiart, Corporate Export Control Advisor of EADSs HQ and affiliates in FranceJesse G. Kreier, Counsellor and Chief Legal Officer, Rules Division, World Trade OrganizationMichael Lux, Graf von Westphalen, Brussels, BelgiumKunio Mikuriya, Secretary General, World Customs OrganizationJames J. Nedumpara, Jindal Global Law School, IndiaFernando Piérola, ACWL, Geneva, SwitzerlandProf. Dr. Reinhard Quick, Verband der Chemischen Industrie, e.V., Frankfurt, GermanyDavide Rovetta, Grayston & Company, Brussels, BelgiumCliff Sosnow, Fasken Martineau, Ottawa, CanadaPaolo R. Vergano, FratiniVergano, Brussels, BelgiumDr. Carsten Weerth, Main Customs Office Bremen; Lecturer for International Trade Law, Jacobs University BremenSamuel X. Zhang, SZ Legal, Hong Kong

Not Your Father’s Trade Agenda: The Evolving Priorities ofInternational Trade and Investment Negotiations

Jonathan S. Kallmer*

1 INTRODUCTION

It is the most active time in international trade andinvestment policy in a generation. Not since the UruguayRound of multilateral trade negotiations in the late 1980sand early 1990s, which led to the creation of the WorldTrade Organization (WTO), has there been such intensenegotiation of international economic agreements.Throughout Europe, Asia, and the Americas, governmentsare crafting new and far-reaching rules governing almostthe entire range of international commerce.

As impressive as these initiatives are for the size of theeconomies that they cover, their greatest significance liesin what they reflect about the challenges facinginternational business. Tariffs still matter, of course, as doforeign equity limitations, inefficient customs procedures,and other market access barriers. But the distortions tocross-border commerce that most disrupt the plans ofinternationally engaged companies have in the past twodecades changed dramatically. For many companies, thebarriers that now matter most are less identifiable, lessassociated with borders, less written down. They are moresubtle and more insidious. That governments understandthis and are prepared to respond meaningfully to theconcerns of global companies is what makes the currentbounty of negotiations so promising.

2 THE (NEW) BIG THREE

The wealth of international economic policy negotiationshas not quite emerged overnight, but it has happenedquickly.

The Trans-Pacific Partnership (TPP) was launched yearsago but has only in the past year become a negotiation of

global significance, with the United States, Canada, Mexico,Australia, Vietnam, and six other countries alreadyparticipating, and Japan joining in July 2013. The TPPwould knit together economies spanning the Asia-Pacificregion and provide companies with important new op-portunities to sell their goods and services across borders andinvest in markets in Asia and the Americas. Equallyimportant, if the ambitions to conclude negotiations in 2013or 2014 hold, it would contain new innovations for address-ing ‘twenty-first century’ trade and investment issues,including competition, environmental protection, govern-ment procurement, intellectual property rights, investment,labour, and regulatory coherence, among others.

After exploratory discussions that started in early 2012,forty-eight countries1 (including the European Union’stwenty-seven Member States) have formally agreed tonegotiate a Trade in Services Agreement (TISA). Thisinitiative is like a phoenix rising from the ashes of thefailed WTO Doha Round of multilateral tradenegotiations, where progress liberalizing global servicessectors was held hostage to intractable differences overtrade in agricultural products and industrial goods. Thecountries negotiating the TISA – which account for some70% of global services trade – will seek not just to furtheropen their markets to each others’ service providers; theywill also attempt to construct a legal framework thatpermits the addition of new countries. This wouldpotentially allow their companies to be better able tocompete in the growing services markets of Brazil, China,India, and Indonesia (among others) in the near future.

Arguably the most significant of these initiatives is theTransatlantic Trade and Investment Partnership (TTIP), anegotiation toward a comprehensive economic agreementthat the EU and United States launched in February 2013.

Notes* Counsel, International Trade and International Dispute Resolution, Crowell & Moring LLP. Mr Kallmer served as Deputy Assistant U.S. Trade Representative for Investment

from 2007 to 2012. He can be reached at jkallmer@crowell.com.1 The economies negotiating the TISA are Australia, Canada, Chile, Colombia, Costa Rica, the European Union, Hong Kong, Iceland, Israel, Japan, Mexico, New Zealand,

Norway, Pakistan, Panama, Paraguay, Peru, South Korea, Switzerland, Taiwan, Turkey, and the United States.

