Obama administration strikes deal on TPP data storage

The Obama administration said Wednesday that it has reached an agreement with the financial services industry that could smooth passage of the 12-nation Trans-Pacific Partnership (TPP) trade agreement.

The thrust of the new proposal, which is aimed at placating concerns about a provision in the TPP that could give foreign governments the ability to require U.S. businesses to maintain data servers within their borders, would broadly prohibit requirements for data storage. 

{mosads}The overhauled framework would apply only to ongoing and future trade negotiations — such as the Trade in Services Agreement, the Transatlantic Trade and Investment Partnership with the European Union and the U.S.-China Bilateral Investment Treaty — and not to the Pacific Rim pact.  

U.S. Trade Representative Michael Froman called the compromise “an important, collaborative solution that will help build momentum for reaching consensus in other areas of TPP.”

“It shows that when we dig into the details with stakeholders and members of Congress we can find common ground approaches that satisfy a range of priorities,” Froman said.

“As we continue our collaborative work on how TPP will be implemented and enforced, we expect the already strong support for TPP to continue to grow.”

Most of the TPP’s largest trading partners are part of other agreements such as the trade in services talks, including Australia, Canada, Chile, Japan, Mexico, New Zealand and Peru, so the data localization obligations would eventually apply to them.

U.S. officials are expected to work with nations such as Vietnam and Malaysia to address the issue in the TPP deal.

“We have worked closely with U.S. financial regulators, Congress and the financial services industry to develop a new approach to financial services under data localization obligations in our trade and investment agreements,” a Treasury spokesperson told The Hill. 

“We believe we have made progress in addressing concerns as we seek to eliminate protectionist and trade-distorting data localization measures imposed by foreign governments in the financial services sector, while also ensuring that U.S. financial regulators have access to the information they need for regulatory and supervisory purposes,” the spokesperson said. 

The financial services industry has vowed to sit out the the push for President Obama’s Pacific Rim trade deal unless the administration fixed the issue. 

Congressional leaders on Capitol Hill have said that the data localization provision is one of three issues considered major roadblocks to approval of the TPP.

The proposals also would broadly prohibit restrictions on data crossing borders, set up a process to address concerns with regulators and create a state-to-state dispute settlement system.

Trade and investment agreements currently prohibit restrictions on the transfer of financial information abroad for data processing but do not expressly prohibit data localization measures that require local data storage for financial services companies.