India shouldn't agree to free cross-border data flows under IPEF: GTRI

India should not agree to take binding commitments on free cross-border data flows under the Indo-Pacific Economic Framework (IPEF), GTRI said

India should not agree to take binding commitments on free cross-border data flows under the Indo-Pacific Economic Framework (IPEF), a 14-member grouping, as the move would lock its policy space, think tank GTRI said on Thursday.

The IPEF was launched jointly by the US and other partner countries of the Indo-Pacific region on May 23 in Tokyo. The 14 IPEF partners represent 40 per cent of global GDP and 28 per cent of global goods and services trade.

The framework is structured around four pillars relating to trade, supply chains, clean economy, and fair economy (issues like tax and anti-corruption). India has joined all the pillars except the trade one.

"India has not joined the IPEF trade pillar which includes taking onerous commitments on digital trade. India should never agree to binding commitments on free cross-border data flows as it will lock in the future," Global Trade Research Initiative (GTRI) said.

It added that taking the commitments under the World Trade Organisation's (WTO) Information Technology Agreement (ITA - 1) has impacted domestic manufacturing of electronic hardware.

It also said that India should retain flexibility to share data with Indian firms and not big tech companies with a view to promote domestic enterprise.

India should also not agree to no tax on services offered online as the government is going to earn significant revenue with most services shifting online, it said, suggesting not to adopt the US standards on artificial intelligence.

"Drawn by a few tech giants, these may have biases built in. It may not suit local jurisdictions," it added.

GTRI co-founder Ajay Srivastava said that India's stance in free trade agreements, including the IPEF, on digital trade leans towards retaining control over its data.

With China and India being major data generators and China already safeguarding its data, India believes in maintaining flexibility in data-sharing with domestic companies rather than international tech giants, he said.

The new US stand on digital trade validates India's approach on the subject, Srivastava said, adding the US on October 25 has announced its decision to withdraw its support for select World Trade Organization (WTO) e-commerce proposals.

"Given the US's dominant role in the global digital landscape, this decision is poised to spark a worldwide reassessment of national e-commerce policies, potentially reshaping the future of digital trade agreements. The key issues will be ensuring ample policy space and revisiting national digital trade strategies," he said.

India had long ago foreseen potential challenges with unregulated digital trade and thus refrained from participating in the WTO e-commerce negotiations and has a conservative stand in FTAs, the GTRI said.

India has so far not joined the IPEF's trade pillar which includes taking onerous commitments on digital trade, it added.

The WTO e-commerce negotiations began in 2019, with 89 WTO members striving to reach a consensus on vital digital subjects. India is not part of this. The contentious issues at stake involve data flows, data localization, and protection of source code.

Srivastava said that India's reasons for not joining WTO negotiations on e-commerce include lacking a thorough law on data protection and India's fear that new rules might favour foreign companies, potentially enforcing market access.

There are also concerns about the potential dominance of a handful of e-commerce players, which could adversely affect the local industry, particularly Micro, Small, and Medium Enterprises (MSMEs), he added.