[House Hearing, 115 Congress]
[From the U.S. Government Publishing Office]
21ST CENTURY TRADE BARRIERS: PROTECTIONIST CROSS BORDER DATA FLOW
POLICIES IMPACT ON U.S. JOBS
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON DIGITAL COMMERCE AND CONSUMER PROTECTION
OF THE
COMMITTEE ON ENERGY AND COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED FIFTEENTH CONGRESS
FIRST SESSION
__________
OCTOBER 12, 2017
__________
Serial No. 115-66
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Printed for the use of the Committee on Energy and Commerce
energycommerce.house.gov
_________
U.S. GOVERNMENT PUBLISHING OFFICE
27-652 WASHINGTON : 2018
____________________________________________________________________
For sale by the Superintendent of Documents, U.S. Government Publishing Office,
Internet:bookstore.gpo.gov. Phone:toll free (866)512-1800;DC area (202)512-1800
Fax:(202) 512-2104 Mail:Stop IDCC,Washington,DC 20402-001
COMMITTEE ON ENERGY AND COMMERCE
GREG WALDEN, Oregon
Chairman
JOE BARTON, Texas FRANK PALLONE, Jr., New Jersey
Vice Chairman Ranking Member
FRED UPTON, Michigan BOBBY L. RUSH, Illinois
JOHN SHIMKUS, Illinois ANNA G. ESHOO, California
TIM MURPHY, Pennsylvania ELIOT L. ENGEL, New York
MICHAEL C. BURGESS, Texas GENE GREEN, Texas
MARSHA BLACKBURN, Tennessee DIANA DeGETTE, Colorado
STEVE SCALISE, Louisiana MICHAEL F. DOYLE, Pennsylvania
ROBERT E. LATTA, Ohio JANICE D. SCHAKOWSKY, Illinois
CATHY McMORRIS RODGERS, Washington G.K. BUTTERFIELD, North Carolina
GREGG HARPER, Mississippi DORIS O. MATSUI, California
LEONARD LANCE, New Jersey KATHY CASTOR, Florida
BRETT GUTHRIE, Kentucky JOHN P. SARBANES, Maryland
PETE OLSON, Texas JERRY McNERNEY, California
DAVID B. McKINLEY, West Virginia PETER WELCH, Vermont
ADAM KINZINGER, Illinois BEN RAY LUJAN, New Mexico
H. MORGAN GRIFFITH, Virginia PAUL TONKO, New York
GUS M. BILIRAKIS, Florida YVETTE D. CLARKE, New York
BILL JOHNSON, Ohio DAVID LOEBSACK, Iowa
BILLY LONG, Missouri KURT SCHRADER, Oregon
LARRY BUCSHON, Indiana JOSEPH P. KENNEDY, III,
BILL FLORES, Texas Massachusetts
SUSAN W. BROOKS, Indiana TONY CARDENAS, California
MARKWAYNE MULLIN, Oklahoma RAUL RUIZ, California
RICHARD HUDSON, North Carolina SCOTT H. PETERS, California
CHRIS COLLINS, New York DEBBIE DINGELL, Michigan
KEVIN CRAMER, North Dakota
TIM WALBERG, Michigan
MIMI WALTERS, California
RYAN A. COSTELLO, Pennsylvania
EARL L. ``BUDDY'' CARTER, Georgia
Subcommittee on Digital Commerce and Consumer Protection
ROBERT E. LATTA, Ohio
Chairman
GREGG HARPER, Mississippi JANICE D. SCHAKOWSKY, Illinois
Vice Chairman Ranking Member
FRED UPTON, Michigan BEN RAY LUJAN, New Mexico
MICHAEL C. BURGESS, Texas YVETTE D. CLARKE, New York
LEONARD LANCE, New Jersey TONY CARDENAS, California
BRETT GUTHRIE, Kentucky DEBBIE DINGELL, Michigan
DAVID B. McKINLEY, West Virgina DORIS O. MATSUI, California
ADAM KINZINGER, Illinois PETER WELCH, Vermont
GUS M. BILIRAKIS, Florida JOSEPH P. KENNEDY, III,
LARRY BUCSHON, Indiana Massachusetts
MARKWAYNE MULLIN, Oklahoma GENE GREEN, Texas
MIMI WALTERS, California FRANK PALLONE, Jr., New Jersey (ex
RYAN A. COSTELLO, Pennsylvania officio)
GREG WALDEN, Oregon (ex officio)
C O N T E N T S
----------
Page
Hon. Robert E. Latta, a Representative in Congress from the State
of Ohio, opening statement..................................... 1
Prepared statement........................................... 3
Hon. Janice D. Schakowsky, a Representative in Congress from the
State of Illinois, opening statement........................... 4
Hon. Michael C. Burgess, a Representative in Congress from the
State of Texas, opening statement.............................. 5
Hon. Frank Pallone, Jr., a Representative in Congress from the
State of New Jersey, prepared statement........................ 80
Witnesses
Victoria A. Espinel, President and CEO, BSA--The Software
Alliance....................................................... 6
Prepared statement........................................... 9
Answers to submitted questions............................... 88
Dean C. Garfield, President and CEO, Information Technology
Industry Council............................................... 22
Prepared statement........................................... 24
Answers to submitted questions............................... 90
Jennifer Daskal, Associate Professor of Law, American University
Washington College of Law...................................... 41
Prepared statement........................................... 43
Morgan Reed, President, ACT--The App Association................. 53
Prepared statement........................................... 55
Answers to submitted questions............................... 93
Submitted material
Statement of the Insights Association............................ 81
Statement of the Electronic Privacy Information Center........... 83
21ST CENTURY TRADE BARRIERS: PROTECTIONIST CROSS BORDER DATA FLOW
POLICIES IMPACT ON U.S. JOBS
----------
THURSDAY, OCTOBER 12, 2017
House of Representatives,
Subcommittee on Digital Commerce and Consumer
Protection,
Committee on Energy and Commerce,
Washington, DC.
The subcommittee met, pursuant to call, at 10:17 a.m., in
room 2322, Rayburn House Office Building, Hon. Robert Latta,
(chairman of the subcommittee) presiding.
Present: Representatives Harper, Burgess, Lance, Guthrie,
Bilirakis, Mullin, Walters, Costello, Schakowsky, Clarke,
Dingell, Matsui, Welch, Kennedy, Green, and Latta.
Staff Present: Zachary Dareshori, Staff Assistant; Melissa
Froelich, Chief Counsel, Digital Commerce and Consumer
Protection; Adam Fromm, Director of Outreach and Coalitions;
Ali Fulling, Legislative Clerk, Oversight and Investigations,
Digital Commerce and Consumer Protection; Theresa Gambo, Human
Resources/Office Administrator; Elena Hernandez, Press
Secretary; Paul Jackson, Professional Staff, Digital Commerce
and Consumer Protection; Bijan Koohmaraie, Counsel, Digital
Commerce and Consumer Protection; Madeline Vey, Policy
Coordinator, Digital Commerce and Consumer Protection; Greg
Zerzan, Counsel, Digital Commerce and Consumer Protection;
Michelle Ash, Minority Chief Counsel, Digital Commerce and
Consumer Protection; Lisa Goldman, Minority Counsel; and
Caroline Paris-Behr, Minority Policy Analyst.
OPENING STATEMENT OF HON. ROBERT E. LATTA, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF OHIO
Mr. Latta. Well, good morning. I would like to call the
Subcommittee on Digital Commerce and Consumer Protection to
order. And the chair now recognizes himself for 5 minutes for
an opening statement.
And good morning again. I appreciate our witnesses for
being with us today for this important hearing on digital trade
and international data flows and the impact on U.S. industry.
The free transmission of data across borders contributes to a
seamless exchange of information, goods, and services. Digital
trade has been a significant benefit to the U.S. economy,
contributing an estimated 2.4 million new jobs, raising real
U.S. GDP, and exceeding the economic trade value of traditional
goods and services.
Today, we will hear from our witnesses about the current
state of digital economy and its positive impact on U.S.
competition, job creation, and economic growth. I hope that
this hearing will be a jumping off point for a closer
examination of these and other nontariff trade matters in the
months to come.
What is digital trade? It happens in each and every one of
our daily lives when we use our personal laptops, tablets,
smartphones, or when companies work to complete projects for
customers. While this might seem broad and difficult to define,
one of our witnesses today, Mr. Garfield, puts forward a clean
definition: Digital trade is simply an economic activity
involving the movement of digital information across borders.
At the enterprise level, companies might be using services
and applications like cloud computing, data processing, and
predictive analytics. Uses can include processing payroll or
designing products that are easy to manufacture at the highest
quality possible for the lowest price.
Through our work already this year, this committee has
heard from many companies using the power of data flows to
improve public policy goals like improving passenger safety and
mobility, access through self-driving car technology. The
internet, data, and digital trade now support economic growth
in all sectors of the U.S. economy. U.S. industry around the
country, whether in manufacturing, retail, and energy, and
healthcare rely on cross-border data flows to run their
businesses. This technological phenomenon also supports local
businesses and smaller enterprises, including entrepreneurs and
app developers.
According to a study by eBay, over 90 percent of eBay U.S.
businesses trade across borders with more than 80 percent
reaching five or more international markets. These small to
medium-size companies touch all States and congressional
districts.
In my home State of Ohio, the software industry directly
employs over 72,000 people and was responsible for $11 billion
in direct value-added GDP in 2014. In my district, there are
over 38,000 high-tech workers in exports of digital goods and
services totaling over $690 million in 2014.
While these numbers are a few years old, in my visits to
businesses around my district, I have certainly seen the impact
of high-skilled workers in the manufacturing industries.
Despite the many benefits of cross-border data flows, many
trading partners have considered or adopted nontariff barriers,
such as restrictions on cross-border data flows or requirements
to localize data, production, or facilities.
If the internet is characterized by openness, then data
localization and other data flow restrictions create conflict
either intentionally as a protectionist measure or
unintentionally. The witnesses here today can speak about the
data localization measures in force and the potential spread of
additional restrictions. I am very pleased to hear about how
the impact of these policies on businesses in my district are
affected and around the country.
Last year, the European Union and the United States put
into place the EU-U.S. Privacy Shield. And last month, the
European Commission began its first review of the Privacy
Shield. In 1 year, the Privacy Shield has been embraced by over
2,500 U.S. companies of all sizes and business models to allow
for the free flow of data between the EU and the United States.
