Written evidence submission from techUK (DTD0015)




Digital Trade and Data

techUK’s response to the International Trade Committee Inquiry on Digital Trade and Data


12 February 2021 










About techUK


  1. techUK is a membership organisation launched in 2013 to champion the technology sector and prepare and empower the UK for what comes next, delivering a better future for people, society, the economy, and the planet.


  1. It is the UK’s leading technology membership organisation, with more than 850 members spread across the UK. We are a network that enables our members to learn from each other and grow in a way which contributes to the country both socially and economically.


  1. By working collaboratively with government and others, we provide expert guidance and insight for our members and stakeholders about how to prepare for the future, anticipate change and realise the positive potential of technology in a fast-moving world. 




  1. The COVID-19 pandemic demonstrated the centrality of digital technologies to our economy and social lives. With the pandemic’s substantial economic and social fallout, it is going to be ever more essential to have a policy agenda that is fit for our digital world and that includes everyone in it. techUK believes a digital trade policy should be a central part of that agenda.
  2. The UK has been a major beneficiary of the rise of digital trade with over 67% of service exports worth £190.3 billion being digitally delivered. Early UK trade deals since leaving the European Union, in particular the UK-Japan Comprehensive Economic Partnership Agreement, have recognised this importance and established that the UK is serious about an ambitious digital trade policy. But much as technology moves fast, so does trade policy. Already countries such as New Zealand, Australia, Singapore and Chile are moving ahead of the UK in what they are attempting to do in the digital realm. As the UK seeks to recover from COVID-19, it should continue to strive to lead the world in digital trade.

Main barriers to digital trade

  1. Over recent years a growing number of countries have introduced measures that seek to either shelter their domestic markets from international competition or shelter their citizens from outside services by restricting trade or discriminating against foreign firms. Digitally protectionist policies take different forms, including but not limited to:
  1. Web censorship
  2. Restriction of data flows (including data localisation)
  3. Tariffs on goods and intangible products
  4. Conditions for market access
  5. Badly regulated telecommunications markets
  6. Forced transfer of intellectual property
  1. The implications of these types of policies are stark. The Swedish Board of Trade has said that the rising restrictions on the movement of data can lead to a fragmentation of the global digital economy, while the European Centre for International Political Economy has argued that such measures will weigh down many non-digital sectors.
  2. Protectionist policies can also have other effects, such as undermining internet stability and interoperability, with a growing risk that this will end in a balkanisation of isolated country specific webs. Reductions to internet openness can reduce technology diffusion, affect global value chains and weaken growth. The implications can be even more extreme when protectionism evolves into forms of cyberwarfare, as in the case of China who has allegedly used distributed denial of service attacks and other methods to disrupt information flows and impede online access.
  3. While China is at the forefront of implementing digitally protectionist measures, they are by no means the only country to do so. Notable recent provisions from 2018 include those by Indonesia that allow it to impose tariffs on digital products and steps by India to enact discriminatory local data storage requirements and target foreign e-commerce firms and user platforms. The UK itself has followed France and Italy in introducing its own digital services tax that specifically targets businesses that provide a social media service, search engine or online marketplace, and essentially acts as a non-tariff barrier to trade in these particular digital activities.
  4. Globalisation raises legitimate questions about the appropriate way to tax multinational corporations operating in multiple countries. However, digital services taxes directly cut across the OECD/G20 efforts to establish common approaches to taxation of multinationals and address the tax challenges arising from digitalisation. Indeed, the OECD has said that without a consensus-based solution there could be a proliferation of unilateral digital services taxes and an increase in damaging tax and trade disputes.
  5. The trade war between the USA and China has further complicated the digital trade landscape. The disagreement is fuelled by a growing competition between the two countries in the technologies of Industry 4.0. This has manifested in two main ways: US objections to protectionist measures implemented by the Chinese such as the forced transfer of technology, and from security concerns, for example around social media, an area long-dominated by US firms. The costs of this trade war are already immense and it is, as of yet, unclear how this relationship will evolve under the new US administration.
  6. The UK has entered a world buffeted by protectionist currents, adverse trade winds and increasing techno-nationalism. The UK’s digital trade policy needs to grapple with a situation that is less open than it has been in a long time.