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Given that the two economies produce almost 50% ofglobal Gross Domestic Product (GDP) and account forfully 30% of world trade,2 the TTIP would be the mostambitious bilateral economic agreement of all time. Inaddition to reducing tariffs, increasing market access, andprotecting investment between the world’s two largesteconomies, the TTIP has the potential to rewrite many ofthe rules of global trade and become the state-of-the-art forthe rest of the world. Despite the growing independenceof developing countries in Asia, Africa and Latin Americain negotiating their own deals, the world still looks toEurope and the United States for leadership oninternational economic rules.

3 THE NEXT GENERATION OF INTERNATIONAL

ECONOMIC ISSUES

These three initiatives represent a renaissance ininternational economic policy. Not in two decades have somany economies – representing such a significant share ofglobal GDP – committed to such comprehensiveliberalization of their economies. Yet the most strikingfeature of these initiatives is not their size or simultaneitybut their substance. For the priorities of these negotiationsreflect how global business has changed and how thebarriers that governments use to protect their firms havechanged as well.

To be sure, the traditional issues in international tradeand investment policy still matter, and these threeinitiatives will aggressively address them. Import tariffson many goods are still too high, and there is often asignificant difference between the tariff rates thatcountries are permitted to apply and those that theyactually do apply. Agricultural and textile interestscontinue to play outsized roles compared to theireconomic significance. And both manufacturing andservices companies still face unacceptable nationality-based discrimination through foreign equity limitations,corporate form requirements, and economic needs tests.

The greatest innovations of these three negotiations,however, relate to the more modern and pernicious typesof trade and investment barriers, of which four categoriesin particular stick out, namely those relating to:(1) regulatory barriers; (2) ‘forced localization’ measures;(3) government influence and control; and (4) cross-borderdata flows. The following describes how this set of issueshas come to dominate much of the discussionregarding the next generation of global trade andinvestment rules.

3.1 Regulatory Barriers

The most significant obstacles to cross-border commerceincreasingly have little to do with borders. They arise,rather, from the choices that countries make about theirpriorities for domestic regulation and the legal,institutional, and other mechanisms that they use to effectthose choices. While few would question the right ofgovernments to regulate to protect health, safety, theenvironment, and other public policy interests, manycountries’ approaches to regulation – and the differences inthose approaches across jurisdictions – unnecessarily raisethe costs for companies of engaging in international tradeand investment. In many cases, these costs result not fromany intention to harm foreign firms but from mereregulatory disparities. In other instances, governmentsactively use domestic regulatory policy to give theircompanies a competitive advantage.

The challenges relating to domestic regulation tend toturn less on the content of the rules as on the processes bywhich governments develop, enact, and enforce them.There are several categories of differences in how countriesapproach regulation that may needlessly raise costs onglobal companies. A first category involves ‘rules ofdecision’, i.e., the presumptions, burdens, or default rulesthat regulators, by law or practice, use to approve productsor services for sale to the public. A textbook exampleconcerns nutritional supplements. A country whoseauthorities permit the sale of a certain diet pill only whenit has been proven ‘safe’ and a country whose authoritiesprohibit the sale of that same pill only if it is shown to be‘unsafe’ may be applying the same substantive standard ofsafety. Yet the difference in presumption, and theconsequences for how companies must structure theiroperations to comply with that difference, create costs(including, ultimately, for consumers) that may bedifficult to justify on health or safety grounds.

Another category of procedural difference concernscountries’ processes for determining that a person isqualified to provide a service, for example for credentialingprofessional service suppliers. Any two economies mayrequire that doctors, lawyers, accountants, or architectsexhibit equivalent levels of skill, competence, andexperience. Yet to the extent that their procedures forsatisfying those requirements differ, they may createneedless burdens on both the individuals seeking thosecredentials in multiple markets and on the firms seekingto employ them.

A final way in which differential approaches toregulation create unnecessary costs concerns differences in

Notes2 See Final Report of the High Level Working Group on Jobs and Growth (11 Feb. 2013) (‘HLWG Final Report’) available at http://www.ustr.gov/about-us/press-office/

reports-and-publications/2013/final-report-us-eu-hlwg, at 1 (accessed 28 Apr. 2013).