Finally, there are multiple trade negotiation dialogues
that are expected to set the stage for digital trade and data
flow policy moving forward. Current trade agreements were
written before the advent of the internet as we know it today.
Going forward, there is a tremendous potential for the digital
economy as we consider cross-border data flow policies and
robust enforcement measures.
We are living in an extraordinary time of growth in today's
digitally integrated global economy. The impact of digital
trade and cross-border data flows will reach far and wide, and
I believe Congress can play a significant role in supporting
the people and businesses that depend on the free and open flow
of data. I look forward to hearing from our witnesses today on
this very timely matter.
And at this time, I would like to recognize the ranking
member of the subcommittee, the gentlelady from Illinois, for 5
minutes for an opening statement.
[The prepared statement of Mr. Latta follows:]
Prepared statement of Hon. Robert E. Latta
Good morning. I appreciate our witnesses being here today
for this important hearing on digital trade and international
data flows, and the impact on U.S. industry.
The free transmission of data across borders contributes to
a seamless exchange of information, goods, and services.
Digital trade has been a significant benefit to the U.S.
economy, contributing to an estimated 2.4 million new jobs,
raising real U.S. GDP, and exceeding the economic trade value
of traditional goods and services.
Today we will hear from our witnesses about the current
state of the digital economy and its positive impact on U.S.
competition, job creation, and economic growth. I hope that
this hearing will be a jumping-off point for a closer
examination of these and other non-tariff trade matters in the
months to come.
What is digital trade? It happens in each and every one of
our daily lives-when we use our personal laptops, tablets and
smartphones, or when companies work to complete projects for
customers.
While this might seem broad and difficult to define, one of
our witnesses today, Mr. Garfield, puts forward a clean
definition: ``Digital trade is simply any economic activity
involving the movement of digital information...across
borders.''
At the enterprise level, companies might be using services
and applications like cloud computing, data processing, and
predictive analytics. Uses can include processing payroll or
designing products that are easy to manufacture at the highest
quality possible, for the lowest price.
Through our work already this year, this committee has
heard from many companies using the power of data flows to
improve public policy goals like improving passenger safety and
mobility access through self-driving car technology.
The Internet, data, and digital trade now support economic
growth in all sectors of the U.S. economy. U.S. industry around
the country--whether in manufacturing, retail, energy, and
health care--rely on ``cross-border data flows'' to run their
businesses.
This technological phenomenon also supports local
businesses and smaller enterprises including entrepreneurs and
app developers. According to a study by eBay, over 90 percent
of eBay's U.S. businesses trade across borders, with more than
80 percent reaching five or more international markets.
These small-to-medium sized companies touch all states and
congressional districts. In my home State of Ohio, the software
industry directly employed over 72,000 people, and was
responsible for $11 billion in direct value-added GDP in 2014.
In my district, there were over 38,000 high-tech workers
and exports of digital goods and services totaled over $690
million in 2014. While these numbers are a few years old, in my
visits to businesses around my district, I have certainly seen
the impact of high-skilled workers in the manufacturing
industry.
Despite the many benefits of cross border data flows, many
trading partners have considered or adopted nontariff barriers,
such as restrictions on cross-border data flows or requirements
to localize data, production, or facilities.
If the Internet is characterized by openness, then data
localization and other data flow restrictions create conflict--
either intentionally, as a protectionist measure, or
unintentionally.
The witnesses here today can speak about the data
localization measures in force and the potential spread of
additional restrictions. I am very interested to hear about the
impact of these policies on businesses in my district and
around the country.
Last year the European Union and United States put into
place the EU-U.S. Privacy Shield and last month, the European
Commission began its first review of the Privacy Shield. In one
year, the Privacy Shield has been embraced by over 2,500 U.S.
companies--of all sizes and business models--to allow for the
free flow of data between the EU and the U.S.i
Finally, there are multiple trade negotiations and
dialogues that are expected to set the stage for digital trade
and data flow policy moving forward. Current trade agreements
were written before the advent of the Internet as we know it
today. Going forward, there is tremendous potential for the
digital economy as we consider cross border-data flow policies
and robust enforcement measures.
We are living in an extraordinary time of growth in today's
digitally-integrated global economy. The impact of digital
trade and cross-border data flows will reach far and wide, and
I believe Congress can play a significant role in supporting
the people and businesses that depend on the free and open flow
of data. I look forward to hearing from our witnesses today
about this timely issue.
OPENING STATEMENT OF HON. JANICE D. SCHAKOWSKY, A
REPRESENTATIVE IN CONGRESS FROM THE STATE OF ILLINOIS
Ms. Schakowsky. Thank you, Chairman Latta.
The internet has made our world dramatically more connected
than ever before. It facilitates the exchange of ideas, keeps
families connected, and creates new opportunities for global
commerce. Over 2.3 billion people have access to the internet,
and this is expected to grow to 5 billion by 2020.
Digital commerce comprises a growing share of the global
economy, and, in fact, a McKinsey report claims that, ``soaring
cross-border data flows now generate more economic value than
traditional flows of traded goods.'' Cross-border data flows
allow for quick communication, whether it is a personal message
or a customer order. It also introduces additional risks to
consumers, privacy, and data security.
Global digital commerce has become a necessity in the
United States economy. Although the internet is global, the
rules governing data are not. Differences among countries can
create challenges for businesses and consumers. Countries
should not be dissuaded from protecting their citizens' privacy
and security. But some of the policies we see across the world
today are counterproductive to data security and privacy.
Requiring local servers can create new security risks. The U.S.
should also not empower regimes that monitor or restrict flow
of data as a limit on their citizens' rights to free speech and
expression.
We need to distinguish between policies that truly
represent an unnecessary or harmful barrier to digital trade
and those policies designed to protect privacy and security.
When it comes to data privacy and security, current U.S. law is
lacking. We heard a clear example of that last week when former
Equifax CEO Richard Smith testified in front of our committee.
By failing to patch a known vulnerability, Equifax allowed the
data of 145.5 million Americans to be compromised. I still have
a lot of questions about this breach. Today, my Democratic
colleagues and I are sending a letter to the majority
requesting additional hearings to get answers that Americans
deserve.
The Equifax breach impacted not only Americans, but also
consumers outside the United States. So you can understand if
consumers and governments abroad have their doubts about the
data practices of American companies. This is yet another
reason why we need to act in Congress to improve data security.
And last week, I introduced the Secure and Protect Americans'
Data Act to ensure that companies take sufficient steps to
protect consumers' data and promptly notify law enforcement and
consumers if a data breach occurs and provide meaningful relief
to breach victims.
Digital trade partners are also concerned about U.S.
surveillance practices. Section 702 expires at the end of this
year, and we should take this opportunity to better protect
privacy, while still providing for our Nation's security.
So as we strengthen our own laws, we need to continue
engaging with partners, such as the European Union, on ways to
facilitate cross-border data flows, while ensuring that
consumers here and abroad enjoy the privacy and security they
expect. The United States benefits greatly from digital trade,
and we should work to keep data flowing across borders. That
requires improving our own laws and engaging with other Nations
on how to keep consumers' data and rights protected. I look
forward to hearing from our witnesses and getting our
perspective on this complex issue.
I yield back.
Mr. Latta. Well, thank you very much. The gentlelady yields
back.
And the chairman of the full committee is not here, but the
gentleman from Texas would like to claim his time.
OPENING STATEMENT OF HON. MICHAEL C. BURGESS, A REPRESENTATIVE
IN CONGRESS FROM THE STATE OF TEXAS
Mr. Burgess. Thank you, Mr. Chairman, and thanks for
holding the hearing. Thanks to our witnesses for being with us
this morning.
In 2015, the European Court of Justice invalidated the
United States-European Union Safe Harbor Framework. This
subcommittee held hearings to evaluate the effect that this
would have on trade, the risks to technological advancements,
and the economic impact of this ruling. In the absence of an
agreement, small and medium-sized businesses were certain to
suffer, leading to decreased output and job losses. Almost a
year later, the United States and the European Union approved
the Privacy Shield Framework to replace the Safe Harbor and
allow compliance with European Union data protection
requirements.
Even though the Privacy Shield was approved, the United
States is again facing restrictions that will decrease cross-
border data flows and may even lead to actual data theft or
theft of intellectual property or increased control of
information flows. The free flow of data improves trade
relations. It actually enhances technologies like blockchain
and artificial intelligence that rely on large datasets and
improve security by increasing awareness of foreign activity,
as well as providing redundancy for data through
disaggregation.
In our interconnected world, it is imperative that concerns
over privacy do not become protectionist. I certainly look
forward to what our witnesses have to share with us today about
how to safely and securely continue the advancements afforded
by cross-data border flows.
And, again, Mr. Chairman, thank you for convening this
hearing, and thanks again to our witnesses. And I will yield
back my time.
Mr. Latta. Well, thank you very much. The gentleman yields
back.
And at this time, we will now move to our witnesses. We are
concluding our members' statements. And pursuant to committee
rules, all members will have their opening statements made part
of the record.
And, again, I want to thank our witnesses for being with us
today and taking time to testify before the subcommittee. And
today's witnesses will have the opportunity to give a 5-minute
opening statement, followed by a round of questions from our
members.
Our witness panel today, for today's hearing, will include
Ms. Victoria Espinel, the President and CEO of BSA, The
Software Alliance; Mr. Dean Garfield, President and CEO of
Information Technology Industry Council; Mr. Morgan Reed,
President of ACT--The App Association; and Ms. Jennifer Daskal,
Associate Professor of Law at American University Washington
College of Law.
So I appreciate your being with us today.
And, Ms. Espinel, we will begin with you today. And just
pull that mic up close and just turn the mic on. And we look
forward to your testimony today. Thank you.
STATEMENTS OF VICTORIA A. ESPINEL, PRESIDENT AND CEO, BSA--THE
SOFTWARE ALLIANCE; DEAN C. GARFIELD, PRESIDENT AND CEO,
INFORMATION TECHNOLOGY INDUSTRY COUNCIL; JENNIFER DASKAL,
ASSOCIATE PROFESSOR OF LAW, AMERICAN UNIVERSITY WASHINGTON
COLLEGE OF LAW; AND MORGAN REED, PRESIDENT, ACT--THE APP
ASSOCIATION
STATEMENT OF VICTORIA A. ESPINEL
Ms. Espinel. Thank you so much.