Opportunities arising from digital trade

  1. Digital technologies have transformed international trade. They have upended traditional goods supply chains and created entirely new industries and services through the internet which can be traded across borders with ease.
  2. The mass adoption of personal computers, mobile phones and broadband internet, as well as the software that underpins them, defined the ICT Revolution. Now Industry 4.0 brings automation into the mix, with the industrial IoT, machine learning, additive manufacturing and autonomous robots along with other technologies already taking on a major role in innovative economies. A good functioning business telecommunications services market plays an important part for the success of Industry 4.0 and other forms of digital transformation in goods and services.
  3. If the pace of change was already quick, the COVID-19 pandemic has accelerated it even further. With large parts of the economy forced to shutter and individuals told to stay home, business operations and social lives moved online. Digital connectivity proved itself to be essential to the continuing functioning of society far beyond any narrow definition of the tech sector.
  4. This much was clear even before the pandemic. Across the economy, industries are benefiting from emerging technologies and digital trade. Mining companies now expect to employ more data scientists than mining engineers. Retail stores are deploying IoT technology to help with predictive equipment maintenance in refrigeration units and automating warehouses to fulfil orders. Digital transformation is present in all part of the economy. Indeed, 75 per cent of the value created by the internet has been captured by companies in traditional industries.
  5. The impact on the global economy by digital technologies has been huge. The UN Conference on Trade and Development has estimated that the value of e-commerce sales reached almost US$26 trillion in 2018, up 8% on the previous year. Of this, the vast majority (US$21 trillion) was in business-to-business (B2B) e-commerce comprising both of sales over online market platforms and electronic data interchange transactions. Business-to-consumer (B2C) value increased by 16% compared to 2017, and cross-border B2C sales amounted to $404 billion. 1.4 billion people made purchases online in 2018, a number that has likely grown significantly thanks to pandemic lockdowns.
  6. Other elements of digital trade have also established themselves as major engines of the economy. Since 1996 the trade in the physical IT goods that the digital economy depends on has tripled to reach $1.6 trillion in 2016. Data flows themselves have been estimated to have increased global GDP by $2.8 trillion in 2014.
  7. These changes are underpinned by the globalisation of goods, services, people and ideas. When intangible goods and services, such as online banking, predictive analytics, or the designs for a 3D printed item, can flow across borders at ease, then it is important to approach digital technologies with a global mindset. Global Value Chains (GVCs) are now an essential component of modern trade and have seen the diffusion of intermediate services (such as design, marketing, or logistics), as well as component manufacturing, across borders.
  8. The UK has been a pioneer and a beneficiary of this growth in digital trade. The UK is the third largest B2C market with sales worth US$266 billion, ranking only behind China and the US. Beyond e-commerce, recent experimental statistics from the Office for National Statistics have better measured for the first-time the trade in services actually delivered digitally. According to this new methodology, in 2018 the UK exported £190.3 billion in digitally delivered services, amounting to 67.1% of total UK services exports. In turn it imported £91.1 billion (51.7% of total UK services imports) with a trade surplus of £99.2 billion. UK exports of ICT services amounted to £21 billion in 2018-2019, according to the ONS. While this doesn’t capture all of the UK’s digital trade, or digital’s role in enabling other non-digital trade, these statistics nonetheless demonstrate the potential economic importance of the UK’s digital trade policies.

Data provisions

  1. The global economy runs on data. Across sectors and borders, data is an essential component of innovation, productivity growth and economic expansion. The use of data in the global economy will only become more ubiquitous as technologies such as cloud computing and AI become more embedded in value chains.
  2. The global transformation of businesses and trade by the flow of data can be characterised in five ways:
  1. The use of the internet to export goods
  2. The purchase and consumption of services online
  3. The use of data collection and data analytics to allow new services, adding value to goods
  4. Data flows underpinning global value chains, opening up opportunities for participation
  1. Despite the importance of data flows many countries have sought to restrict them. Restrictive regulatory barriers have had a negative and significant impact on trade in services. It is essential then to reach a sensible balance between measures that address legitimate public concerns, for example the protection of personal data, while not unduly erecting barriers to trade.