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how regulations are promulgated and administered. Manycountries lack formal mechanisms, such as the UnitedStates has under the Administrative Procedures Act,providing for advance publication and the opportunity forinterested parties to comment on proposed regulations.Where countries provide for these or similar procedures,notice and comment periods may be so short as to bemeaningless, or governments may have no obligation toconsider and respond to the substantive comments thatthey receive. In many cases, countries lack mechanisms forprivate parties to appeal or otherwise seek formal review ofadministrative decisions affecting them. Given theimportance of legal certainty and predictability tointernationally engaged companies, deficiencies inregulatory transparency may substantially increase thecosts of doing business in certain markets.

All three of the agreements under negotiation will aimto reduce the costs and distortions associated withdivergent approaches to regulation. Of the group,regulatory issues are most significant in the TTIP. The EUand United States have comparatively few traditional tradeand investment barriers between them. While theelimination of remaining marginal tariffs will providesignificant economic benefits, given the volume of trade atissue, the persistent barriers to greater and more efficienttransatlantic commerce are regulatory in character. Indeed,the two sides have acknowledged the need ‘to reduce costsassociated with regulatory differences by promotinggreater compatibility, including, where appropriate,harmonization of future regulations …’3 Even where theyare pursuing comparable levels of regulatory protection,which in most cases they are, the EU and United Statesoften take such different procedural approaches toregulation that they needlessly raise costs on companies(including many affiliated entities) doing business acrossthe Atlantic.

One of the most difficult issues in the TTIPnegotiations will concern the two sides’ respectiveapproaches to food safety or, more broadly, human, animal,and plant health in the context of agricultural products(sanitary and phytosanitary (SPS) measures in internationaltrade parlance). The history of EU-US trade tensions islargely a story of the differences that regulators use inevaluating the safety of imported agricultural products.The EU has long relied on the ‘precautionary principle’,which reflects the view that where:

the possibility of harmful effects on health is identifiedbut scientific uncertainty persists, provisional risk

management measures necessary to ensure the highlevel of health protection chosen in the Communitymay be adopted, pending further scientific informationfor a more comprehensive risk assessment.4

In contrast, the United States considers the precautionaryprinciple, relying as it arguably does on non-scientificmeans of risk management, as inconsistent with the WTOSPS Agreement, which provides that SPS measures thatburden trade must be science-based. Differences inregulatory approaches to food safety have led to a numberof disputes between the EU and United States in theWTO, including over imports of hormone-treated beefand approval requirements for Genetically ModifiedOrganisms (GMOs).

The EU and United States will also seek to‘approximate’ their approaches to regulation in a numberof other areas. With respect to chemicals, recognizing thetwo sides’ very different approaches to regulation, thenegotiations will likely focus on reducing costlyprocedural disparities, including with respect to riskmanagement measures and classification and labellingpractices.5 Negotiators will also seek greater convergenceon automotive regulation, most likely by seeking to alignsubstantively comparable standards on auto safety,emissions, and fuel efficiency.6 And they will seek greatertransparency, and potential substantive convergence, inservices sectors such as banking, insurance, and auditing/accounting, among others.

Next to simple restrictions on market access, regulatoryburdens may be the most damaging type of barriers forcompanies supplying services across borders. For thisreason, the countries negotiating a TISA will also focussubstantially on regulatory issues. Companies in allservices sectors will have a stake in the outcome of thiselement of the negotiation, but certain sectors stick out.For example, differences in national approaches tofinancial regulation are a notorious cause of unnecessaryeconomic costs and administrative burdens. In addition,separate national or sub-national certification processes forcertain professional service providers create substantialcosts for individuals and firms in those sectors.

Regulatory issues have also played a significant role inthe continuously evolving TPP negotiations. Indeed, theTPP (if it concludes per political leaders’ ambitiousschedules) would become the first major trade andinvestment agreement to systematically take on regulatorymatters. The TPP’s chapter on ‘Regulatory Coherence’,coupled with provisions focused on regulatory practices in

Notes3 HLWG Final Report, at 3.4 Regulation (EC) No. 178/2002, OJ L 31 p. 9 of 1 Feb. 2002.5 See United States Council for International Business Submission to the US Trade Representative on Promoting Regulatory Compatibility between the United States and the

European Union (5 Nov. 2012), available at http://www.regulations.gov/#!documentDetail;D=USTR-2012-0028-0074, at 2 (accessed 28 Apr. 2013).6 See Jeffrey J. Schott and Cathleen Cimino, Crafting a Transatlantic Trade and Investment Partnership: What Can Be Done, Peterson Institute for International Economics (Mar.