Good morning, Chairman Latta, Ranking Member Schakowsky,
and members of the subcommittee. My name is Victoria Espinel,
and I thank you for the opportunity to testify here today on
behalf of BSA--The Software Alliance.
BSA members provide software-based services that have a
significant positive impact on the U.S. economy and the global
economy. Those services, such as cloud computing, data
analytics, artificial intelligence, depend on the ability to
transfer data freely across borders. As a result, eliminating
barriers to cross-border data flows is an important priority
for BSA and for our members, and I am very pleased that it is a
priority for this committee as well.
When I testified before this committee 2 years ago, the
U.S.-EU Safe Harbor agreement had just been invalidated by the
European Court of Justice. The Safe Harbor agreement was a
critical mechanism that allowed data to move back and forth
between the United States and Europe, and, without it,
transatlantic digital trade and the growth and job creation
that go with it, on both sides of the Atlantic, would have been
in jeopardy.
The bipartisan letter that was signed by the chairman and
ranking member of the full committee and the subcommittee, and
many other members of the committee, instilled much-needed
confidence into the process, and the United States and the
European Union were able to come to a conclusion of a new
agreement, which has been called the Privacy Shield. And I
thank the members of the committee for your leadership at that
time. But I thank you as well for keeping continued focus on
this issue, because we are continuing to see concerns around
the world.
Our economy today is rooted in digital data. Across every
industry sector cloud computing and data analysis have made
businesses more agile, more responsive to their customer needs,
and more competitive around the world. And all of these
technologies depend on the ability to move data across borders.
So as an example, human resources is an important element
of every company that exists. If you are a company that has
employees across the United States, but also employees around
the world, if you lack the ability to transfer that data about
your employees back and forth, it will make it, among other
things, much harder and much slower to hire and much harder and
much slower to be able to reward your employees as you should.
For U.S.-based companies, that also means that they will have
less jobs in the United States because they will have to source
and resource those functions overseas.
In cancer treatments, we are seeing great advances in
artificial intelligence, allowing doctors to be able to make
diagnoses more quickly and more accurately. And that is very
dependent on the ability for doctors to be able to access as
much data as possible about patients around the world.
In manufacturing, data around the world are allowing
manufacturers to be much more responsive to their customer
needs more quickly. And for small manufacturers in particular,
that feedback loop to be able to get information from their
customers and then be able to redesign their products to be
more responsive to their customer needs is extremely important.
And what makes all of those examples work is the ability
for data to move across borders. This is about real jobs and
economic growth in the United States.
Last month, software.org, the BSA Foundation, released a
study that we conducted with data from the Economist
Intelligence Unit that shows that the software industry alone
supports over 10 million jobs in the United States and
significant jobs in every one of the 50 states of the United
States. For example, since 2014, the number of software jobs
has increased by nearly 10 percent in Ohio and by 14.4 percent
in Illinois. Nationwide, softwares contributed $1.14 trillion
to the U.S. GDP and has grown at three times the speed of the
overall economy.
U.S. leadership on digital trade will help ensure that this
growth continues. We see three clear opportunities for Congress
and the administration to act.
The first is to modernize the digital trade agenda. And, at
the moment, NAFTA presents an opportunity for us to do that.
When NAFTA was negotiated, the commercial internet essentially
did not exist, digital trade was in its infancy, and, as a
result, the agreement, understandably, does not address digital
issues. So there is a clear opportunity. We were encouraged to
see that the administration included digital trade and cross-
border data flows in this negotiating the objectives. And we
are very pleased that Congress has also included those in the
objectives that they have set out for the administration to
meet.
Second, ensure the continued success of the Privacy Shield.
I alluded a moment ago to this committee's important role and
the conclusion of the Privacy Shield. The Privacy Shield just
had, last month, its first review. There are 2,500 companies
that have already certified under it, as the chairman noted.
And continuing to impart to both the U.S. administration and to
the Europeans the importance of the Privacy Shield continuing
is extremely important.
And the third thing I would suggest is to continue to
encourage like-minded trading partners to promote rules that
support the movement of data across borders, whether that is in
formal trade negotiations or outside of formal trade
negotiations. The U.S. is the leader in the technology that
drives economic growth and depends on the ability for data to
move across borders. We need the United States Government to
also show leadership on this issue if we are to remain dominant
in this area. And we know that if we do not, there are other
countries that would be happy to move into that position.
So, with that, I will conclude my remarks. And thank you
very much for continuing to focus on this issue.
[The prepared statement of Ms. Espinel follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Latta. Well, thank you very much for your testimony.
And, Mr. Garfield, you are recognized for 5 minutes. Thank
you.
STATEMENT OF DEAN C. GARFIELD
Mr. Garfield. Thank you, Chairman Latta, Ranking Member
Schakowsky, members of the committee. On behalf of 62 of the
world's most dynamic and innovative companies, as well as my
colleagues at ITI, I thank you for the opportunity to present
at this hearing and for your efforts to spotlight this
important issue.
This hearing arrives at an opportune time. We submitted my
testimony for the record. So rather than repeat it, what I will
do is highlight three things. One, why this issue is so
important. Two, our sense of the state of play. And then,
three, where we see gaps where your efforts in American
leadership could be particularly valuable.
On the first, this issue is so important because, in many
respects, digital trade and cross-border data flows are the air
that sustains 21st century commerce. Moreover, the United
States has a comparative advantage that will be unfairly
undermined without vigilance and our intervention.
It is hard to think of anything that we do today that
doesn't involve cross-border data flows in digital trade. Just
my day today reflects that. When I got up this morning, I
decided to go on a run and to download some music. Because the
cloud servers that Ms. Espinel mentioned, and content-
distribution networks are distributed all around the world, the
music that I downloaded resulted in cross-border data flows.
When I got in my car and drove here, and stopped at the grocery
store, my car, the farming equipment for the food that I
bought, as well as the delivery truck, have sensors to ensure
safety that involve cross-border data flows and digital trade.
I flew back from California yesterday. And while I was on my
flight, my airplane has sensors that are making sure that the
flight gets there safely, and if there is a problem when we get
to the ground, that the ground crew is prepared to deal with
any problems that may exist. Cross-border data flows, digital
trade.
I could go on and on, but I think you get the point. While
cross-border data flows and digital trade involve technology,
it is not a technology issue. It is an all-of-America economic
issue. In fact, America has a significant economic comparative
advantage in digital trade and cross-border data flows. Ms.
Espinel mentioned cloud servers. Seventeen of the top 20 cloud
companies in the world are based here in the United States.
What is the state of play? Most countries around the world
see that comparative advantage and are unwilling to sit by and
watch it continue to exist. In China, for example, we face a
tapestry of rules that are aimed at undermining that
comparative advantage, whether it is forced localization or
check and IP transfer, source code transfers, we see that
catching fire. So markets like Indonesia and Vietnam are doing
the same.
In other markets, including in some of our allies like
Europe, we see some of the same. While the motivation may be
quite distinct, the end result is the same, which is
undermining the competitive advantage and comparative advantage
of U.S. companies, and, from our perspective, doing damage to
their own economy.
What can Congress do about it and what should it do? I
endorse all of the things that Victoria mentioned, and would
add two more. One is that Congress, in passing the bipartisan
Trade Prioritization and Accountability Act, TPA, made the
point that digital trade should be a point of emphasis. While
we have a number of trade agreements that are progressing
today, where the opportunity exists to advance digital trade,
whether that is in NAFTA, which we strongly support and hope
the administration will as well, or in the efforts around the
KORUS Agreement, and upgrading that agreement as well, which we
also view as incredibly important, the opportunity exists to
make sure that we continue to advance our competitive advantage
in American interests in a way that is fair.
The second is that acting in America's interests means, in
this instance, working with the rest of the world. And so,
second, we have an opportunity here to provide global
leadership on what the rules of the road should be on digital
trade and cross-border data flows. The President has announced
that he is heading to China in November. That is an opportunity
to work with the Chinese to bring them onboard to following
global rules around digital trade.
We are hopeful that in working with Congress and working
with the administration, we can ensure that this issue, which
is so fundamental to America's leadership in the world, is
prioritized but also acted on appropriately.
Thank you for the time.
[The prepared statement of Mr. Garfield follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Latta. Thank you very much for your testimony.
And, Ms. Daskal, you are recognized for 5 minutes. Thanks
again.
STATEMENT OF JENNIFER DASKAL
Ms. Daskal. Thank you. Chairman, ranking member, and
members of the committee, thank you for inviting me to testify
here today.
The free movement of data, as we have heard, is critical to
economic growth, has benefits for data security, and promotes
privacy, speech, and associational rights. Yet increasingly,
states are adopting a range of measures that restrict data
flows to the United States and elsewhere and adopting costly
data localization requirements pursuant to which companies must
store data locally.
Many of these restrictions are directed specifically at the
United States or adopted in direct response to concerns about
U.S. policies and market power. The motivating factors are
multiple, including fears about the scope of U.S.-foreign
intelligence surveillance, concerns about the adequacy of U.S.
consumer privacy protections, a desire by foreign governments
to ensure access to data that they seek for law enforcement
investigations, and sheer protectionism.
There is, as a result, no single, all-encompassing
solution. But there are also, nonetheless, important steps that
the United States can and should take to address some of these
motivating factors and promote a free and open internet.
Specifically, I identify four key areas for reform.
First, improvements to key foreign intelligence
surveillance rules so as to better promote both privacy and the
free flow of data, while also continuing to protect national
security. Second, the adoption of enhanced consumer privacy
protections. Third, reforms to U.S. law to better facilitate
law enforcement access to data across border, consistent with
baseline substantive and procedural protections. And, fourth,
the use of trade policy has been discussed already to preclude
data localization mandates and impose penalties on those who
engage in digital protectionism.
In my written testimony, I go into detail in all of these
areas. But given my limited time here, I am going to focus on
two: surveillance policy and law enforcement access to data
across border.
As we have already heard, in 2015, the European Court of
Justice sent shockwaves to the business community by striking
down the then-in-place Safe Harbor Framework given, primarily,
concerns about U.S. foreign intelligence surveillance. The
Framework had been relied on by close to 5,000 companies to
support the transfer of data from the EU to the United States.