Enable the Cross-Border Flow of Data without compromising data protection standards

  1. The UK should ensure that it enables the cross-border flow of data in future trade agreements by taking five steps.

Include a Data Protection Framework

  1. Strong and robust data protection frameworks are a crucial prerequisite to ensuring enduring public trust and support in the cross-border flow of data. Data protection is a fundamental right in UK law and the UK’s trade policy should reflect this.
  2. Future UK trade agreements should ensure that all parties are encouraged to adopt or maintain a legal framework providing for the protection of personal information. These should take into account the principles enshrined in the UK Data Protection Act 2018:
  1. Lawfulness, fairness and transparency
  2. Purpose limitation
  3. Data minimisation
  4. Accuracy
  5. Storage limitation
  6. Integrity and confidentiality (security)
  7. Accountability

Include an Onward Transfer Mechanism

  1. Where differences may arise between different data protection frameworks, it is important to ensure that there are mechanisms to allow businesses to continue to transfer personal data provided they meet the required level of protection. GDPR allows this through mechanisms such as standard contractual clauses and binding corporate rules. And the recently agreed UK-EU TCA’s Digital Chapter makes important progress in article 7 towards such as system.

Commitment to Allow the Cross-Border Flow of Data

  1. UK trade agreements should include a strong commitment that parties shall not prohibit or restrict the cross-border flow of data and information. Measures that restrict it for legitimate public policy objectives would be allowed, in a manner that is consistent in all trade agreements, provided that measures are not a means of arbitrary or unjustifiable discrimination or a disguised restriction on trade.

Dispute Resolution

  1. Given the increasing centrality of data flows to the all sectors of the UK economy, the UK should ensure that provisions and commitments on the cross-border flow of data are subject to dispute resolution. These commitments can then be properly enforced and the UK and its businesses would have a means of redress if trade distorting measures are imposed or commitments on onward transfer not honoured.

Protection of UK-EU Mutual Adequacy

  1. Finally, the UK should ensure that any commitment it makes in future trade agreements does not jeopardise a future UK-EU Mutual Adequacy Agreement. 75 per cent of the UK’s cross-border data flows are with EU countries and preventing any barriers to UK-EU data flows should be the UK’s priority.

Prevent the Forced Localisation of Data

  1. The case is often made that keeping data within a country’s borders is more private and secure, both from risks of hacking and from government surveillance. However, in most cases the reverse is true and localisation requirements do not increase commercial privacy or data security. Data transferred overseas is not exempt from the home country’s laws and contracts between consumers and businesses are an effective and enforceable means of ensuring data is protected.
  2. Not only do localisation requirements fail to meet their own policy objectives but they then impose significant costs on a country’s economy.
  3. The UK should ensure it includes a reciprocal commitment in future trade agreements that ensures that no party shall require the use of computing facilities or their location in a Party’s territory as a condition of market access.


Intellectual property provisions

  1. Recent years have seen a transformation in the use of intellectual property, bringing with it many challenges and opportunities. The protection of proprietary knowledge, to ensure creators of new products are duly rewarded needs to be an important ongoing element in the UK’s trade policy. The protection of intellectual property rights has a number of positive benefits by:
  1. creating powerful incentives for domestic innovation
  2. inducing knowledge spillovers that help others to innovate
  3. ensuring a country’s companies can focus on operating productively and innovating, instead of having to devote an undue amount of their time and resources to protecting their IP in an environment where it’s at risk
  4. promoting the international diffusion of technology, innovation, and knowhow
  5. boosting a country’s levels of research and development, inbound foreign direct investment (FDI), and exports of goods and services.
  1. The UK already has a robust IP framework and it is important this is protected, including in relation to patents. Any future trade deal should ensure that it does not threaten the UK’s membership of the Unified Patent Court and the European Patent Convention. These are highly valued by the UK tech sector and continued membership should be a key priority.
  2. However, the impact of the digital economy has widened IPR issues far beyond patents. Issues such as the protection of source codes and the enabling of AI through the use of open data should also be central elements of a future UK digital trade policy.

