VoxEU Column Frontiers of economic research International trade

Can trade policy set information free?

The internet is an expanding opportunity for growth. This column argues that in recent years, however, policymakers and market actors have been undermining its potential. Governments and market actors are reducing both access to information and freedom of expression, as well as moving towards a splintered, non-global internet. Commitment to an open, free and global internet will be hard, but if bilateral, regional or multilateral trade agreements encourage interoperability, we might see some harmony among signatories’ privacy, online piracy, and security policies.

 Although the internet is creating a virtuous circle of expanding global growth, opportunity, and information flows (Lendle et al. 2012), policymakers and market actors are taking steps that undermine access to information, reduce freedom of expression and splinter the internet (Herald 2012). Almost every country has adopted policies to protect privacy, enforce intellectual property rights, protect national security, or thwart cyber-theft, hacking, and spam. While these actions may be necessary to achieve important policy goals, these policies may distort cross-border information flows and trade. Meanwhile, US, Canadian and European firms provide much of the infrastructure as well as censor-ware or blocking services to their home governments and repressive states such as Iran, Russia, and China (Heacock 2011, Horwitz 2011, Ungeleider 2011). As a result, although the internet has become a platform for trade, trade itself and trade policies have served both to enhance and undermine both internet freedom and an open internet.

Trade agreements as internet governance

Trade agreements and policies have become an important source of rules governing cross-border information flows:

  • Policymakers recognise that when we travel the information superhighway, we are often trading – and internet usage can dramatically expand trade1.
  • The internet is not only a tool of empowerment for the world’s people, but a major source of wealth for US, EU, and Canadian business.

Moreover, internet commerce will grow substantially in the future as much of the world’s population is not yet online (OECD 2008, Internet World Stats 2012). US, European and Canadian policymakers want to both protect their firms’ competitiveness and increase market share.

  • US, European and Canadian governments understand that while some domestic laws can have global reach, domestic laws on copyright, piracy, and internet security do not have global legitimacy and force. Hence, they recognise they must find common ground on internationally accepted rules governing cross-border data flows2.

In theory, the WTO should be an appropriate venue for such discussions. WTO members agreed not to place tariffs on data flows. In addition, the WTO’s dispute settlement body has settled two trade disputes related to internet issues: internet gambling and China’s state trading rights on audiovisual products and services (WTO 2007, WTO 2012).

However, the member states have not found common ground on how to reduce new trade barriers to information flows3. In 2011, several nations stopped a US and EU proposal that members agree not to block internet service providers or impede the free flow of information online4. Moreover, the members of the WTO have made little progress on adding new regulatory issues such as privacy and cyber security that challenge internet policymakers5. However, many new online activities will require cooperative global regulation on issues that transcend market access – the traditional turf of the WTO. These issues will require policymakers to think less about ensuring that their model of regulation is adopted globally but more about achieving interoperability among different governance approaches (see Burri and Cottier 2012). Alas, policymakers are not consistently collaborating to achieve interoperability.

Trade giants and the internet

In a recent policy brief (Aaronson and Townes 2012), Miles Townes and I examined how the US, the EU, and Canada use trade policies to govern the internet at home and across borders.

We found the three trade giants use bilateral and regional trade agreements to encourage e-commerce, reduce online barriers to trade, and to develop shared policies in a world where technology is rapidly changing and where governments compete to disseminate their regulatory approaches (Coppock and Maclay 2002). Policymakers also use export controls, trade bans or targeted sanctions to protect internet users in other countries or to prevent officials of other countries from using internet related technologies in ways that undermine the rights of individuals abroad.

Finally, policymakers may use trade agreements to challenge other governments’ online rules and policies as trade barriers. We discuss how these policies, agreements, bans and strategies could affect internet openness, internet governance, and internet freedom.

Table 1 Case study Free Trade Agreements: Provisions that can enhance (+) or reduce (-) internet openness


The US is actively pushing for binding provisions in trade agreements that advance the free flow of information while challenging other nations privacy and server location policies as trade barriers. However, the US provisions are incomplete. Hence, we recommended that as trade agreements have long addressed governance, the US and other governments negotiating binding provisions to encourage cross-border information flows should also include language related to the regulatory context in which the internet functions; free expression, fair use, rule of law, and due process. Moreover, the US and other nations should coordinate policies to promote the free flow of information with policies to advance internet freedom. Policymakers may need to develop principles for the proper role of government in balancing Internet freedom and stability at the domestic and global levels. Finally, governments may also need to develop shared principles for steps governments may take when countries do not live up to these principles (a responsibility to protect the open internet).