The Safe Harbor Framework, as we have also heard, has now
been replaced by Privacy Shield, which just underwent its first
review. But both Privacy Shield, and an alternative basis for
allowing such transfers of data from the EU, what is known as
standard contractual clauses, are now subject to legal
challenge. And, in fact, just 2 weeks ago, the Irish High Court
referred one of those challenges back up to the European Court
of Justice based on ``well-founded'' concerns about the scope
of U.S. surveillance and accountability mechanisms. If these
bases for transferring data from the EU to the United States
are struck down, it would be devastating to the free flow of
data and to United States' businesses.
There are, however, reforms that Congress can and should
push that would help respond to these concerns. In fact, the
House Judiciary Committee's USA Liberty Act, introduced earlier
this week, includes several such important reforms.
Importantly, it codifies an already implemented restriction on
so-called about communications pursuant to which communications
that are about a foreign target and not just to or from the
foreign target can be acquired. This kind of about collection
yields large quantities of incidental collection on those that
wouldn't be otherwise legitimate targets and is, thus, a source
of concern.
The bill also sets up new transparency and accountability
mechanisms, and, importantly, it includes improvements to the
Privacy and Civil Liberties Oversight Board, which would allow
it to better function. This board plays an important role in
overseeing surveillance, policies, and, importantly, from a
European perspective, reviewing complaints made by EU citizens
regarding U.S. national security surveillance. It is now down
to one member, so it can't currently function. So Congress also
should push the administration to move forward the other four
nominees needed to fill this board.
Secondly, Congress should also respond to the legitimate
concerns of foreign law enforcement officers that find
themselves subject to lengthy delays in accessing emails and
other communication content of their own nationals in the
investigation of local crime based simply on the fact that some
of the data is U.S. held. Notably, the Obama administration,
and again the Trump administration, have sent up legislation to
Congress that would ease some of those restrictions and
facilitate access to cross-border data for law enforcement
investigations, subject to important baseline substantive and
procedural protections. This is something that should be
supported.
Collectively, these reforms are important to help ensure
the free flow of data, to promote the U.S. in the global
economy, and to protect data security and data privacy.
Thank you.
[The prepared statement of Ms. Daskal follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Latta. Well, thank you very much for your testimony.
And, Mr. Reed, you are recognized for 5 minutes.
Thank you.
STATEMENT OF MORGAN REED
Mr. Reed. Thank you.
Chairman Latta, Ranking Member Schakowsky, and
distinguished members of the committee, my name is Morgan Reed,
and I serve as the president of The App Association, which
represents 5,000 small business app makers and connected-device
companies across the globe. Our members leverage the
connectivity of devices from cars, to phones, to refrigerators,
to produce innovation that enhances our lives.
The app ecosystem is now valued at roughly $143 billion and
represents the front end for $8 trillion of international
trade. Impressively, the big numbers produced by this powerful
engine are actually driven by small businesses. Our members
range from one-person shops with a few hundred people at the
most. Yet virtually all of our members are global businesses
with customers and users around the world. And small business
in America is busy creating 64 percent of new private sector
jobs.
The United States leads in world digital innovation. Why?
Because American companies are at the forefront of using data
to improve the lives of our customers. With over 7 million tech
sector jobs, as you have heard from all of us on this panel,
and a growth rate of 3 percent, the policy environment of the
U.S. has produced successful tech industry, and countries all
over the world are working to expand their tech sectors as
well.
We must take steps to ensure continued job growth in the
industry, and we see three key barriers. Nontariff digital
trade barriers result from domestic policies rooted in privacy,
some that require data localization; conflicts between U.S. law
enforcement agencies' access to data stored overseas, which can
and should be addressed with the passage of the International
Communications Privacy Act, or ICPA. And I want to recognize
Vice Chairman Harper as one of the cosponsors of that bill as
well as full committee Chairman Walden, who is not here. And I
want to thank you for your support on that important bill. We
are looking to get Chairman Latta to support it as well.
And then, finally, any actions that weaken IP protections
either through arbitrary enforcement of the law or through
domestic sourcing preferences.
Everyone in the room understands the way data is a key
aspect of how we use and benefit from the internet. We heard
about the billions of dollars flowing across the border in
terms of general commerce. But I would like to discuss some
aspects of cross-border data that you might not have
considered.
The future of medicine is in data that helps doctors make
the right decisions. Think of it this way. You go to a
physician, and a successful physician might have seen 25,000
patients by the time that they see you. But they have only seen
about 500 with your genotype, age, gender, comorbidity, racial
history, et cetera, et cetera. Now, imagine that the doctor can
use data to know that, for example, a woman of Irish descent
responds better to one medication and South Asian males under
the age of 30 respond better to another. But we can only
provide that kind of leap forward if we have data, including
global data, about treatment and effectiveness.
And this isn't a pipe dream. In your district, Congressman
Harper, the University of Mississippi Medical Center is relying
on remote patient monitoring and digital data collection to
provide tens of thousands of underserved in the state, and they
rely entirely on technologies developed by our members and
platforms.
Chairman Latta, in your district you have NAMSA, a leading
medical research organization, and they rely on the Privacy
Shield to interact with data from researchers around the world.
And an issue that I know Congresswoman Dingell knows well,
the next advances in car safety technology will rely on access
to data. Self-driving cars will run on data to tell the
difference between a tree and a bicycle. And yet if we have
foreign governments or our own government interfering with that
cross-border data flow, we will block that key resource, which
will harm our ability to save lives.
And it isn't all about life saving. Sometimes we just do it
to make our lives easier. In Congressman Schakowsky's district,
we have Paylocity, which helps manage software on the web for
international clients to handle HR, payroll, and more.
Congressman Guthrie, in your district we have Hitcents,
which is an innovative mobile apps and games company. And yet
they are a global player with global customers.
Congresswoman Clarke, we have got Brooklyn Software Dev
that does web development applications and mobile applications.
Again, it is a global company in your district with five
people.
Congresswoman Matsui, you have got Health Rescue in your
district. They are looking to expand internationally, and yet
worries about cross-border data flow are harming their ability
to get bigger, stronger, and do a better job for their
patients.
In order to keep all of this going, we need Congress to
act, and we need them to focus on the three key elements that
you have heard from all of us today. We need to resolve the
questions about law enforcement access. We need to resolve the
questions about how we deal with intentional or other digital
barriers to trade that serve as protectionists. And then,
finally, we need to remember that my members' most valuable
resource is often the intellectual property that is the engine
behind their products.
I look forward to your questions, and thank you very much
for this hearing.
[The prepared statement of Mr. Reed follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Latta. Well, thank you very much. And as the gentlelady
from California said to me, you did your homework on us. Thank
you very much for your testimony today.
And, Mr. Garfield, if I could start my questions with you.
How do the restrictions on cross-border data flows not only
impact industries like yours in the technology sector but
others like manufacturing, retail, energy, and healthcare?
Mr. Garfield. Thank you for the question. As all of the
witnesses have shared, cross-border data flows, digital trade,
is a broad economic issue. And so whether you are in farming or
pharmaceuticals, you rely on cross-border data flows for your
companies to function.
Moreover, it is no longer a big company versus small
company issue. As Mr. Reed pointed out, there are small
companies in all of your districts that rely on this. And so it
is, in fact, in our economic interest to make sure that there
aren't restrictions that limit the growth of those companies.
Mr. Latta. Thank you.
Ms. Espinel, can you discuss how big data cloud computing,
artificial intelligence, and other emerging technologies like
blockchain are changing how business is done, and why cross-
border data flows are important for these disruptive
technologies and future innovation?
Ms. Espinel. I would be happy to. So artificial
intelligence, by its nature, typically demands large amounts of
data in order to learn from that data and help whoever is using
it, whether it is a doctor or a farmer or a manufacturer, be
able to make better decisions based on that data. Artificial
intelligence, in most circumstances, doesn't really work unless
there is a large amount of data. And if you are trying to
discern patterns or the best outcome, having as much data from
as many places in the world is very helpful. And I will give a
specific example of that.
But first you mentioned data analytics. Data analytics is
often a little bit like looking for a needle in a haystack. So
you have, typically, very large, unstructured datasets. And
what data analytics is letting you do is discern meaningful
patterns that will then, again, help you make better decisions
that would be virtually impossible, or literally impossible,
for human beings to do on their own. But artificial
intelligence, data analytics, are two examples of things that
really don't work, unless you have very large amounts of data
and the computing power to be able to process and analyze it
coming from various places around the world.
To make that a little bit more concrete, I would turn to
agriculture as one of the many, many, many examples of sectors
that are using it. So many farms now have sensors in the soil.
Those sensors, among other things, are determining the levels
of moisture that are in the soils. And farmers can take the
data that they are getting from the sensors that they are
planting in their own farms and they can compare it to
historical weather patterns around the world. And they can then
use that to make decisions about when is the best time to
plant, how best to irrigate, when is the best time to harvest.
Their ability to do that is totally dependent on the ability to
gather historical data on weather patterns across the world. It
doesn't work, it doesn't give them the same advantage, unless
they have the ability to do that.
I will mention one other example, which I think is very
much on people's minds today, which is cybersecurity.
Cybersecurity and companies' ability to be able to protect
themselves from threats is--I am trying not to be overly
superlative because that is not in my nature. But it is
incredibly enhanced, shall we say, by the ability to be able to
detect patterns of threat that are moving around the world in
realtime. And you cannot do that unless you have access to the
data from around the world.
It also allows companies internally to be able to look at
their network analytics and how they are using technology
inside their own companies, and then, again, compare that to
threat data that they are collecting from around the world.
That is, again, quite literally not possible, unless you have
the ability to collect data from around the world and to do it
in realtime, which means you need to be able to do it with as
little friction as possible.
I think myself and every member of this panel could give
you examples in manufacturing and agriculture and healthcare
and financial services. So I will yield back my time to others
if they want to. But the examples are plentiful. And I think
what is really exciting is that, as plentiful as they are, we
are also clearly at the beginning of what is possible. We talk
a lot about data revolution and how that is transforming
business and transforming the economy. But we sometimes forget
that that itself is very nascent, and I think the advances that
we are going to see over the next 5, 10, 20 years are going to
dwarf the advances that we have already seen so far, as long as
the ability to transfer data across borders remains.