2013), available at http://www.iie.com/publications/pb/pb13-8.pdf, at 15 (accessed 28 Apr. 2013).

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other chapters, will address a range of concerns regardingthe promulgation and administration of regulations inAsia-Pacific economies, including the possibleestablishment of national coordinating bodies, the use ofregulatory impact assessments, and the adoption of publiccomment periods for draft regulations.7

3.2 ‘Forced Localization’ Measures

Some of the newest and most pernicious types ofchallenges for globally engaged companies fall under theheading of ‘forced localization’ measures. These arerequirements that firms locate investments or operations,consume goods or services, or carry out other activitieswithin a country’s territory as a condition of doingbusiness there. Forced localization measures may be broadand diverse and include (among other categories): datastorage requirements (e.g., where a retail company obtainingcustomer information is required to store that informationon servers within the country); local content requirements(e.g., where a telecommunications firm is required topurchase a certain percentage of its equipment andnetwork security services from local vendors; ownership/management requirements (e.g., where an express deliverycompany is required to form a joint venture with a localpartner and ensure that a certain percentage of seniormanagement are nationals; technology transfer requirements(e.g., where an energy services company is required toprovide its drilling technology to a national oil company);and indigenous innovation requirements (e.g., where a mobiletelecommunications company is required to incorporatelocally developed microchip technology into its devices).

While politically appealing in the short term for theirperceived employment and development benefits, forcedlocalization measures can be particularly harmful trade andinvestment barriers, for several reasons. First, suchmeasures disrupt companies’ decisions about how mostefficiently to deploy their global supply chains. In doingso, they distort the competitive landscape and createeconomic losses not just for foreign firms and localconsumers, but for the country as a whole, which becomesa less attractive place to do business. Second, because suchmeasures by their terms typically do not treat foreigncompanies less favourably than domestic companies, they

are difficult to oppose on grounds of nationality-baseddiscrimination. Indeed, many governments can plausiblyargue that such measures ‘treat all companies the same’.Third, governments have at their disposal an almostlimitless supply of such measures. Unlike tariffs andforeign equity caps, which cannot fall below zero,governments can always identify new domestic interests towhich foreign firms should contribute as conditions forparticipation in their economies.

In recent years the international business communityhas focused intensively on the economic distortions andcompetitive disadvantages caused by forced localizationmeasures. Various industry groups have identified andanalysed the range of such measures that companies use,and in 2012 the United States developed a dedicatedpolicy initiative for combating the phenomenon. It istherefore not surprising that forced localization measuresare squarely in the cross-hairs of each of these threeagreements, though the specific types of concerns varyfrom agreement to agreement.

Forced localization measures are a source of substantialconcern for many countries negotiating the TPP. SomeTPP countries are among the most common users of thesepolicies and practices. For example, Australia maintainslocal content requirements for television, including 55%domestic programming during prime time.8 Canada hasbeen challenged in the WTO for requiring the use ofdomestic equipment in its renewable energy programme;9

it also maintains television content quotas.10 Malaysiamaintains local content quotas for television programmingand advertising.11 Vietnam has proposed a measurerequiring that equipment used for providing data centreand cloud computing services be located in Vietnam.12 Italso maintains requirements that foreign pay televisionproviders hire local agents to provide advance translationservices for a wide range of content.13 And the UnitedStates maintains the ‘Buy American’ provisions of theAmerican Recovery and Reinvestment Act of 2009, whichcondition the receipt of government stimulus funds on theuse of US iron, steel, and other goods in domesticconstruction and related projects.14

In the services context, where governments lack theability to raise tariffs, impose quotas, or introducecomplicated customs procedures, requirements that

Notes7 See Ian F. Fergusson et al., ‘The Trans-Pacific Partnership Negotiations and Issues for Congress’, Congressional Research Service (15 Apr. 2013), available at http://insidetrade.com/

iwpfile.html?file=apr2013%2Fwto2013_1327a.pdf, at 43 (accessed 28 Apr. 2013).8 See 2013 National Trade Estimate Report on Foreign Trade Barriers, Office of the US Trade Representative (1 Apr. 2013) (‘2013 NTE Report), available at http://www.ustr.gov/

sites/default/files/2013%20NTE.pdf, at 30 (accessed 28 Apr. 2013).9 See 2013 NTE Report, at 57.10 See ibid., at 59.11 See ibid., at 253.12 See ibid., at 383.13 See ibid., at 384.14 See American Recovery and Reinvestment Act of 2009, Pub. L. No. 111-5, § 1605.