Prevent the mandatory transfer of source codes, algorithms or encryption keys as a condition of market access

  1. While innovations in working practices have led to much more intellectual property being co-created via open source software, the reality is that for many businesses their products are a mix between proprietary content and open source. It is therefore worrying that the forced transfer of technology is demanded in certain jurisdictions, notably in China, as a condition of market access.
  2. It is important that the UK’s digital trade policy is used to protect the IP of innovative UK firms. The UK should work with likeminded countries to ensure the JSI e-commerce negotiations include robust provisions to prevent the mandatory transfer of source codes, algorithms, or encryption keys as a condition of market access.
  3. Likewise, future trade agreements should include a clause stating that no party shall require the transfer of, or access to, source code of software, algorithms, or encryption keys owned by a person of another party, as a condition for the import, distribution, sale or use of such software, or products containing such software, in its territory. Such a provision would not prevent the provision of source code in commercially negotiated contracts, nor would it prevent requiring the modification of software to comply with a party’s laws and regulations.

Support the development of AI through enabling open government data and text and data mining, while respecting Intellectual Property rights.

  1. The development of AI has also had implications for intellectual property rights. Access to large data sources are crucial to train AI programs.
  2. Unlike the major trading powers of the US, EU, and China, the UK does not have a domestic market of hundreds of millions of people as a foundation. To continue to scale the UK’s AI sector and export its innovations then access to global data will be essential. One way that the UK government can facilitate the development of AI technology is to build on the gold standard set by the USMCA in future trade deals that commit parties to make government data available to the public in machine-readable and searchable open formats, and allow it to be searched, retrieved, used, reused, and redistributed. Facilitating the provision of accessible, organisable public data will help allow innovative UK AI companies to develop and train their products and deploy them readily in foreign markets.
  3. An additional step that the UK should take to break new ground on digital trade would be to include mutual commitments to facilitate the use of text and data mining in the training of AI programs and artificial neural networks by providing greater access to data, where that material is lawfully accessed. This would help drive the development of technologies that can find previously unknown patterns and possibilities in vast data sets, helping to develop predictive analytics. Copies of works and content that are made should only be retained as long as necessary for the text and data mining to train AI and artificial neural networks. Such a commitment should also only apply to works and content that has not been expressly reserved by IP holders in the appropriate manner, such as by machine-readable means in the case of content made publicly available online.

Telecommunications provisions

  1. Improving access of UK companies to international telecommunication markets should be an aim of future trade agreements. Telecommunication services provide the backbone to the digital economy yet they are subject to some of the most protectionist requirements and anti-competitive policies. The UK’s telecommunications sector is highly competitive, with exports of £6.4 billion in 2017 of which 58.6% was to non-EU countries. The intention of the EU to review and sharpen existing WTO telecommunications rules as part of the WTO e-commerce negotiations is to be welcomed.
  2. Future UK trade agreements should seek to liberalise telecommunications trade in a number of ways: 
  1. ensure that the definitions of public telecommunications networks and/or services must include an explicit reference to business to business supplies; 
  2. enhance non-discrimination clauses for wholesale access, including an obligation on domestic suppliers not to discriminate in favour of their own downstream business, to ensure consistent, pro-competitive regulation of business grade wholesale access;
  3. ensure that UK providers enjoy the same rights to offer services and trade on equivalent terms as domestic providers, including not facing additional licensing or domestic ownership requirements; 
  4. remove geo-blocking restrictions, allowing the transfer of content across borders; 
  5. include direct, indirect and common costs, as well as a reasonable rate of return, where cost-oriented rates are applied. Such rates shall not include costs not related to the provision of public telecommunications services; and
  6. ensure that competent regulatory authorities should be fully independent and impartial, with appropriate enforcement powers and appeal mechanisms. Their powers and standing should be mutually recognised and there should be mechanisms in place for ongoing regulatory dialogue to exchange best practice with a view to ensuring consistency of approach. 
  1. Future UK trade agreements should not jeopardise the light touch regulatory approach which has helped position the UK as an enabling regime for digital and which is particularly important for emerging services, such as IoT and 5G. This approach should apply to telecommunication services.