Internet openness

We also believe that the US, EU and Canada should also show their commitment to internet openness by annually reporting when and why they blocked specific applications or technologies and/or limited content (or asked intermediaries to limit access) to sites or domains. With this information, policymakers may get better understanding of how to achieve a flexible and effective balance of internet stability and internet openness.

Is censorship a barrier to trade?

Policymakers don’t know if censorship is also a barrier to trade. The US and EU have issued reports describing other countries’ internet policies – regarding privacy, censorship, server location and security policies – as potential barriers to trade. However, none of the three governments has yet challenged internet restrictions as a barrier to trade. We recommended that trade policymakers ask the WTO secretariat to analyse if domestic policies that restrict information – short of exceptions for national security or public morals – are also barriers to cross-border information flows which can be challenged in a trade dispute. Moreover, policymakers should develop strategies to quantify how such policies affect trade flows.


Without deliberate intent, domestic and trade policies may gradually fracture a unified, global internet. Given that countries have different priorities for privacy, free speech, and national security, the international harmonisation of strategies to advance the open internet is unlikely.

Thus, when they negotiate bilateral, regional or multilateral trade agreements, policymakers should use language that encourages interoperability among signatories’ privacy, online piracy, and security policies.


Burri, Mira and Thomas Cottier (eds.) (2012), Trade Governance in the Digital Age, World Trade Forum, New York, Cambridge University Press.

Clarke, George R and Scott J Wallsten (2006), “Has the Internet Increased Trade? Developed and Developing Country Evidence”, Economic Inquiry, 44(3), 456-484.

Karen Coppock and Colin Maclay, “Regional Electronic Commerce Initiatives: Findings from three case studies on the Development of regional electronic commerce initiatives”, Information Technologies Group, Harvard University, July.

Herold, David Kurt (2011), “An Inter-Nation-al Internet: China’s Contribution to Global Internet governance?” 5 September.

Heacock, Rebekah (2011) “ONI Releases 2010 Year in Review”, OpenNet Initiative, 18 March.

Hindley, Brian and Hosuk Lee-Makiyama (2009), “Protectionism Online: Internet Censorship and International Trade law”, Ecipe.org, December. 

Horwitz, 2011 “Syria using American software to censor Internet, experts say”, Washington Post, 23 October.

Internet World Stats (2012), website, last viewed 27 November 2012.

Lendle, Andreas, Marcelo Olarreaga, Simon Schropp, and Pierre-Louis Vezina (2012), “There goes gravity : how eBay reduces trade costs”, World Bank Policy Research Paper, 6253, October.

OECD (2008), “Policy Brief: The Future of the Internet Economy”, 1, 2, June.

Ungeleider, Neal (2011), “How American-Made Tech Helped Middle Eastern Governments Censor the Internet”, Fast Company, 30 March.

WTO (2007), “United States — Measures Affecting the Cross-Border Supply of Gambling and Betting Services”.

WTO (2012), “China — Measures Affecting Trading Rights and Distribution Services for Certain Publications and Audiovisual Entertainment Products”.

Wu, Tim (2006), “The World Trade Law of Censorship and Internet Filtering”.


Table 2 The struggle to balance Internet Stability and Internet Freedom leads to policy incoherence

1 In a study of 27 developed and six six developing countries Clarke and Wallsten found a 1 percentage point increase in the number of Internet users correlates with a boost in exports of 4.3 percentage points (Clarke and Wallsten 2006)
2 Several scholars were the first to recognise that Internet restrictions could be trade barriers and that the world would need to develop shared rules for information flows (Wu 2006, Hindley and Lee-Makiyama 2009)
3 Cf. WTO (2012a), “15 Years of the Information Technology Agreement: Trade, Innovation and Global Production Networks” and WTO (2012b) “News on Information Technology Agreement, 1 November. However, discussions on free flow may be revived as part of a plurilateral agreement on the liberalisation of services, cf.Bloomberg (2012), “WTO Members Seek Services Accord as Doha Stalls, US Says”, Bloomberg News, 3 Feburary and “US steps up push for WTO services trade talks”.
4 The WTO’s General Agreement on Trade in Services (GATS) sets limits as to when governments could block services (such as Internet services), but it is vague: Members can only invoke this exception to the rule “where a genuine and sufficiently serious threat is posed to one of the fundamental interests of society.” General Agreement on Trade in Services (1994) 33 ILM, 1167, Article XIV, n. 5. On US and EU proposal forbidding blocking, see US Tables Second Part of TPP Data Proposal, But Talks Still Preliminary,” Inside US Trade, 10 November 2012.
5 Data protection regulations are exempted from scrutiny under the GATS as long as these regulations are not a disguised restriction on trade.

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