authorising the opening of negotiations for the inclusion of provisions on cross-border data flows in the Agreement between the European Union and Japan for an Economic Partnership

EXPLANATORY MEMORANDUM

1.CONTEXT OF THE PROPOSAL

•Reasons for and objectives of the proposal

By decision of 29 November 2012, the Council aproved negotiating directives for the Commission to negotiate a free trade agreement with Japan, on the basis of wich the Commission negotied the Agreement between the European Union and Japan for an Economic Partnership (the Agreement). Chapter 8 of the Agreement contains comprenhensive provisions on trade in services, investment liberalisation and electronic commerce.

However, at the time of the conclusion of the negotiations, the European Union had not yet consolidated an internal position on horizontal provisions for cross-border data flows and for personal data protection in trade agreements. As a result, the Agreement does not contain substantive rules on cross-border data flows between the European Union and Japan, but a review clause, in Article 8.81 of the Agreement, according to which “[t]he Parties shall reassess within three years of the date of entry into force of [the] Agreement the need for inclusion of provisions on the free flow of data into [the] Agreement.”

On 31 January 2018, the European Commission endorsed horizontal provisions for cross-border data flows and personal data protection in trade negotiations, which were published in July 2018. These provisions have been successfully negotiated in several bilateral negotiations and proposed in the context of the ongoing negotiations on electronic commerce in the WTO. The European Union is thus now in a position to include the July 2018 provisions on cross-border data flows in the Agreement’s existing rules on e-commerce.

Following a series of exploratory discussions held at technical level between representatives of the European Union and Japan during 2021, the Joint Committee established by Article 22.1 of the Agreement, in its meeting of 25 Mars 2022, examined whether the economic partnership between the European Union and Japan would benefit from the inclusion of provisions on cross-border data flows in the Agreement. Building on that examination, the representatives of the European Union and Japan, at the 28th EU-Japan summit, committed to consider the launch of the negotiations needed for such inclusion.

The European Union and Japan have a deep and dynamic economic relationship and, through their mutual adequacy arrangement, have created the world's largest area of safe transfers of personal data. Japan is the closest strategic partner of the European Union in the Indo-Pacific region and the European Union’s second-biggest trading partner in Asia. It is therefore appropriate to initiate, for the first time, single-issue trade negotiations to include provisions on cross-border data flows, data protection and privacy into the Agreement.

•Consistency with existing policy provisions in the policy area

By aiming for rules addressing unjustified obstacles to data flows while preserving the European Union regulatory autonomy, in particular in the area of data protection and privacy, the proposal contributes to the objectives laid down in the Communication of 18 February 2021 from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of Regions.

•Consistency with other Union policies

By negotiating rules on cross-border data flows with Japan in line with the consolidated proposal for provisions on cross-border data flows and protection of personal data and privacy in trade agreements, the proposal pursues the Commission’s strategy laid down in the Trade Policy Review, the EU Data Strategy and in the Commission’s Joint Communication on the EU Strategy for Cooperation in the Indo-Pacific. In the Trade Policy review the Commission committed to “continue to address unjustified obstacles to data flows while preserving its regulatory autonomy in the area of data protection and privacy”. The EU Data Strategy states: “The EU will continue to address these unjustified obstacles to data flows in bilateral discussions and international fora – including the World Trade Organisation – while promoting and protecting European data processing rules and standards, in full compliance with EU legislation”. Data flows is also identified as an important element of the Commission’s Joint Communication on the EU Strategy for Cooperation in the Indo-Pacific.

2.LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY

•Legal basis

Article 207(4) first subparagraph in conjunction with Article 218(3) and (4) of the Treaty on the Functioning of the European Union (TFEU) shall be indicated as legal basis for this proposal.

•Subsidiarity (for non-exclusive competence)

According to Article 5(3) of the Treaty on the European Union (TEU), the subsidiarity principle does not apply in areas of exclusive EU competence.

•Proportionality