US Trade Secretary Wilbur Ross on Tuesday highlighted data localisation restrictions in India as a barrier to US companies operating in India, saying that it is a goal for the US to eliminate such barriers, which weaken data security and increase the cost of doing business (for US companies). Secretary Ross was speaking at Trade Winds Conference in New Delhi.
Data localisation and the restrictions on cross-border data flows have been a key concern for US companies operating in India, especially payments companies like Visa and Mastercard; Mastercard, in fact, also said recently that around $350 million of its $1 billion investment in India is going to be spent on compliance with the Reserve Bank of India’s localisation mandate. WhatsApp’s rollout of payments in India is held up because of the directive from the RBI. India’s recent draft e-commerce policy also sought to mandate localisation for e-commerce data within three years. The draft data protection bill did provide an alternative, allowing for data mirroring, but it remains to be seen whether the final version of the bill (expected to be tabled in Parliament once it re-convenes) will have mirroring or localisation.
Citizen data is being viewed as a national asset in India, and the localisation of this data seeks to meet these objectives, among others:
- Access to data for security agencies for law enforcement requirements
- Protection against trade sanctions that might make data inaccessible
- Addressing taxation concerns
- Treatment of analysed data as a community/national asset, which may be made available to the government and/or “infant” Indian companies for development of services
In conversation with MediaNama a few months ago, Tim Berners-Lee, the founder of the World Wide Web had said that the web foundation is concerned about “the balkanisation of the Internet. If you want to balkanise it, (data localisation) is a pretty darn effective way of doing it. If you say that Indian people’s data can’t be stored outside India, that means that when you start a social network which will be accessed by people all over the world, that means that you will have to start 152 different companies all over the world. It’s a barrier to entry. Facebook can do that. Google can do that.”
“When an Indian company does it, and you’ll end up with an Indian company that serves only Indian users. When people go abroad, they won’t be able to keep track of their friends at home. The whole wonderful open web of knowledge, academic and political discussions would be divided into country groups and cultural groups, so there will be a massive loss of richness to the web.”
High tariffs on medical devices, electronics, telecommunication products, routers, cellular phone parts
Ross said that as per the latest figures from 2017, “India’s foreign direct investment into the United States totaled $13.1 billion. US FDI into India was more than $44 billion, so we are a substantial net investor here.”
He added that India is paramount to the US government’s approach to the Indo-Pacific region. India remains the US’s 13th largest export market, “due to overly restrictive market access barriers. Meanwhile, the United States is India’s largest export market.” India has a trade surplus of $21 billion in goods and $3 billion in services with the US.
In what seemed to be a signal that there might be a reciprocal response to trade restrictions, Ross said cited President Trump as saying that “trade relationships should be based on fairness and reciprocity. Currently, US businesses face significant market access barriers in India. These include tariff and non-tariff barriers, as well as multiple practices and regulations that disadvantage foreign companies.” He added that the US’s strict “Foreign Corrupt Practices Act also assures the Indian government that our companies will not cause a scandal”, but “American companies need to operate in a transparent environment supported by the rule of law, and a level playing field.”
He highlighted high tariffs in India, saying that “India’s average applied tariff rate of 13.8% remains the highest of any major world economy. It has a 60% tariff on automobiles; 50% on motorcycles; and 150% on alcoholic beverages. Its bound tariff rates on agricultural products average 113.5%, and are as high as 300%.” “Other obstacles include price controls on medical devices and pharmaceuticals, and restrictive tariffs on electronics and telecommunications products. Tariffs for network routers and switches and parts of cellular phones are as high as 20%.”
“In stark contrast, the US rate for these same products exported from India to the United States is zero. These high tariffs undermine India’s goal of improving digital access and digital literacy.”