Mr. Latta. Thank you.
Mr. Reed, in my remaining time, again, you pointed out a
lot of the small businesses that you represent. And one of the
other major concerns for the small business is small, medium
enterprises that do not have the resources to localize this
data production or facilities in a country abroad. How do they
go about it?
Mr. Reed. Well, I think as you have heard from all of us,
the revolution of data often is primarily aided by the concept
of cloud computing. We all know that the term ``cloud
computing'' is a bit of a marketing term, but the idea that
data can be anywhere and everywhere all at the same time is
absolutely critical to a small business.
So data localization laws that go into effect in other
parts of the world, which limit two aspects: One is data
localization laws that say any data collected on a citizen of
that country must be on a server and only be on a server in
that country. That is terrible. It is almost impossible to grow
in that kind of an environment as an American company.
And the second is one that you have heard all of us talk
about, is the future of what this can do to improve lives. Now,
imagine that I can't take that data out or I can't use it. I
can't bring it back to the United States to analyze it. I have
to set up a whole series of different cybersecurity mechanisms
based on the state or national laws in those other countries.
And all of a sudden, if I am a small business, and I am looking
in my pocketbook and thinking, do I hire a developer to work on
a product here in the states or do I roll the dice and spend a
fortune to do something in a country where I don't speak the
language, I no longer can depend on the cloud, and I no longer
have the resources in place to grow, then they are going to opt
out of that global opportunity. And when they opt out of the
global opportunity, they opt out of creating more jobs here
domestically.
Mr. Latta. Well, thank you very much. And my time has
expired.
And I would like to recognize the gentlelady from
California for 5 minutes.
Ms. Matsui. Thank you very much, Mr. Chairman. And thank
you very much for calling this very important hearing today.
And I want to thank the witnesses for joining us today. This
has been a very interesting discussion.
Dr. Daskal, it is clear that while many data flow policies
across the world are blatantly protectionist, countries also
have real privacy issues to address. How can we distinguish
between policies that are purely protectionist and those that
address a legitimate need.?
Ms. Daskal. So thank you, and thank you for the question.
As I said in my testimony, I think that the factors
motivating data localization are multiple, and it is not always
possible to parse out what is the motivating factor. And it
highlights, I think, the need to work on the various different
areas that identify both dealing with trade policy and concerns
about the digital efforts to be protectionist.
At the same time, there are a number of data localization
mandates and data localization rules that derive from concerns
about U.S. privacy protections, both consumer privacy
protections and also concerns about the scope of U.S.-foreign
intelligence surveillance. And addressing those, I think, is
also critical, particularly with respect to preserving the flow
of data from the EU to the United States.
As we have talked about, the Safe Harbor Framework that was
in place was struck down primarily because of concerns about
the scope of foreign intelligence surveillance. And there are
now a number of court cases, including one that was just
referred back to the European Court of Justice, that raises
those same set of concerns based on a record and a finding by
the Irish High Court that said we have a lot of concerns about
the scope of U.S.-borne intelligence surveillance and the
sufficiency of remedies for EU citizens whose data is
collected.
Ms. Matsui. OK. Mr. Garfield, in your testimony, you say
that even when governments have the right motivations, like
protecting public safety and privacy, they often pursue the
wrong policies that result in data flow barriers. What do you
see as the right privacy and public safety policies that will
not impede data flows?
Mr. Garfield. I think a part of what is needed here is
actually U.S. leadership in bringing the world along in
developing definitions. And so I could sit here today and give
you my sense of what the appropriate data security or privacy
regime should look like. But I think the U.S. has an
opportunity to build on the Privacy Shield in a way that is
globally necessary and encouraging. And so that is what I would
actually encourage.
Ms. Matsui. OK.
Mr. Garfield. It is bilateral in the sense that it is with
the EU and all of the countries of the EU. But we have an
opportunity to build upon that with the rest of the world. And
the way that data moves today, it is absolutely necessary to do
that on a global basis.
Ms. Matsui. All right. OK.
Just yesterday, the President suggested he could support
breaking up NAFTA into separate, bilateral trade agreements.
Dr. Daskal, do you think breaking up NAFTA or other
multilateral agreements will have any impact on our efforts to
ensure the global-free flow of data? If so, how?
Ms. Daskal. So I would be concerned about an effort to
break up NAFTA. I think we have heard from other panelists the
importance of NAFTA and the importance of using NAFTA as an
opportunity to promote a digital-free trade agenda. And I hope
that the administration follows the recommendations of all of
those who support that quite strongly.
Ms. Matsui. OK. And I have been very concerned about the
forced transfer of technology as a condition for foreign market
access, especially as it pertains to encryption and
intellectual property. Can any of our witnesses provide
examples of these forced transfers? And do you have any
suggestions of how we might address this issue? Any of you?
All of you can comment.
Ms. Espinel. So, yes, I think there are specific countries
around the world where we have seen either our members not be
able to access the market or have their access severely
limited. And among those are Russia, Indonesia, Brazil, China,
Vietnam. Mr. Garfield noted many of these as well. And we have
concerns that the litigation that Ms. Daskal and I believe
other of the panelists have referred to several times, the
litigation that is happening right now in the European Union,
is also going to end up limiting data flows between the United
States and Europe. So this is a live issue in many parts of the
world.
I think in terms of what can be done, a part of that is
Congress continuing to encourage the administration to tackle
this issue head-on. I do think, at least in our interactions
with the Department of Commerce and with USTR, they realize how
important digital trade is to the United States and to the
global economy, but it is not an easy issue. So I think
continuing to make clear to them that this is also a priority
issue for this committee is very important.
We live in a world right now where we don't have any
international consensus on what the right set of rules would
be. You have heard many of us talk about NAFTA. A big part of
the reason that we are interested in NAFTA is because it gives
an opportunity to start setting that precedent, and that is
really where we need to go to collectively. We need to have, at
least among the major economies, an international consensus on
what the right sets of rules around free movement of data
should be. And that does not exist right now.
Mr. Garfield. If I may just suggest one recent report. The
Information Technology and Innovation Foundation is doing an
annual report on cross-border data flows and the limitations to
that. In that report, they identified 37 countries that now
have these principles in place or limitations in place. And so
we can make that report available for the committee as well.
Ms. Matsui. OK. Well, thank you very much.
And Mr. Chairman has been very generous with me. So I need
to yield back. Thank you.
Mr. Latta. Well, thank you very much. The gentlelady yields
back.
The chair now recognizes the gentleman from Mississippi,
the vice chairman of the subcommittee, for 5 minutes.
Mr. Harper. Thank you, Mr. Chairman. And thanks to each of
you for being here.
It is mind boggling when you think of where we are today
and with the opportunities that we have. And think back 10
years ago, I don't know that we could have envisioned we would
be on the--with such opportunities. And the challenges really
are opportunities for us.
And so I want to thank you each. You bring so much
expertise to the table to help us as we go forward to make sure
that we do things that do improve people's lives, that we do
things that don't block that cross-border flow. And we want to
make sure that we get it right. And, certainly, there are those
opportunities we are going to grasp and go forward.
So, Ms. Espinel, you mentioned in your testimony that you
indicated how digital trade can improve lives. Explain to me
how that works. When I go back to my home State of Mississippi,
what should I tell them?
Ms. Espinel. So I think Mississippi, as we have already
heard today, is a leader in healthcare and in personalized
healthcare. And I think that is an area that is well worth
emphasizing. So I am going to tell a story that is a little bit
personal to me because it is borne out from my personal
experience, actually in a couple of areas, where artificial
intelligence and the ability to assess data from around the
world is making an impact.
The first I will start with is Alzheimer's. So my mother
suffers from Alzheimer's. Researchers in the United States and
Japan and Europe are now working together using technology
developed by IBM Watson to use the medical patterns of
Alzheimer's patients from around the world to hopefully be able
to find, if not a treatment to Alzheimer's, increase risk
factors for Alzheimer's. And that is an issue that is personal
to my family. I know it is an issue to many families around the
world. I think anything we can do to advance there is well
worth it. And, again, that is an area where it is, if you are
restricted to your ability to use data from a specific
population set, that is going to make it much, much slower to
be able to see the kind of advances that we would like.
Another example that also resonates with me because of my
own personal experience relates to doctors in Canada. So
doctors in Canada started monitoring newborn babies,
prematurely newborn babies for signs of risk. And one of the
things that they found is that right before a premature baby
has a crash, goes into a serious risk incident, their vital
signs stabilize, which is actually sort of intuitively very
strange, right. So, in fact, the medical practice up to that
point had been if they saw the vital signs stabilize, they
would lessen the monitoring of that particular baby because the
assumption was that the baby was going into recovery. What they
actually found using cross-border data flows and data
analytics, was that, in fact, that is a risk factor for a baby
going into crisis. And that has completely changed the
treatment and the monitoring of premature babies that are in
the NICU and has saved lives.
As a mother who, happily for me, very briefly had a child
in the NICU, that is an example that resonates----
Mr. Harper. Sure.
Ms. Espinel [continuing]. With me very strongly. But it is
another example of an advance that would have been literally
impossible without the ability for doctors to be able to
compare datasets from around the world.
Mr. Harper. That is great.
Ms. Espinel. So Mississippi is a leader in healthcare.
There are so many great examples there, and I think anything
that we can do to try to keep the data within--while respecting
privacy, to keep medical data flowing around the world to try
to help researchers and doctors treat their patients is
tremendous.
Mr. Harper. Thank you very much.
Mr. Reed, we discussed a few moments before the hearing
began, you know, University of Mississippi Medical Center
selected last week as a Telehealth Center of Excellence. And
that just didn't happen because they went around to pick that.
Tell us how following up on that has helped.
Mr. Reed. The reality is for University of Mississippi
Medical Center, and I think there is something important. The
ability to save lives is a critical aspect of this. But also,
let's not undervalue the fact that the University of
Mississippi is also looking for the students that are coming
out of there, and the school itself, to create jobs, to create
opportunities, and to break the place that they are now and
find something that they can do. They can hire 10 people, 20
people, 30 people. And you start to look at the fact that, from
UMMC, when they are looking to do spinoffs and those students
are looking to build the next product that comes out of there,
they are going to rely on data from all across the world to
find that next solution. The example I gave you, if I have got
to figure out what drug works better on this group of people
versus this group of people, then I need the data to do so.
