Today sees the official start of the world’s largest free trade zone, covering around a third of the global economy, as an agreement between Japan and the European Union (EU) kicks in.
In stark contrast to what’s happening in the US, the agreement eliminates Japanese tariffs on 94% of imports from EU nations and European tariffs on 99% of Japanese goods.
The deal is made possible in large part thanks to the earlier creation of the world’s biggest data adequacy zone, allowing for cross border data flows between Japan and EU countries - and without so much as a Privacy Shield comfort blanket in place.
The data adequacy arrangements kicked in last month. In a joint statement, Věra Jourová, Commissioner for Justice, Consumers and Gender Equality and Haruhi Kumazawa, Commissioner of the Personal Information Protection Commission of Japan, said:
These mutual adequacy findings create the world's largest area of safe data transfers. They build on the high degree of convergence between the two systems, which rest notably on an overarching privacy law, a core set of individual rights and enforcement by an independent data protection authority. As data privacy and security have become a central factor of consumer trust, it is this type of convergence, based on strong laws and robust enforcement, that can ensure the sustainability of our increasingly data driven-economy and facilitate commercial flows.
The citizens of the EU and Japan will now enjoy solid protections of their personal data when transferred, while all their companies will benefit from free data transfers to each other's economies. In this way, today's decisions complement and enhance the benefits of the Economic Partnership Agreement and contribute to the strategic partnership between the EU and Japan.
It’s all a stark contrast to the likes of Brexit negotiations in the UK or to the ‘trade wars are good’ rhetoric coming out of the Oval Office. What’s also interesting is that Japan’s government now intends to build on this detente with the EU and extend its influence into other areas, most notably global data governance.
In June, Japan will play host to the 2019 G20 Summit and Prime Minister Shinzō Abe has data as a priority agenda item:
I would like Osaka G20 to be long remembered as the summit that started world-wide data governance. Let Osaka G20 set in train a new track for looking at data governance — call it the Osaka Track - under the roof of the World Trade Organization. Osaka G20 will be the summit that started world-wide data governance.
It’s time to tackle this issue, he declares:
The time to do so is ripe as we all know that for decades to come, it will be digital data driving our economy forward. We had better act now, because coming into being every single day is more than 2.5 quintillion bytes of data, which is, according to one estimate, as much as two hundred fifty thousand times the printed material in the U.S. Library of Congress. A delay of one year means we will be light years behind.
The objective has to be to strike a particular balance, he explains:
We must, on one hand, be able to put our personal data and data embodying intellectual property, national security intelligence, and so on, under careful protection, while on the other hand, we must enable the free flow of medical, industrial, traffic and other most useful, non-personal, anonymous data to see no borders, repeat, no borders.
The regime we must build is one for D.F.F.T. -Data Free Flow with Trust - non-personal data, needless to say. It is not the big, capital intensive industries, but rather we individuals who will benefit from both the fourth industrial revolution and what we call “Society 5.0,” which this Fourth Industrial Revolution will bring about.
Society 5.0 might be thought of as being another iteration of the Fifth Industrial Revolution that Salesforce CEO Marc Benioff pitched at the World Economic Forum Annual Meeting a couple weeks back. Certainly much of how Abe pitches his concept chimes with the ‘trust and values’ message that Benioff outlined. Abe’s version runs:
In Society 5.0, it is no longer capital but data that connects and drives everything, helping to fill the gap between the rich and the less privileged. Services of medicine and education, from elementary to tertiary, will reach small villages in the Sub Saharan region. Girls who have given up going to school will see, beyond their own village, a wider horizon where the sky is the limit.
Our task is obvious. We must make data a great gap buster. Through AI, IoT and robotics, the data-driven Society 5.0 will bring about a new reality for urbanity. Our cities will be made much more liveable for all sorts of people from all walks of life.
To do all this there is a need to cut through outdated regulations to change them, he argues, and that extends to how bodies such as the WTO operate:
The engine for growth, if you think about it, is fuelled no longer by gasoline, but more and more by digital data. When we say, we need to change the WTO, we are still thinking about goods, agricultural or otherwise, for which distances and borders matter. We have yet to catch up with the new reality, in which data drives everything, where the D.F.F.T., Data Free Flow with Trust, should top the agenda in our new economy.
In a sense, it's all déjà-vu. When John D. Rockefeller was building Standard Oil, no one knew what to do with gasoline. Dumped into the nearby Cuyahoga River, gasoline caused fires many times. It took 3 to 4 decades before we humans came to know the value of gasoline. About 20 years into the twentieth century, gasoline was running cars and flying airplanes. It is the same, isn't it, about data. Around 1995, we started to use the Internet on a massive scale, but it was almost 20 years into the 21st century that we found data driving our economy.
So now is the time to get transformative in thinking, is the gist of Abe’s thesis. But when you start to think about change on a global scale, vested interests and alternative views are inevitably going to arise. Angel Gurria, Secretary-General of the Organization for Economic Co-operation and Development (OECD) has set a hugely ambitious - and frankly unlikely - goal of having a workable global digital services tax regime in place by 2020. Good luck with that.
The same issues will arise around data governance standards. There will be lots of public posturing around the global greater good, but national positions will be struck in the negotiating chambers. The precursors to this could be seen in Davos this year. For example, outgoing German Chancellor Angela Merkel talked about the challenges of data governance in a digital economy where values and standards are different around the world:
How do we deal with data, how do we analyze and evaluate data? What about ownership of data? All of that is something that we are grappling with then as a consequence of this Big Data world we live in….As yet I don’t see a global architecture that deals with all of these different issues.
If we look at the two different poles that we have these days as regards how to deal with data, we have on the one hand the United States where the data very much are owned by private players by private stakeholders and it's difficult to set down guidelines where the limits to this private ownership are.
We have China where the state has a lot of access to data, even price of data so in a way you have here two different extremes that I feel are not in line with the ideas that I would have and that Germany would have and in line with social market economy as we know it, where we say the rights of the individual need to be protected.
As if to make Merkel’s point all the clearer, China’s Vice President Wang Qishan countered with:
We need to respect the independent choices of model of technology management and of public policies made by countries, and their right to participate in the global technological governance system as equals.
The overall message? Global data governance is on the agenda at the top level of government in major economies and that is a good first step. Just don’t expect miracles when it comes to trying to set a standard. Merkel noted:
I think the European Union ,even though it has its flaws obviously, with adopting of the General Data Protection Regulation has given itself a good guideline as to how to deal with private data. We're trying to define more clearly how we can get forward in this, but I am delighted to know that President Abe said that the Presidency of the G20 of Japan is one that he wishes to use in order to tackle the question. I think the G20 is the ideal format to come to a comprehensive agreement and coordination among the industrialized nations.
Sitting watching another car crash week of Brexit chaos and brinkmanship between London and Brussels, the Japan-EU alliance is simultaneously something to admire and regret. On the one hand, it’s an amazing achievement and one built on an understanding of the need for change in a global digital economy. On the other hand, it’s an achievement that the UK looks set to drop out of come Brexit day unless something changes fast. Given that there’s stlll a lack of clarity around cross-border data flows between a Brexit Britain and the rest of the EU, that’s doubly-galling.
President Abe’s determination to press ahead now to deal with data governance issues is hugely welcome and whatever the outcome - and however long it takes - I’ll confidently predict it’ll be a damn sight more robust that the ‘liptstick on a pig’ Privacy Shield fudge between the US and the EU.