  1. Japan represents a significant market for the UK tech sector. In 2018 it accounted for over £321 million in telecommunications, computer and information services exports, and £56 million in imports. The total value of the services exports to Japan in 2018 was £675m.
  2. In CEPA, the UK negotiated an admirably comprehensive e-commerce chapter. The structure closely follows the EU-Japan agreement but it goes beyond it in some areas. The new deal in particular leans heavily on clauses from CPTPP, that Japan is party to and that the UK has formally applied to join.
  3. These additions cover key areas, including on cross-border data flows, commitment to high standards of data protection, and provisions protecting source codes. It also incorporates some language from USMCA relating to open government data, which will allow innovative UK AI companies to develop and train their products and deploy them readily in the Japanese market.
  4. Moreover, regulatory divergence is the main barrier to digital trade, so the agreed framework of dialogue and cooperation on emerging technology regulation is particularly valuable. While the commitment to encourage the use of interoperable electronic authentication and electronic signatures will help to significantly reduce cost and red tape for businesses trading with Japan.
  5. These additions will benefit the UK tech sector looking to serve the Japanese market, and compete with companies who already have similar access through CPTPP.

WTO Moratorium on customs duties on electronic transmissions

  1. One key achievement of the WTO in supporting the digital economy was the introduction of the moratorium on customs duties on electronic transmissions. Since 1998, the moratorium has been a key plank of the multilateral trading system, and a vital enabler of the growth of the internet. By preventing the development and imposition of tariffs and customs duties on electronic transmissions, the moratorium has facilitated the development of the $27.7 trillion global e-commerce market.
  2. However, it has only ever been a temporary measure, subject to renewal at every WTO Ministerial Conference. Though it was renewed at the last meeting, in 2017, it has since come under renewed attack. India and South Africa have called for a “re-think” of the moratorium, citing the potential revenue lost due to the expansion of items electronically transmitted. In fact, goods that are readily digitizable of the kind that India and South Africa cite, such as books or DVDs, make up less than 1 per cent of the total goods trade in both developed and developing countries, yielding only around 0.25 per cent of all customs revenues in 2014.
  3. Other countries have a different protectionist take on the moratorium, with Indonesia arguing that the moratorium should apply only to the electronic transmissions and not to products or contents which are submitted electronically. It has consequently introduced tariff lines on intangible products such as software.
  4. Ending the moratorium, or defining it in such a way as to open up the contents of electronic transmissions to the imposition of tariffs, would mark the single biggest reversal of trade liberalisation in living memory. New digital tariffs could threaten entire digital business models, and increase costs for other rapidly digitizing sectors.
  5. The UK should make it a central tenant of its digital trade policy to make the moratorium a permanent feature of the multilateral trading system. This should primarily be done through the WTO by working with likeminded countries to secure a consensus on making it permanent. The e-commerce negotiations offer an unprecedented opportunity to reach an agreement and finally secure a tariff free future for cross-border electronic transmissions.
  6. In this process, the UK should advocate for a broad definition of electronic transmissions and include the content of those transmissions (i.e. e-books, video, software, etc.). Furthermore, the UK should follow best practice in digital trade policy and include a strong commitment in future trade deals to ban the imposition of customs duties in connection with the import or export of digital products transmitted electronically.
  7. This commitment should extend to all digital products regardless of source rather than being limited to just the signatories of the agreement, thus helping embed the moratorium in international law.




For further information, please contact: 

Sabina Ciofu

Head of EU and Trade Policy, techUK 



February 2021