And so it is important that we find a way to solve the
health problems that we have raised, but let's not undervalue
the fact that part of what we are also doing is looking to
promote entrepreneurship. And entrepreneurship comes from
information. All of us in the business case, we talk about
asymmetry, information asymmetry. We lose out when we have with
information asymmetry. The more information they have, the
better the product they can make, the more jobs that they can
build. And I think we should remember that part of this is
using data to spur entrepreneurship as well as life saving.
Mr. Harper. Great. Thank you, Mr. Reed.
My time has expired, Mr. Chairman.
Mr. Latta. Well, thank you.
The chair recognizes the gentleman from Vermont for 5
minutes.
Mr. Welch. Thank you very much. I thank the panel of
witnesses. We are on pretty good bipartisan terms here. And the
reason is because what we are talking about, the data flow, is
so important to the economy, independent of where you are from
or even what your enterprise is.
And the two issues that I guess I want to ask about are,
number one, what are some of the issues we have to deal with
with respect to European actions that are intended either to
protect privacy as they see it, somewhat different than ours,
and the collateral consequences of the Snowden incident? And,
number two, some of the anticompetitive steps they may take
disguised as privacy steps for their people.
So I will start with you, Ms. Espinel. Can you address
that?
Ms. Espinel. So I will mention at least two things. One is
there is a regulation called the GDPR that is in the process of
being implemented throughout Europe. And part of what the GDPR
does is puts into place stronger privacy rules.
I will say, based on the experience at least of my
companies, what we have found is, in terms of implementing
that, U.S. companies are often far ahead of where the European
companies are. So I think our companies, and certainly my
members and their commitment to privacy, is unparalleled.
However, I think we do have concerns about some potential
regulations or litigation challenges that are happening in
Europe. So two I will highlight is there is an e-privacy
regulation that is being discussed in Europe right now, and we
do have concerns that that is going to make it very difficult
to operate in Europe, while not actually advancing the cause of
privacy very much. So that is one that I would flag.
The second I would flag is one that we have mentioned a
couple of times on the panel, but I think it bears repeating
because the threat of it is so serious. While the Privacy
Shield is in place, as you know--and we were happy to see the
United States and Europe come to an agreement and conclusion,
and we are happy that it remains in place--the Privacy Shield
is only one of the mechanisms that companies use for moving
data back and forth and around the world. And the other
challenge, there are other mechanisms called standard
contractual clauses that are right now also being challenged in
Europe, as Ms. Daskal referred to. Those have been very
recently referred up to the European Court of Justice.
Potentially, the impact of those being overturned could be even
broader than the impact when the Safe Harbor was revoked. So we
are watching that with great interest. And I think that goes to
the discussion that we need to have collectively between the
United States and Europe about what a long-term solution is.
Mr. Welch. OK. Thank you.
Go ahead, Mr. Reed, and then Ms. Daskal.
Mr. Reed. I think that one of the key elements that is on
the forefront is finding a way to solve the question about law
enforcement access. Right now, the International Communications
Privacy Act, H.R. 3718, is going to be critical. Because we are
staring right in the face of a decision by a court that will
essentially say that U.S. law enforcement can take data from
anywhere, regardless on who it is on, regardless of what
country it is stored on. And while that may be the right
decision, the impact that that will have on our ability to do
cross-border data flow with Europe will be significant. Because
if we say that, then you have to assume that the European
nations are going to say the same thing.
And then, without a comity agreement, without some kind of
ability for companies to adequately provide for the security of
that data, you are facing a world where U.S. companies are
either going to have to obey the law of the United States and
find themselves in violation of laws overseas or violate the
law in the United States to serve their European customers. And
nothing will do as much damage to our positive relationship
with Europe than the idea that I can no longer do business
there without breaking a law in one place instead of the other.
Mr. Welch. Ms. Daskal, I have only got about a minute, a
little less. Thank you.
Ms. Daskal. So I fully agree that the issue of law
enforcement access to data across borders is important. And the
converse of what Mr. Reed was just talking about is foreign
governments' inability to access emails, communications,
content, that happens to be U.S. held, even when they are
investigating a local crime involving a local perpetrator and a
local victim based on kind of outmoded rules from the 1980's
Stored Communications Act.
As I said in my testimony, first the Obama administration,
now again the Trump administration, have sent up legislation to
the Hill that would begin to ease those restrictions. And I
think it is something that Congress should take up to at least
alleviate one of the pressures in favor of data localization.
Mr. Garfield. If I may, very quickly.
All of that is absolutely correct, but we are in an
untenable position if the United States has to continually
change its laws in order to respond to shifting court rules and
dynamic in Europe. And so you asked about solutions. I think
what is absolutely necessary here is American leadership in
working with the rest of the world, not just Europe, to come up
with rules of the road in this area. Because in the same way
that the Privacy Shield can now be undermined by Schrems II, it
will be Schrems III and IV a year from now.
Mr. Welch. Yes.
Mr. Garfield. And so that is why our leadership in
developing rules of the road in this area is so critically
important.
Mr. Welch. Thank you. I thank the panel.
Thank you, Mr. Chairman.
Mr. Latta. Thank you very much. The gentleman's time has
expired.
And the chair now recognizes the gentleman from Kentucky
for 5--I am sorry. Mr. Lance is here. I am sorry. The gentleman
from New Jersey for 5 minutes.
Mr. Lance. Thank you very much. Kentucky is a great State,
however, and very beautiful.
I want to thank the panel for joining us today to discuss
this important topic.
The congressional district I serve is heavily involved in
this field. Almost 60,000 constituents are employed in the
high-tech sector. That is nearly 2 1A\1/2\ times greater than
the average in a congressional district which, as I understand
it, is 24,000. It is a driving force in our local economy and
will continue to be as business and society become ever more
reliant on advanced technologies.
Ms. Espinel, can you please explain how the free flow of
data around the world supports emerging technology in machine
learning and algorithms, for example, and the impact it has on
businesses today?
Ms. Espinel. I would be happy to.
So machine learning is one aspect of artificial
intelligence, and algorithms are the parameters or rules that
let all kinds of artificial intelligence work. But artificial
intelligence and the ability to be able to discern patterns and
then help human beings make better decisions doesn't work in
most circumstances unless you have fairly massive amounts of
data. If you are a farmer looking at it trying to understand
what is likely to happen in terms of weather conditions and,
therefore, how you should be planting your fields and when you
should be harvesting, if you are a manufacturer trying to
understand what the consumer demand is around the world, if you
are in cybersecurity and trying to track threats as they move
across the world very rapidly, you can use artificial
intelligence and data analytics to do a much, much better job
of assessing what the outcomes will be in making decisions, but
you can't unless you have large amounts of data to be able to
do the data analytics and the artificial intelligence.
And in all of those areas I just mentioned, having
international data is going to be very important. If you only
have the ability to assess the weather patterns that are
hanging right over the State of New Jersey or even just the
United States, that is going to very much limit your ability to
determine what is actually going to happen in terms of weather.
At the same time, if you are a manufacturer hoping to
expand overseas and you can only get customer feedback from
inside the United States, that is going to limit your ability
to be able to best serve the largest amount of customers that
you want to have. In cybersecurity, if you are limited to
information that is in the United States, it will be virtually
impossible to be able to detect patterns, because they move
around the world so quickly.
So artificial intelligence depends on large amounts of
data. But in many, many areas it also depends on having
datasets that are coming from around the world with as little
friction as possible in order to make them useful.
Mr. Lance. Thank you very much.
Mr. Reed, are there any digital trade issues that are
important to your members, small tech companies, that may be
different from the priorities of larger companies?
Mr. Reed. I think the issue of scale generally ends up
being one of scarce resources. The reality is everyone here at
this table has the same concerns when it comes to cross-border
data flow. But let's consider it from a company in your
district who has got, let's say, 20 employees. When they are
looking at their CapEx expenditure, how much can they spend to
build a data center or to source something overseas? If they
have got 20 employees, I have got to decide do I hire the 21st
employee to deal with a contract I have for a company in New
Jersey or do I try to spend that money to build a data center
overseas?
So our primary issue that you are going to see the
differentiation here is, for the larger companies, it is a cost
but doable. For our folks, it becomes a barrier in which they
cannot pass. And what becomes really disappointing about that
outcome is, oftentimes, our companies are the one that drive
forward the innovation. We get acquired by the big guys. We
look forward to that opportunity to either beat them in the
marketplace or get acquired and build another better product.
So the real differences that you are going to see in this
space are where they say it is a cost, we say we can't go. And
there is where we end up with the more significant painful and,
frankly, anti-innovation damage that is done by trade barriers.
Mr. Lance. Thank you.
Would anyone else on the panel like to comment?
Yes, Mr. Garfield.
Mr. Garfield. Well, I was going to give a concrete example.
So we met with a company 2 weeks ago that is 4,000 people. And
in order to comply with GDPR, they are putting 34 engineers
against it. So GDPR is moving forward for legitimate reasons.
But it speaks to the point that Mr. Reed made which is, for
some companies, they can afford to assign 34 engineers. For
others, they simply can't and so won't operate.
Mr. Lance. Thank you. My time has expired.
Thank you, Mr. Chairman.
Mr. Latta. Thank you very much. The gentleman yields back.
And now the chair recognizes the gentleman from Kentucky
for 5 minutes.
Mr. Guthrie. Too bad he went first. He asked some of my
questions, so I appreciate it very much.
But, no, it has actually been a fascinating panel, and you
have all done such an excellent job. The things that I was
going to ask you, really--I was going to talk about NAFTA. I
wasn't going to say Mississippi. I was going to say Kentucky.
But the same question that seems to be the same kind of answer,
so I appreciate it.
I guess it is probably about 20 years now, but it was twin
brothers who were in high school when they founded Hintcents,
and they now have a very successful company, doing business in
Bowling Green, so it is a great, great business.
I guess the one thing, there was a European Centre for
International Political Economy that examined the consequences
of GDP in countries that have cross-border restrictions, and
under the sum of it is for safety and security, or there are a
few of what is private. But in doing it for economics it says
it decreases GDP in these countries that have these cross-
border restrictions. So why would these countries do that?
