SUPPORT US

In The Media

U.S. Banks Want Freer Flow of Data in Nafta Pact

by Vipal Monga & Telis Demos (feat. Eric Miller)

FOX Business
November 2, 2017

As talks on a new North American Free Trade Agreement heat up over auto parts and agriculture, U.S. financial firms are quietly pushing for another, less tangible change: the free movement of data across borders.

A proposal, presented by the U.S. at Nafta renegotiations in September, would keep any government in the new trade pact from demanding banks or insurers store customer data on local servers, say people familiar with the text.

It's a long-coveted goal for financial firms, who say this could potentially save them millions of dollars in technology-storage costs.

Firms such as Citigroup Inc., J.P. Morgan Chase & Co. and MetLife Inc. are among the companies behind the push. They say it's expensive to comply with data rules in countries where they operate because of requirements to maintain servers within each country's borders for privacy and other reasons.

They also worry about potential risks in countries where protection against hacking might be less robust, firms say.

"For the financial services industries, data flow commitments really are a must-have in Nafta," said Steve Simchak, director of international affairs for the American Insurance Association, a trade group that represents 320 U.S. insurers.

Getting free flow of data enshrined in the pact would not only affect data between the U.S., Canada and Mexico, it would create a template for future trade deals that could include more jurisdictions. The Trump administration has backed bilateral trade agreements with Asia-Pacific countries and with the U.K. when the country completes a planned separation from the European Union.

Banks and insurers today operate data centers in dozens of countries, and often must call on local offices even when deals are being negotiated in hubs such as New York, London and Singapore, slowing down transactions.

"These are global companies," said Peter Matheson, managing director at the U.S. Securities Industry and Financial Markets Association trade group. He said negotiators today need to consider technological advances that didn't exist when Nafta went into effect: "There were no such things as clouds in 1994."

For Citigroup, which already operates 20 regional data centers, guaranteeing free flow of cross-boarder data means the bank could avoid building more. Indonesia, for example, has sought to require banks to onshore both their data centers and backups, Citigroup said in a letter to the U.S. Trade Representative on a separate matter.

Citigroup Chief Executive Michael Corbat has been outspoken on data issues, and has in the past discussed localization requirements with Indonesian officials, people familiar with those talks said.

"The movement of data is no less important to the global economy than the movement of money," Mr. Corbat said in 2014 speech in Barcelona.

Banks say local data storage can cost them millions of dollars in hardware and software costs and the labor required for local offices, say people familiar with the industry.

J.P. Morgan said it has had to open a data center in Saudi Arabia to comply with that country's rules. The need to store customer information locally was among the factors that made opening operations there "far more expensive," said Daniel Pinto, head of the firm's investment banking unit, during a 2013 meeting with investors, according to a transcript.

Any new data rule in Nafta is contingent on the successful renegotiation of the broader pact. Canada, Mexico and the U.S. are facing deep divisions over issues like arbitration panels and auto parts. Talks will resume in mid-November.

While data is one of the least controversial Nafta issues, it is raising concerns among privacy advocates, especially in Canada.

Any discussion about data and privacy, especially in the wake of a massive data breach at Equifax Inc., could become a political hot potato, said Eric Miller, a president of the Rideau Potomac Strategy Group, a cross-border consulting firm. "Certainly, the Equifax situation will not help matters," said Mr. Miller.

Currently, the rules that govern privacy in each country diverge widely, causing confusion among some financial services firms.

Some parts of Canada's Bank Act, which regulates the industry, and guidelines issued by the Office of the Superintendent of Financial Institutions, could be interpreted to require firms to keep their books and records in the country.

Laws in some Mexican states say customers have the right to block access to data by third parties, which banks say can inhibit movement of information within organizations.

The push for free data flows goes back to the Trans-Pacific Partnership trade deal, negotiated by the Obama administration, which excluded financial services from a provision allowing U.S. companies to store their data anywhere they pleased.

Following an intense push by banking groups, Obama administration trade officials agreed to try to include banks in future agreements.

After President Donald Trump abandoned the TPP when he took office, administration officials, including Commerce Secretary Wilbur Ross, have told industry groups that they would continue the push for unrestricted data movement in its new trade negotiations.

Mr. Ross recently praised an arrangement the U.S. has with the European Union and Switzerland to ensure privacy but also allow the international flow of data.

"It's worked flawlessly; we don't have any big problems that have come up," Mr. Ross told the Economic Club of New York in late October.


Be the first to comment

Please check your e-mail for a link to activate your account.
SUBSCRIBE TO OUR NEWSLETTERS
 
UPCOMING EVENTS


No events are scheduled at this time.


SEARCH
EXPERTS IN THE MEDIA

Global Times: BRICS summit displays the potential of a new future

by Editorial Staff (feat. Swaran Singh), WSFA 12, June 24, 2022

Oil's Dive Won't Bring Any Immediate Relief on Inflation

by Alex Longley, Elizabeth low, and Barbara Powell (feat. Amrita Sen), BNNBloomberg, June 24, 2022

China To Tout Its Governance Model At BRICS Summit

by Liam Gibson (feat. Stephen Nagy), The Asean Post, June 23, 2022

Soutien aux victimes d’inconduites sexuelles dans l’armée

by Rude Dejardins (feat. Charlotte Duval-Lantoine), ICI Radio Canada, June 23, 2022

Defence: $4.9 billion for radars against Russian bombs

by Editorial Staff (feat. Rob Huebert), Archynews, June 23, 2022

The Hans Island “Peace” Agreement between Canada, Denmark, and Greenland

by Elin Hofverberg (feat. Natalie Loukavecha), Library of Congress, June 22, 2022

What the future holds for western Canadian oil producers

by Gabriel Friedman (feat. Kevin Birn), Beaumont News, June 22, 2022

At BRICS summit, China sets stage to tout its governance model

by Liam Gibson (feat. Stephen Nagy), Aljazeera, June 22, 2022

Crude oil price: there are no changes to the fundamentals

by Faith Maina (feat. Amrita Sen), Invezz, June 22, 2022

Few details as Liberals promise billions to upgrade North American defences

by Lee Berthiaume (feat. Andrea Charron), National Newswatch, June 20, 2022

Defence Minister Anita Anand to make announcement on continental defence

by Steven Chase (feat. Rob Huebert), The Globe and Mail, June 19, 2022

Table pancanadienne des politiques

by Alain Gravel (feat. Jean-Christophe Boucher), ICI Radio Canada, June 18, 2022

Russia Ukraine conflict

by Gloria Macarenko (feat. Colin Robertson), CBC Radio One, June 17, 2022

New privacy Bill to introduce rules for personal data, AI use

by Shaye Ganam (feat. Tom Keenan), 680 CHED, June 17, 2022


LATEST TWEETS

HEAD OFFICE
Canadian Global Affairs Institute
Suite 1800, 150–9th Avenue SW
Calgary, Alberta, Canada T2P 3H9

 

OTTAWA OFFICE
Canadian Global Affairs Institute
8 York Street, 2nd Floor
Ottawa, Ontario, Canada K1N 5S6

 

Phone: (613) 288-2529
Email: [email protected]
Web: cgai.ca

 

Making sense of our complex world.
Déchiffrer la complexité de notre monde.

 

© 2002-2022 Canadian Global Affairs Institute
Charitable Registration No. 87982 7913 RR0001

 


Sign in with Facebook | Sign in with Twitter | Sign in with Email