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countries source inputs or locate production domesticallyare often irresistible tools for protecting domestic firms.For this reason, the reduction or elimination of forcedlocalization requirements will be a high priority for theeconomies negotiating the TISA. Companies across sectorsare already imploring governments to decisively addressthis phenomenon. Global media and entertainmentcompanies must grapple with domestic laws requiringthat a certain percentage of domestic televisionprogramming be broadcast in a given week or limiting thenumber of cinema screens on which foreign films can beshown.15 Internet and other technology companies areconcerned about requirements that firms locate equipmentand facilities in the countries in which they operate.16 Andretailers must deal with requirements that they sourcegiven levels of products from within the country.17

While addressing forced localization measures will be acomponent of the TTIP negotiations, the EU and UnitedStates will be doing so not so much because such measuresare a hindrance to transatlantic trade, but because of theopportunity the two sides have to send a strong message tothird countries and carve the outlines of a global standardon the issue. US and European firms share interests indisciplining such measures throughout the world, andthey will likely take the opportunity presented by theTTIP to develop either binding legal rules or ‘bestpractice’ guidelines that can serve as a model for thirdcountries wanting to attract greater foreign investmentand participation in their economies.

3.3 Government Influence and Control

Of the many developments in the global economy in thetwo decades since the close of the Uruguay Round, fewhave been as important as the growing influence ofeconomies characterized by significant levels ofgovernment influence and control. State-owned companiesaccount for 80% of the stock market value in China, 62%in Russia, and 38% in Brazil. They were responsible forone third of developing country foreign direct investmentbetween 2003 and 2010. Developed countries also havesignificant pockets of state control; France owns 85% ofÉlectricité de France (‘EDF’), Japan owns 50% of JapanTobacco, and Germany owns 32% of Deutsche Telekom.18

As the participation of governments in internationalcommerce has increased, so too have concerns over the

distortions and inequities that government influence andcontrol may create. Private companies legitimately fearthat governments may, in ways undetected andundetectable, put a thumb on the scale of the competitivelandscape in favour of their own firms. State-ownedEnterprises (‘SOEs’) may receive government cashinfusions that permit them to outbid private sector rivalsin tenders both at home and in third countries. SovereignWealth Funds (‘SWFs’) may be able to borrow from theircentral banks at non-commercial rates, allowing them toinvest more aggressively than the market would otherwiseallow. Even private ‘national champions’ may receiveregulatory preferences from governments, for example inthe development of product standards or technicalregulations, that give them a structural advantage overtheir foreign rivals. All such preferences permit SOEs andsimilar entities to compete on more favourable termsagainst their private sector rivals in markets around theworld.

Only in the last decade have globally engagedcompanies (and some governments) come to appreciate thenature and extent of the distortions that increasedgovernment participation in the economy may cause.WTO rules and regional and bilateral trade andinvestment agreements address these challenges onlyperipherally, and companies around the world routinelycite the absence of international rules or principlesconcerning state influence and control as a gaping hole inthe global economic architecture. These three agreementsoffer the possibility of meaningfully filling that hole.

The TPP negotiations have been instrumental instarting to place rules regarding government influence andcontrol on an international law footing, as the partieslikely will agree to provisions to ensure that SOEs andsimilar types of entities compete on commercial terms.While the contents of the negotiation are confidential, onesuspects that negotiators will seek to include at least someof the provisions that companies have requested. Theseinclude requirements that countries: identify their SOEsand other government-controlled entities, as well as theinterests they hold in them; ensure that SOEs and similarentities operate on the basis of ‘commercialconsiderations’; address concerns over ‘subsidized finance’or ‘subsidized investment’, where SOEs and relatedentities receive capital at below-market rates or otherwiseon non-commercial terms; and mandate that SOEs and

Notes15 See Peter Allgeier, Comments on the International Services Agreement Negotiations, Coalition of Service Industries (26 Feb. 2013) (‘CSI TISA Comments’), available at http://

www.regulations.gov/#!documentDetail;D=USTR-2013-0001-0027, at 2 (accessed 28 Apr. 2013); see also Greg Frazier, Comments on the International Services AgreementNegotiations, Motion Picture Association of America (26 Feb. 2013), available at http://www.regulations.gov/#!documentDetail;D=USTR-2013-0001-0036, at 2–3 (accessed28 Apr. 2013).