Ms. Espinel. So I would certainly argue that it is not in
the long-term economic interest of countries to put in data
localization policies, although I can imagine that some may
view it as being at least in their short-term economic interest
because of a view that, if it is harder for U.S. companies to
be operating inside of their borders, it will allow them to
boost their domestic industry. I think longterm, that is not
going to be the case. And I think it also is a real harm to
their companies.
One of the things we have been talking about here, but I
want to emphasize the point is, some of us are larger tech
companies, some of us are smaller tech companies. What is
really important here, I think, is the customers of our
companies. And the customers of our companies are in every
industry sector that exists. And that is true in the United
States. That is true overseas as well.
So when governments put data localization policies in
place, not only are they, in my view, hurting their own long-
term economic interests in terms of building their tech
industry, they are hurting the immediate economic interests of
companies across their healthcare and manufacturing,
transportation, other sectors, because they are denying them
access to the latest innovation.
Mr. Garfield. The other thing is that businesses are so
integrated today, both large and small, domestic and
international; we represent companies all over the world. And
they are codependent. And so when you put these rules in place,
you do damage to your local businesses and customers.
Mr. Guthrie. We do a lot of stuff here when the States are
doing, in the Commerce Clause, we have to kind of look at our
role.
So I am going to go off the topic a minute; it is why you
are here, Mr. Garfield. I met this morning with Secretary
Acosta, Labor Secretary. Everywhere I go, people are talking
about jobs, the right skills, the right skills for jobs. People
are hiring, but people don't have the skills to move forward.
And I am of a manufacturing background, so a lot of repetitive
work has gone to automation. And some of your companies are
involved in that, obviously. But as it goes to automation, the
requirement to have somebody to be able to maintain that
automation has raised, instead of being a $14, $15 person to
the $25, $30, $35 person an hour.
So your member companies are kind of driving this. What
things are you guys doing----
Mr. Garfield. Yes.
Mr. Guthrie [continuing]. To help develop the workforce?
And what can Congress do to help, is the question?
Mr. Garfield. It is completely on topic. I think one of the
things you can do is what you are doing right now. So one of
the examples you mentioned, I think banking, which is when ATMs
came into the marketplace, most people assumed that there would
be fewer people needed in banks. Well, the opposite is true. We
have more ATMs around the world, but we have more people
working in banks because there are more bank branches.
Part of the disconnect, there are 6 million open jobs in
the country today and about 7 million people looking for work,
that the challenge is that the skills of the people looking to
work don't always match up with the jobs that exist. And so one
of the things that we are putting a lot of energy behind,
actually collectively, is making sure that we are reskilling
the workforce such that those skills do align.
I think where Congress can help is by putting resources
behind those efforts, but making sure that they are well
coordinated so that there is closer connection between the
private sector and the public sector. The job training programs
should be rooted in the needs of the world today, not the needs
of the world 20 years ago.
Mr. Guthrie. Yes. It is also localized. I am on another
committee that did the Workforce Investment and Innovation Act,
WIOA, whatever they all stand for. And one of our main premises
of changing it was make sure there was a business majority on
the local boards and it is localized, because even though it is
a global economy, there are certain things that happen in
certain--people--they are clusters, and people become experts
in their clusters.
Ms. Espinel. And if could just add to that briefly. I think
the issue of reskilling and making sure that young people and
people on their career paths have the skills that we need is a
very important one, and I would echo everything that Dean just
said. I think we also need to do a better job in terms of
matching. So where people do have the skills and there is
employee demand for those, making sure that the employees that
have those needs are in touch with the people that have those
skills. And I know there are training programs now that are
being very intentional about making sure that, once you go
through the training programs, there is also a clear path into
a company that has a job. I think that is a very important part
that we need to make sure is infused throughout our training
programs to the extent possible.
I think this is a great area, though, for the industry,
which is very focused on this and for Congress to be working
together.
Mr. Reed. I know we are out of time, but I think one of the
issues that I want to differentiate a little bit from what we
just discussed is, even though we are the software industry and
we know what the salary is, I come from a background of working
with machinery as well. And one of the things that is
fascinating to me is not everybody needs to be a programmer. If
you were in the manufacturing side of the world. Well, you know
what a toolmaker is, you know what a patternmaker is. The same
skill set that required you to be good with a file and good
doing patternmaking, you transfer that same knowledge of a
three-dimensional shape to a CAD program.
So when somebody says, well, I am a patternmaker, I don't
know how to live in this precision manufacturing world, my
sense is that is a failure on us, because the skill set, the
idea, how does this fit together, where does this fit in the
machinery, how do I make a better widget that goes better with
this product, it is exactly the same as holding a file in one
hand and a piece of metal in another or just putting the
keyboard in between. And that, to a certain degree, is
something we need to do to change the language about how we
talk about reskilling and that we look at it from the
standpoint of tools we are making to accomplish the same job
are different, but the outcome is the same.
Mr. Guthrie. Thank you. My time has expired.
Mr. Latta. Well, thank you very much.
And the chair now recognizes the gentlelady from California
for 5 minutes.
Mrs. Walters. Thank you, Mr. Chairman.
Mr. Garfield, you state that data localization is the
primary type of digital trade barrier. Can you describe which
regions or countries have proposed or enacted nontariff
measures like data localization or transfer of data
restrictions?
Mr. Garfield. Yes, certainly. It is actually a long and
growing list, unfortunately, so--there is a recent report from
the Information Technology and Innovation Foundation that
identifies 37 different countries. Their market is certainly
like China, Indonesia, Vietnam, a number of South American
markets that are now doing the same that is highly problematic.
The thing that we have noted is that the motivations may be
distinct in some of those markets. The drivers in Europe, for
example, may be rooted in human rights and constitutional
principles. But the end result is pernicious both for their
local market and for global companies. And so there is a better
approach to achieving the goals they have in mind.
Mrs. Walters. OK. Thanks. And have you recognized patterns
in which certain regions or similarly situated countries
justify nontariff measures based on a particular reasoning? For
example, do you recognize that developing countries justify
these barriers based on protectionism or whether geopolitical
rivals to the U.S. justify their barriers on national security?
Mr. Garfield. I think the pattern that we see most often is
that national security is the preeminent concern that is
identified and articulated. The irony of it all is that
national security is often undermined by localization
requirements, because you are not getting patterns, as Victoria
has pointed out or Mr. Reed has pointed out, from around the
world. You are also closing yourself off from access to the
best technologies that would actually support security.
And so part of this is addressing the legitimate security
concerns while making sure they are not acting in a
protectionist fashion.
Mrs. Walters. OK. The next question is for the entire
panel. The testimony we have received for this hearing makes
clear that the flow of data is really about the flow of ideas.
Recently, some have advocated for the United States to
implement a more protectionist trade policy. Are foreign
countries reacting to this debate by moving toward additional
policies to restrict data flows?
Ms. Espinel. Well, I will start because, actually, I think
that is a nice follow-on from the question you just asked. And
Dean talked about patterns. And I would agree that I think
national security concerns is a pattern that we are seeing
governments raise around the world. But another pattern that we
are seeing is that governments that are not the United States
are involved in trade or other bilateral discussions with
governments around the world, and they are encouraging their
vision of data or, in some cases, their lack of vision on data.
And that is a troubling trend. And that is one of the reasons I
think we and others have encouraged the United States to
continue to show leadership on this issue.
The United States is using its trade negotiations, such as
NAFTA, as sort of an immediate example or other bilateral
discussions it is having to push for cross-border data flows.
That is going to be very helpful in no small part because other
governments are out saying that trade agreements or bilateral
discussions either should not have rules on data flows or
should have rules that would localize data. So I think that is
an important aspect of this.
Mr. Garfield. It is not just theoretical, not to rehash
TPP. But the Chinese model for data flows is almost 180 degree
from ours. But their influence in that region post-TPP is
pronounced. I have spent a lot of time there in the last few
months traveling between Japan, South Korea, and other markets
in the region, and you can see the impact of that, particularly
around data flows.
Ms. Espinel. And to give another example, the Japanese and
the European Union are engaged in trade discussions right now.
The Japanese are aligned with the United States, and they have
been big promoters of cross-border data flows. Obviously,
global innovation is a big part of their economy as well. But
it looks like they are going to come to an agreement with the
European Union that is going to leave this entire area out,
rather than having rules on it as TPP and as we hope NAFTA
would. So I think that is a troubling trend that we are seeing
as well.
Mr. Reed. And I will pile on. We just spent time dealing
with Indonesia at, of all things, ITU, where there is an effort
underway to essentially give the ITU power to control what is
called over the top, which is essentially everything on the
internet, through the ITU. And part of that is a move to
restrict the success of the United States and the United States
companies around data and get a lot of that under the control
of the ITU and ultimately the United Nations.
I am sending staff around the world to deal with these
exact issues from a small business perspective. So it is
everywhere, it is pernicious. And ultimately, we are going to
have to address it quickly.
Ms. Daskal. And I would just add briefly, in addition to
the protectionism concerns and the security motivating factors,
there are, as we have talked about a little bit today, concerns
about privacy, particularly amongst the EU. And there are steps
that the United States can take both to take steps to improve
its privacy protections both in the foreign intelligence
surveillance regime and in the consumer privacy protection
regime. And as Mr. Garfield said, also to play a leadership
role in setting new norms and explaining better what the United
States already does well.
Mr. Reed. And I would be remiss if I didn't thank you for
your current cosponsorship of H.R. 3718, which is legislation
that helps to address some of that, the International
Communications Privacy Act. So thank you.
Mrs. Walters. Thank you. And I am out of time. Thank you
very much.
Mr. Latta. Thank you. The gentlelady yields back.
The chair recognizes the gentleman from Florida for 5
minutes.
Mr. Bilirakis. Thank you very much. I appreciate it, Mr.
Chairman. And I apologize for being late. We had a hearing and
a markup in the VA Committee.
But I want to ask the question of Mr. Garfield. Each day,
my constituents are utilizing internet-enabled tools to access
customers abroad in ways impossible a decade ago, of course.
American industries from manufacturing tools to financial
services to agriculture are increasingly relying on the
internet for their current and future global competitiveness,
as you know. Unfortunately, U.S. internet services continue to
face a number of market access and regulatory barriers.
