[CTC] TPP and Financial Data

[Arthur Stamoulis]

Washington Trade Daily
Volume 25, Number 59 Wednesday, March 23, 2016

TPP and Financial Data
The TransPacific Partnership is not open to renegotiation, but the Administration believes it can
resolve concerns over the exclusion of financial services from language prohibiting forced localization of
data servers – possibly through a side agreement, Treasury Secretary Jacob Lew said yesterday (WTD,
3/10/16).

In an appearance before the House Financial Services Committee, Mr. Lew was questioned by
several members about why financial institutions were not given the same protections from forced
localization as other industries – and how the Administration intends to fix the problem.

Mr. Lew agreed that forced localization amounts to a nontariff barrier and the Administration
has been aggressive in fighting it. But in this case, the issue is that US “prudential regulators” wanted to
be guaranteed access to “timely and appropriate” information – something that was not always the case
during the global financial crisis.

The Administration now is “trying to thread the needle” and find a balance that “reconciles the
legitimate interests of financial services institutions not to have nontariff barriers and costs imposed on
them and of our prudential regulators to have access to the information they need,” he said.

The TPP is closed and cannot be reopened, but the issue could be addressed in a side agreement,
Mr. Lew suggested. The secretary added that reconciling the competing interests in the case will be
important to the ongoing TransAtlantic Trade and Investment Partnership negotiations with the
European Union and as the United States negotiates bilateral investment treaties.

TTIP Too
On TTIP, Mr. Lew reiterated the Administration’s position that financial services market access
must be part of the negotiations – but not regulation. Discussions on financial services in TTIP have
been “challenging,” but some progress is being made now, he told the committee.

At a separate forum, Deputy US Trade Representative Robert Holleyman noted that TPP was
the first US trade agreement to impose disciplines on the transmission of data across borders. He told a
forum at the Information Technology Industry Council that the agreement covers 80 percent of data
transferred among the TPP members and includes two-dozen free-trade principles pushed by the United
States in the negotiations.

Digital technology will likely be on the agenda for the upcoming Group-of-20 summit meeting
set for this September and being chaired by China. But Mr. Holleyman suggested that a full-scale
discussion of the issue in the G-20 – much less any start to plurilateral negotiations – would be too
ambitious.

Instead the USTR official suggested that the G-20 should be able to agree not to charge duties on
internet-related products, such as downloaded apps. Mr. Holleyman said the G-20 should focus on
concluding an Environmental Goods Agreement in Geneva – long overdue – before moving on to other
issues. It would be nice to conclude those negotiations during the year that China is chairing the G-20,
he said. Several have blamed China for holding up those negotiations by not offering an ambitious
market access offer in the negotiations in Geneva.

A G-20 priority, however, will be on cyber-security issues, Mr. Holleyman added.
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