Lexpert Magazine

LEXPERT MAGAZINE | APRIL 2016 63 | COLUMNS | BY GEORGE TAKACH TECHNOLOGY Canadian businesses would benefit mightily from e-commerce in a TPP-supported economy Going Trans-Pacific: Part II LAST MONTH I provided an introduc- tion to the Trans-Pacific Partnership Trade Agreement (TPP), and explained how ben- eficial this trade agreement is for Canada, given that we have a relatively small coun- try, economically speaking. And with re- spect to tech and soware companies, such as Shopify, Hootsuite or Constellation Soware, the TPP contains specific provi- sions that will assist these businesses in sell- ing their products and services abroad in countries that adhere to the TPP. One important way the TPP does this is through chapter 14 of the agreement, on electronic commerce. Essentially, the e-commerce provisions foster openness in trade in digital products across borders, while preserving government's prerogative to legislate regulation impacting cross-bor- der digital trade, so long as the legislation does so without discriminating against for- eign businesses, and is the bare minimum to achieve the permissible objective. NO ELECTRONIC CUSTOMS DUTIES More and more trade is being done by the delivery of digital products, typically trans- mitted over the Internet. Canadian so- ware and content companies, for example, are increasingly making their soware, images and other data available to custom- ers by Internet download, rather than by a disc through snail mail or courier. e TPP recognizes this new reality and pro- hibits member countries from imposing customs duties on these digitally conveyed products. Equally, a member country can- not favour the digital products produced by business enterprises in its own country over those developed by a company located in another member country. Avoiding this sort of discrimination (sometimes referred to as "most favoured nations" treatment) is the meat and po- tatoes of trade agreements and chapter 14 of the TPP applies the concept to e- commerce. But, it should be noted, this does not prevent governments from taxing particular activities or formulating regula- tion. When it does, however, a government cannot do so in a way that favours its own nationals (individuals and companies) over those of another member country. So, when Desire to Learn (or another Canadian soware company) wants to do business in Vietnam, say, it will not be met by a tax, or some other measure, that unfairly prefers a local Vietnamese entity. Equally, however, that discipline will apply to the Canadian government, thereby lev- elling the playing field when a Vietnamese soware company competes against DTL in Canada. at's the essence of free trade. RATIONAL DATA CENTRE LOCATIONS Suppose there's a Canadian soware com- pany offering a soware and data hosting service. It makes its product available over the "cloud" as a "soware as a service," with its data centre located in Canada. Vietnam- ese customers (to continue with that ex- ample) would merely access the Canadian soware over the Internet; in effect, the Canadian soware company doesn't have to have a data centre in Vietnam. e TPP encourages this sort of ratio- nalization of computing resources by pro- hibiting a member country from passing legislation that would restrict such open cross-border data flow, subject to a couple of important exceptions. at is, a govern- ment can deviate from this open-border approach, but only if it does so to achieve a legitimate public policy objective that, in turn, doesn't unfairly discriminate against foreign interests (there's that core non- discrimination principle at work again), and the deviating provision is as minimal as possible under the circumstances (i.e., a government cannot purport to block all trans-border data flows when a narrow restriction will meet the particular non- discriminatory objective). ere is another important excep- tion. e e-commerce chapter of the TPP doesn't bind governments in terms of the data they hold, or the data held on their behalf. us, if a member country decides that certain data held by, or collected on behalf of, the government must be stored in that country, then that is allowed under the TPP. I should add, however, that gov- ernments hopefully will exercise this dis- cretion only rarely, aer very careful study, because in my experience acting for certain public entities, such a decision typically re- sults in material extra cost to the public en- tity – and ultimately its citizens – for what are generally dubious benefits. FACILITATING E-COMMERCE If a Canadian soware company wants to enter into an electronic contract with a cus- tomer in Vancouver, it has the comfort that BC law will not deny the enforceability of the contract's e-signature just because it is in electronic form. However, currently, Ca- nadian companies have no such assurance when dealing with a counterparty in a TPP member country that does not have similar e-signature legislation. PHOTO: SHUTTERSTOCK

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