As governments continue to assert a heavy hand on U.S.
internet services, how would you use trade policies to stop
other countries from blocking or discriminating against the
U.S. services and ensure that the U.S. continues to lead the
world in innovation?
Mr. Garfield. Thank you for the question. I would do what
Congress suggested when it passed TPA, which is making sure
that digital trade, trade promotion, cross-border data flows
are a priority, and that we put in place mechanisms for holding
markets accountable. It is not a theoretical issue. The United
States is in the process of updating NAFTA and has said that
they are on the path to do the same thing with the Korean trade
agreement. I think in both instances we have the opportunity to
ensure that all of the things that you identified that have an
impact on the ground in Florida are, in fact, addressed.
Mr. Bilirakis. Thank you. Good answer. I appreciate that.
Mr. Garfield. I tried.
Mr. Bilirakis. Ms. Espinel. Is that how you pronounce it?
Is that right?
Ms. Espinel. Espinel.
Mr. Bilirakis. OK. Thank you. I have a question for you. In
your testimony, you explain how the services and technologies
provided by your member companies are fundamentally affecting
the ways in which companies are running their businesses,
accessing markets, interacting with clients and customers, and
generally innovating. How can trade agreements be used to help
advance U.S. standards and best practices in protecting
innovation and intellectual property like copyright, trade
secrets, and, of course, patents?
Ms. Espinel. So one of the things that we have talked about
a little bit today is the fact that, right now, one of the gaps
in the international legal system is that there are no rules of
the road. There is no international consensus on what data
policy should be. And to me, it feels a little bit like where
we were in the 1990s with intellectual property, investment,
and services, where there were also no international rules of
the road, or at least no trade international rules of the road.
And at the time, the United States stepped up.
And as part of the negotiations that led to the
establishment of the World Trade Organization, they said
intellectual property, investment, services clearly--already
important parts of the U.S. economy, clearly going to be even
more important to the U.S. economy and the global economy. We
need to have international trade rules. There need to be some
internationally recognized parameters on how intellectual
property, investment, and services should work cross border.
And the U.S. pushed hard for that to happen. And I am very
confident, without U.S. leadership, it would not have happened.
But it did, and eventually, all of the members of the WTO
countries agree that there should be international rules on
intellectual property, investment, and services.
It feels to me like we are at that moment again for data.
Data is also new. Although there has been so much progress and
advance already, this is still a new industry. And the way it
is impacting industry sectors across the economy is still
relatively new. And that is part of the reason why there are no
international rules on it yet.
And what I would ask Congress to do is to encourage the
administration to look for places, NAFTA as an example, where
we can start to set a precedent for international rules on
data. I think it is clear that this is going to continue to be
a very important part of the U.S. economy in the global
economy, like IP investment and services. I am confident it is
important so the economy will only grow over the next decade or
so. And so we are going to need to have those rules. And I very
much hope that this administration takes that mantle up and
continues to work with countries around the world to try to set
those rules.
As a former trade negotiator, that is not going to be easy
discussion. That is not going to be a few days of discussions
with other countries. It is a cutting edge issue, so it is
going to be difficult. But it is so important, not just to our
economy, but to the economy of our trading partners around the
world. But I think it is very important.
And so whether it is NAFTA, whether it is Korea, whether it
is discussions with the European Union and the U.K., whether it
is discussions with Japan, whether it is discussions in
multilateral venues, like the GS and the G8 and the G20, I
would encourage the administration to be looking for every
opportunity it can to start laying the ground rules for
international trade rules on data.
Mr. Bilirakis. All right. Very good. Thank you very much.
I yield back, Mr. Chairman.
Mr. Latta. The gentleman yields back.
And the chair recognizes the gentleman from Pennsylvania
for 5 minutes.
Mr. Costello. Thank you, Mr. Chairman.
As we all know, technological innovation shapes every State
and region of the country. I am very proud in my southeastern
Pennsylvania and congressional district, over 800 million high-
tech manufacturing exports, over 200 million IT services
exports, 42,000 high-tech sector workers, 30,000 STEM workers,
over 17,000 computer and math workers, and over 12,000 highly
educated immigrant workers.
My question, Mr. Garfield--and I appreciated your mention
in your written testimony of several lead innovators from
diverse industries and the many different ways they rely on
cross-border data transmission as part of their core business
function.
Merck, which employs several thousand just east of my
district, but many live in my district, they have been able to
deliver medical advancements more efficiently as the technology
platforms they rely upon have grown increasingly global and
sophisticated. I am asking you to elaborate on how removing
barriers to cross-border data flows has the potential to
increase business efficiency for medical innovators, create
jobs, expedite the delivery of lifesaving therapies, and
ultimately, lower costs for patient end users. In essence, how
does removing these barriers translate into a higher quality of
life both here and also in countries engaging in freer digital
trade?
Mr. Garfield. Thank you. Thank you for the question. We
were just noting that it makes me want to visit Pennsylvania
just listening to your description of the place.
Mr. Costello. Come on down.
Mr. Garfield. So the shortest answer to your question is
that cross-border data flows allow us to look at patterns where
we wouldn't know where to pull the information from. And so you
would never know what insight you are going to get from these
technologies which leads to greater innovation, greater
collaboration, greater job creation, greater economic growth,
and greater development in places like Pennsylvania.
And so the bottom line is cross-border data flows is really
the oxygen, if you will, as I said at the beginning, for
innovation today. And we all know the benefits of innovation
and the broad-based impact that it has on economic development
and growth in places like Pennsylvania, but throughout the
country.
Mr. Costello. Yes. And thank you for the answer--a couple
other questions. But does anyone have anything to add different
from that? Otherwise, I will move along.
OK. Next question. Have any studies been conducted on lost
productivity that results from some of the current nontariff
barriers to digital trade?
Ms. Espinel. I don't know one specifically. I know the U.S.
Commerce Department has estimated that the digital trade is
worth $250 billion to the U.S. economy. But I am not familiar
with the study that looks at lost productivity precisely.
That said, it is clear that cloud computing and data
analytics and others contribute to productivity. So it is clear
that it is going to have a negative significant impact. But I
don't know of a specific study that has looked at that issue.
Mr. Reed. I am happy to bring you some numbers on that. I
think the way that we would look at that is the old what
happens if you put your hand out and you spray paint around it?
What we look for is countries nearby and regions nearby where
they haven't seen the productivity growth that you should
expect.
It is interesting you bring up Merck, because that is one
of those where you can really see some impact on lifesaving
drugs.
Mr. Costello. I think the committee would certainly
appreciate any feedback on that question further.
Mr. Garfield, data localization laws that contribute to the
restriction of cross-border data flows. You mentioned the U.S.
should work to establish new norms to remove some of those
barriers. Two questions real quickly. Some of the nations you
mentioned, have they demonstrated a willingness to help change
the international norms? Second, besides formal negotiations,
what else can be done to help change these international norms?
Mr. Garfield. The answer to the first is yes. So in Latin
America, for example, we have seen some progress from private
sector efforts to push countries away from the direction they
were heading on restrictions on cross-border data flows. And
so, yes, there is an opportunity there.
What more can you do? Or what can the U.S. do? I think, as
we negotiate trade agreements, emphasizing the importance of
digital trade and cross-border data flows and building in
accountability mechanisms is a key part of that. My colleague
tapped me on the shoulder to say that there is a report from
ICIP and ITIF that gets into productivity, and we will make
sure we get that report to you.
Mr. Costello. Thank you.
I yield back. Thank you, Mr. Chairman.
Mr. Latta. The gentleman yields back.
And seeing no other members seeking to ask questions, I
would like to thank our witnesses today for appearing before us
today.
And before we do conclude, I would like to include the
following documents be submitted for the record by unanimous
consent: a letter from Insights Association and a letter from
Electronic Privacy Information Center.
[The information appears at the conclusion of the hearing.]
Mr. Latta. Pursuant to committee rules, remind members that
they have 10 business days to submit additional questions for
the record. And I ask that the witnesses submit their responses
within 10 business days upon receipt of the questions.
And, without objection, the subcommittee is adjourned.
[Whereupon, at 11:47 a.m., the subcommittee was adjourned.]
[Material submitted for inclusion in the record follows:]
Prepared statement of Hon. Frank Pallone, Jr.
Today's hearing is about the policies of foreign
governments that affect the free flow of information across
national boundaries.There is no dispute that the United States
leads the world in technological innovation. And data
continually crossing national borders is critical to that
status.
Most of us don't spend much time thinking about how data is
stored, how it moves, or how it affects our daily lives. But in
our digital society, we rely on the ability of data to move
quickly and seamlessly. It is essential to American innovation
and enterprise.
Businesses of all types and sizes, and in virtually all
industries, rely on data flows. For example, this near-
instantaneous data flow happens when you use a credit card in
another country to buy a sandwich or when you purchase a
product from a company located overseas online. All sectors,
including agriculture, mining, and manufacturing, are reliant
on moving data.
The free flow of data allows business to flourish both
domestically and abroad. Unnecessary barriers to these data
flows affect the American economy and American jobs.
In recent years, a number of countries have begun to put
policies in place that may hamper the free flow of information.
Data localization policies take a number of forms, from
explicit requirements that data be stored and processed within
a country's borders to prohibitions on the transfer of personal
information to countries that do not have adequate levels of
data protection.
Governments assert a number of reasons for data
localization policies. Concerns about law enforcement access to
individuals' personal information have gotten a lot of
attention in recent years following the disclosure of the NSA's
surveillance programs.
Other factors are also at play-factors like competitiveness
and antitrust concerns. In addition, national security and law
enforcement interests have only increased in the wake of recent
terror attacks all over the world. And some policies may be
purely protectionist-to attempt to give local companies
competitive advantage.
Like most Americans, citizens of other countries are
troubled by the mass collection of personal information by
private companies and whether that information is kept secure.
Massive data breaches-like the Equifax breach, which affects
British and Canadian citizens in addition to Americans-makes
people even more nervous about their personal privacy. Enacting
baseline consumer privacy and data security protections in this
country can help ease those fears.
Meanwhile, addressing the other concerns of foreign
citizens and foreign governments-those based on national
security or economics-may require a combination of government
and commercial actions to prevent harmful restrictions on cross
border data flows.
I look forward to hearing from our witnesses on this
important topic. Thank you.
----------
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]