16 See John Neuffer, Comments on the International Services Agreement Negotiations, Information Technology Industry Council (26 Feb. 2013), available at http://www.regulations.gov/#!documentDetail;D=USTR-2013-0001-0023, at 4 (accessed 28 Apr. 2013).

17 See Sarah F. Thorn, Comments on the International Services Agreement Negotiations, Wal-Mart Stores, Inc. (26 Feb. 2013) (‘Walmart TISA Comments’), available at http://www.regulations.gov/#!documentDetail;D=USTR-2013-0001-0028, at 2–4 (accessed 28 Apr. 2013).

18 See Special report: State capitalism, The Economist (21 Jan. 2012).

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related entities disclose details regarding their governancestructures (to ensure that they are managed byprofessionals rather than politicians) and their financialaccounts (to ensure that they are using legitimateinternational accounting practices).

Addressing the potential distortions caused bygovernment participation in the economy will also be asignificant focus of the TISA. SOEs and other instrumentsof government influence and control are particularlyprominent in services sectors, including in the ICT,energy, telecommunications, and financial servicessectors.19 For example, SOEs have historically createdparticular distortions in the insurance industry. State-owned insurance firms may provide their policyholderswith implicit government guarantees or enjoy exemptionsfrom certain requirements relating to licensing, taxes, andcompetition laws. In many economies (such as Japan,Korea, and Taiwan), where state postal monopolies alsosell insurance products, insurance arms may benefit frommore lenient enforcement treatment, preferentiallicensing, advantageous business structures, and non-commercial financing.20 Many of these same benefitsadvantage the delivery of national postal entities of expressdelivery services, as compared to their foreign and privatecompetitors.21

In the TTIP, the EU and United States will also likelynegotiate provisions relating to state influence andcontrol. As with forced localization measures, however, thetwo sides will be addressing not so much a bilateralirritant as a broader global challenge, and the keyaudiences will be located not in Washington and Brusselsbut in Beijing, Moscow, and Hanoi. Regardless of whatthe TPP and TISA achieve in terms of disciplining SOEsand related entities, any rules, principles, or guidelines toemerge from the TTIP negotiation will provide animportant benchmark against which global companieswill measure governments around the world.

3.4 Restrictions on Cross-Border Data Flows

The WTO came into existence on 1 January 1995.Netscape went public on 9 August 1995. Since that time,the digital transmission of data across borders has becomecritical to almost all internationally engaged companies,

not just those in the ICT sector. Whether for industrialmanufacturers managing sourcing and distributionthroughout their global supply chains, media andentertainment companies delivering content andprogramming to new markets, or financial institutionsclearing international transactions, companies in almost allsectors depend implicitly on the ability to transmit datadigitally across borders. Few of the government officialsnegotiating the GATS and other WTO agreements couldhave conceived of this.

Yet just as the need for companies to have free cross-border data flows has grown, efforts by governments torestrict those flows have increased. Governments restrictdata flows for many reasons – both stated and actual –including privacy, consumer protection, cyber security,preservation of culture, and public morals, among others.While the inherent legitimacy of these motives is difficultto question, the measures used to effect them are oftenoverbroad, under-inclusive, and opaque.

International business interests – across sectors – havepressed for each of these three agreements to ensure thatcompanies can transmit data freely across borders and thatthe restrictions that governments impose be narrow andtransparent. In the case of the TPP, companies aremotivated largely by the concern that certain countrieswill use restrictions on data flows for protectionistpurposes. TPP negotiators may succeed in craftinglanguage that, for the first time, explicitly protects thecross-border flow of data, subject to limited, narrowly-tailored public policy exceptions.

