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Editorial: Japan and the US must work together to tackle China’s cybersecurity law

China’s newly implemented cyber-security law is raising concerns among Japanese, U.S. and European businesses. Ostensibly enacted to safeguard “national sovereignty in cyberspace,” the law requires companies to store customer information collected in China within the country and to submit to a security assessment by Chinese authorities if they wish to transmit any of that data out of the country. 

 

 

Depending on how it is applied, the law could seriously hamper foreign companies’ Chinese operations. Japan, the U.S. and European countries must work together to address this issue, ideally through the World Trade Organization, the leading platform for talks on international trade issues.

 

NOT LISTENING

 

The Chinese government approved the law last November and put it into effect in June this year. In May, 54 organizations from around the world, including the Japan Business Federation, or Keidanren, Japan’s biggest business lobby, petitioned the Chinese government to delay its enforcement, citing the extremely adverse effects that the digital security regulations would likely have on the global economy. But Beijing refused to heed their appeal.

 

So far, no serious damage has been reported by Japanese or Western companies. But there is a very real risk that the controversial law, which is vague in many regards, will make it difficult for foreign companies to continue operating in China as long as they need to collect and use data.

 

China will likely continue turning a deaf ear to individual countries or businesses. That is why international coordination and cooperation is needed. An initial and welcome step in this direction came on Oct. 16 when Japan and the U.S. held their second round of economic talks in Washington. Though not mentioning China by name, the two sides agreed to cooperate to ensure “more effective enforcement activities against unfair trade practices by third countries.”

 

Washington also raised this issue at a WTO meeting earlier this month. This is a positive sign that the Donald Trump administration is willing to work within the framework of the WTO rather than just threatening to impose unilateral counter-measures against countries that have trade surpluses with the U.S., as it has been doing. Japan must sieze the chance presented by Washington’s apparent change in attitude.

 

If the Chinese law specifically takes aim at foreign businesses, it may be found to contravene WTO rules, which call for domestic and foreign companies to be treated equally. It would also constitute a violation of WTO rules if Chinese authorities oblige foreign companies to adopt proprietary Chinese standards without first notifying the countries concerned.

 

Actions that can be taken include asking China to rethink the law and, if needed, filing an official complaint with the WTO. If such steps fail to improve the situation, governments themselves will have to take concerted action to address the law. Tokyo and Washington should begin forging concrete plans for such an eventuality.

 

In the current era of big data, the free flow of data across borders is a source of growth for the global economy. Ensuring this flow remains unhindered is one of the most significant aspects of the Trans-Pacific Partnership trade pact that 12 countries, including the U.S., agreed upon.

 

Even though America has since pulled out of the TPP, it is still in the country’s interest to urge China to adhere to the principle of free and fair trade based on rules and regulations. We hope that Japan will work to form a united front with European nations and others to address China’s cybersecurity legislation, and at the same time encourage Washington to make greater use of the WTO’s functions.

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