Open Internet Central to U.S. Trade Policy

Administration officials say they are sympathetic to U.S. cloud service providers' concerns that data-localization requirements, other restrictive policies and the fallout from Edward Snowden's revelations cut off access to foreign markets.

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WASHINGTON – U.S. cloud providers have ambitious designs on foreign markets, but overseas expansion has been slowed by a number of obstacles, ranging from privacy worries over government surveillance activities to policies that impede cross-border data flows.

In response, top Obama administration officials say they're pressing other nations on open Internet issues as they negotiate trade agreements and working to repair some of the damage done by the revelations of Edward Snowden, the former NSA contractor.

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"Certainly this is a very central and important part of the administration's trade agenda," Christine Bliss, assistant U.S. trade representative for services and investment, said Thursday at an event hosted by the Brookings Institution. "We start from the premise that digital trade and information flows are becoming a more and more important source of our GDP."

For Cloud Service Providers, Snowden Fallout Reverberates

For a company such as Google, which has been one of the most vocal critics of the NSA's clandestine intelligence operations disclosed by Snowden, the international fallout has been severe.

Richard Salgado, director of law enforcement and information security at the search giant, notes that several countries have responded to the Snowden revelations by enacting or considering data-localization laws, requiring cloud providers to store citizens' data within their national borders.

"What's interesting about this is that the world of surveillance and the world of trade has now collided," Salgado says.

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The idea of concentrating data within a single physical facility, Salgado notes, runs counter to the distributed ethos of the cloud and undermines core benefits of the technology such as redundant storage and low latency rates for data movement.

"All that is lost with data localization laws," he says. "The value of a cloud as we think about it is lost when you break it up into little pieces. You just have lots of sub-clouds."

Bliss ranks localization requirements "in various forms" as the top challenge – though by no means the only one – that U.S. trade negotiators face as they hammer out Internet issues in multilateral agreements with their counterparts.

Other items on that agenda include online censorship and Internet freedom, protectionist policies that give a competitive advantage to local companies and interoperability barriers that can arise when countries insist that tech firms adhere to certain technical standards not broadly recognized in the international community.

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Those trade priorities certainly aim to protect the interests of U.S. tech firms. In a larger sense, too, they seek to combat what's sometimes described as the balkanization of the Internet – the concern that, added up, various nations' restrictive policies could have the effect of fragmenting the global network and the commercial activity it supports.

Daniel Sepulveda, deputy assistant secretary of state and the department's coordinator for international communications and information policy, says administration officials work in their negotiations to convince their counterparts of "the value of the platform as a source for development for your entire economy," rather than opting for protectionist policies that narrowly aim to prop up local tech companies.

Sepulveda also touts what he describes as a thoroughgoing, independent review of government surveillance activities that Obama commissioned, along with reforms the president set in motion to limit data collection and beef up oversight of the intelligence community.

Data Localization Hurts More Than It Helps

Google's Salgado argues that laws and policies that limit the cross-border flow of information often have the perverse effect of hurting the local economy by cutting off access to cloud services that could help businesses improve efficiencies and expand their market reach.

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"There's an irony to it as well. There's a presumption … that data localization laws are good for the local country that's imposing them," he says. "What it overlooks is the fact that local businesses of all types actually take advantage of the services that are offered by cloud providers. An awful lot of companies use the services of Google and Amazon and Salesforce and lots of other companies out there to run their business."

To that end, Bliss says the U.S. Trade Representative's office is pressing partner nations to sign onto concrete language supporting cross-border data flows and rejecting server and data localization requirements, among other provisions, in the discussions over the Trans-Pacific Partnership, a massive trade deal the United States is negotiating with 11 other Asia-Pacific nations.

Sepulveda is quick to point out that the promotion of an open Internet is hardly a U.S. trade priority alone. Indeed, many policymakers around the world are warming to the potential economic benefit from a truly global cloud regime, where data can flow unimpeded across political borders.

Earlier this year, for instance, Brazilian lawmakers pulled controversial language mandating foreign tech firms to store data locally from an Internet regulation bill, striking what Sepulveda sees as the "biggest localization threat" among recent policy proposals to come up for debate.

"We're seeing that kind of educational process taking place around the world," he says. "There's a glass-half-full story to be told here. We're making some good and significant progress with our colleagues abroad."

This story, "Open Internet Central to U.S. Trade Policy" was originally published by CIO.

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