After ensuring that they can access markets on open andnon-discriminatory terms, there are few issues as importantto international service providers as maintaining unfet-tered cross-border data flows. Services companies in all sec-tors will press hard for the TISA to strongly protectinternational digital traffic, subject to narrow and well-defined public policy exceptions (such as national security,public safety, and consumer protection). Software companiesare naturally among the most vocal supporters of liberalcross-border data flows, arguing that the benefits of globalcloud computing services depend largely on the ability tocentralize the storage and distribution of data wherever ismost appropriate to do so.22 Instant, unfettered flows ofinformation are equally critical to express deliverycompanies, whose business models depend on the ability to

Notes19 See ibid.20 See CSI TISA Comments, at 17; see also Brad Smith, Comments on the International Services Agreement Negotiations, American Council of Life Insurers (26 Feb. 2013) (‘ACLI TISA

Comments’), available at http://www.regulations.gov/#!documentDetail;D=USTR-2013-0001-0008, at 3–5 (accessed 28 Apr. 2013); Stephen Simchak, Comments on theInternational Services Agreement Negotiations (February 25, 2013) (‘AIA TISA Comments’), available at http://www.regulations.gov/#!documentDetail;D=USTR-2013-0001-0013, at 3–5 (accessed 28 Apr. 2013).

21 See Ralph S. Carter, Comments on the International Services Agreement Negotiations, FedEx Express (26 Feb. 2013), available at http://www.regulations.gov/#!documentDetail;D=USTR-2013-0001-0007, at 3 (accessed 28 Apr. 2013).

22 See David J. Ohrenstein, Testimony of BSA | The Software Alliance Before the Trade Policy Staff Committee (TPSC) on Negotiations for an International Services Agreement, BSA | TheSoftware Alliance (12 Mar. 2013), available at http://www.regulations.gov/#!documentDetail;D=USTR-2013-0001-0033, at 3 (accessed 28 Apr. 2013); see also Ken Wasch,Comments on the International Services Agreement Negotiations, Software & Information Industry Association (26 Feb. 2013), available at http://www.regulations.gov/#!documentDetail;D=USTR-2013-0001-0044, at 3 (accessed 28 Apr. 2013).

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facilitate and track the movement of packages around theworld in real time. Retailers and wholesalers need to overseetheir global purchasing, inventory, and distribution;23

securities dealers trading in overnight markets must be ableto count on near instantaneous clearing of transactions;24 andinsurance companies need reliable flows of information tomake underwriting decisions, process claims, and preventfraud.25

The differing perspectives of the EU and United Stateson the desirability of freely moving data will createparticular challenges in the TTIP context. WhileEuropean firms, like their US counterparts, dependimplicitly on the ability to move information acrossborders instantaneously, Europe and the United Stateshave very different traditions and legal regimes concerningprivacy and personal information. As Google, Yahoo!, andother Internet companies have found, EU law containsstrong protections for personal data, and one can expectthese protections to inform the approach of EuropeanTTIP negotiators. The stakes are too high for the two sidesto fail to resolve this issue, but it will be a significantchallenge for negotiators to develop language thatproperly protects cross-border data flows, while preservingthe expansive conception of privacy that Europeanscherish.

4 CONCLUSION

The current agenda of major global trade and investmentnegotiations represents a new dawn for internationaleconomic policy. Despite not yet including many keydeveloping country markets, the economic significance ofthe agreements under negotiation is colossal. Assumingthey can be finalized, these accords will immediatelyincrease market access opportunities and remove trade andinvestment barriers in a substantial portion of the world’seconomy.

What makes these negotiations so important, however,is that they reflect an important shift in negotiatingpriorities to the emerging sets of challenges faced bycompanies doing business across borders. The concrete,identifiable obstacles that countries erect at their bordersare still commercially significant and priorities foraddressing, but it is a new breed of behind-the-borderregulatory and administrative policies and practices thatare creating the greatest complications for manyinternationally engaged companies. Differential regulatoryburdens, forced localization measures, governmentinfluence and control, and restrictions on cross-border dataflows – these are the issues that reveal how the concerns ofcross-border firms are evolving and how the rulesgoverning international trade and investment need toevolve to address them.

Notes23 See Walmart TISA Comments, at 4.24 See CSI TISA Comments, at 8.25 See ibid., at 15; see also ACLI TISA Comments, at 5; AIA TISA Comments, at 5.

