It has been reported that the European Commission has agreed language that would allow data flows to be added to future trade agreements.
There has been a long running tension within the Commission about the place for data flows within trade discussions, spurred by increasing recognition that data flows underpin trade in global digital economies. Recent trade deals have unsuccessfully sought to include agreements on data, including in the EU - Japan deal.
Efforts have stalled due to differences of opinion between two key Commission departments, Trade and Justice. Advocates have argued that allowing data to flow freely between states will boost the amount of trade. Others are concerned that trade deals must not put Europe’s strong data protection rules at risk, with European residents’ data being transferred to countries with different data protection laws.
The ability of data to be transferred between countries is increasingly seen as necessary for seamless trade given the amount of data involved in delivering goods and, particularly, services around the globe. Evidence by McKinsey suggests data flows make up approximately 3% of global GDP, but that this will rise rapidly as more industries digitise. The impact of this issue doesn’t just affect the tech sector, but every industry from financial services to automotive.
Up until now data can only flow freely from the EU to third countries if the third country has received an adequacy decision from the EU, or individual companies put in place specific safeguards for European data. The adequacy process has always sat outside any discussions around free trade agreements.
The breaking of the deadlock in the Commission suggests that future trade deals will enable data to flow, without the need for those additional safeguards to ensure high standards of data protection are met. However, it is not yet clear exactly what has been agreed within the Commission, with the text being presented to MEPs national representatives soon.
This significant development will be of interest to UK businesses given the need for data to be able to flow freely between the UK and the EU post-Brexit. The risk to the legal framework for data flows is one of the key threats facing the tech sector as a result of Brexit, but the ramifications of not agreeing a deal on data would go much further than just the tech sector.
As techUK outlined in its recent report, ‘No Interruptions: Options for the future UK-EU data sharing relationship’, along with UK Finance, the UK and EU must ensure that the free flow of data between the UK and EU is not disrupted. Data is global and knows no borders. Data flows underpin modern digital economies and societies. techUK has called on the UK and EU to agree mutual adequacy decisions as soon as possible to ensure unhindered data flows can continue. This is just as important for the EU27 as it is for the UK given data flows are two-way.
The inclusion of data transfer agreements in EU trade deals could theoretically provide a basis for the future of the UK and EU’s data sharing relationship. However, it is not yet clear what is in the Commission’s text on data flows and whether the other EU institutions will find agreement within the limited time available for Brexit talks. This remains a highly political issue and techUK is clear that the continued free flow of data between the UK and EU is too important for politics and cannot be traded away as a result of difficult negotiations.
Only time will tell if the Commission’s proposed text on data flows will actually lead to comprehensive trade deals containing provisions on data, and the detail will be very important. The text, when published, will provide an interesting insight into current EU thinking on how to balance different interests in trade deals, specifically the desire to increase EU trade while maintaining the EU’s commitment to a high standard of data protection. Even if the UK and EU do not use this new method to maintain data flows, the text is likely to highlight some of the key issues currently at play when developing data flows agreements, which will be relevant to any future UK-EU relationship. techUK will therefore continue to monitor developments carefully.