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Publisher Kluwer Law InternationalP.O. Box 3162400 AH Alphen aan den RijnThe Netherlands

General EditorJeffrey L. Snyder, Crowell & Moring, Washington, DC

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Author Guide

[A] Aim of the Journal

Global Trade and Customs Journal provides readers with new ideas, fresh insights, and expert views on critical practical issues affectinginternational trade, including export controls, trade remedies, and customs compliance, with a growing focus on international investmentregulation. Written for practitioners by practitioners, the journal offers practical analysis, reliable guidance, and experienced advice to supportprofessionals in protecting their clients’ or organization’s compliance interests.

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[1] Manuscripts should be submitted electronically, in Word format, via e-mail. [2] Submitted manuscripts are understood to be final versions. They must not have been published or submitted for publication elsewhere.[3] Articles should not exceed 7,500 words. [4] Only articles in English will be considered for publication. Manuscripts should be written in standard English, while using ‘ize’ and ‘ization’ instead of ‘ise’ and ‘isation’. Preferred reference source is the Oxford English Dictionary. However, in case of quotations the original spelling should be maintained. In case the complete article is written by an American author, US spelling may also be used. [5] The article should contain an abstract, a short summary of about 100 words. This abstract will also be added to the free search zone of the Kluwer Online database.[6] A brief biographical note, including both the current affiliation as well as the e-mail address of the author(s), should be provided in the first footnote of the manuscript.[7] An article title should be concise, preferably with a maximum of 70 characters.[8] Special attention should be paid to quotations, footnotes, and references. All citations and quotations must be verified before submission of the manuscript. The accuracy of the contribution is the responsibility of the author. The journal has adopted the Association of Legal Writing Directors (ALWD) legal citation style to ensure uniformity. Citations should not appear in the text but in the footnotes. Footnotes should be numbered consecutively, using the footnote function in Word so that if any footnotes are added or deleted the others are automatically renumbered. [9] Tables should be self-explanatory and their content should not be repeated in the text. Do not tabulate unnecessarily. Tables should be numbered and should include concise titles. [10] Heading levels should be clearly indicated.

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[1] Publication in the journal is subject to authors signing a ‘Consent to Publish and Transfer of Copyright’ form. [2] The following rights remain reserved to the author: the right to make copies and distribute copies (including via e-mail) of the contribution for own personal use, including for own classroom teaching use and to research colleagues, for personal use by such colleagues, and the right to present the contribution at meetings or conferences and to distribute copies of the contribution to the delegates attending the meeting; the right to post the contribution on the author’s personal or institutional web site or server, provided acknowledgement is given to the original source of publication; for the author’s employer, if the contribution is a ‘work for hire’, made within the scope of the author’s employment, the right to use all or part of the contribution for other intra-company use (e.g. training), including by posting the contribution on secure, internal corporate intranets; and the right to use the contribution for his/her further career by including the contribution in other publications such as a dissertation and/or a collection of articles provided acknowledgement is given to the original source of publication.[3] The author shall receive for the rights granted a free copy of the issue of the journal in which the article is published, plus a PDF file of his/her article.

Editorial Board

Edwin Vermulst, VVGB Advocaten, Brussels, Belgium, Immediate Past General EditorJohn P. Barker, Arnold & Porter, Washington, DCLourdes Catrain, Hogan Lovells, Brussels, BelgiumPatricio Diaz Gavier, Sidley Austin LLP, Brussels, BelgiumLaura Fraedrich, Kirkland & Ellis, Washington, DCGary Horlick, Law Offices of Gary N. Horlick, Washington, DCArnaud Idiart, Corporate Export Control Advisor of EADSs HQ and affiliates in FranceJesse G. Kreier, Counsellor and Chief Legal Officer, Rules Division, World Trade OrganizationMichael Lux, Graf von Westphalen, Brussels, BelgiumKunio Mikuriya, Secretary General, World Customs OrganizationJames J. Nedumpara, Jindal Global Law School, IndiaFernando Piérola, ACWL, Geneva, SwitzerlandProf. Dr. Reinhard Quick, Verband der Chemischen Industrie, e.V., Frankfurt, GermanyDavide Rovetta, Grayston & Company, Brussels, BelgiumCliff Sosnow, Fasken Martineau, Ottawa, CanadaPaolo R. Vergano, FratiniVergano, Brussels, BelgiumDr. Carsten Weerth, Main Customs Office Bremen; Lecturer for International Trade Law, Jacobs University BremenSamuel X. Zhang, SZ Legal, Hong Kong