How USMCA Addresses The Digital Age

USMCA Replaces NAFTA

After months of negotiation and threats of a trade war, Canada, the United States, and Mexico have tentatively agreed on the United States, Mexico, Canada Agreement (USMCA). This new agreement is set to come into effect in 2020, replacing the current North America Free Trade Agreement (NAFTA). There are a handful of differences between NAFTA and USMCA, one of which is the inclusion of a chapter on digital trade. With the continued rise of digital industries, digital trade is increasingly important and in the spotlight of government policy. Following on the heels of the European Union’s creation of the General Data Protection Regulation (GDPR) in 2018, the USMCA modernizes the trade agreement in North America by addressing digital trade. This is consequential for all digital industries, especially digital marketing, as rules around data will affect firms’ capabilities to generate insights. This deal has not yet been signed by any of the participating countries and will need to be ratified by Congress once it’s been signed in order to be implemented.

USMCA

Free Flow Of Data

A big impact of USMCA on digital trade is allowing the free flow of data. The rules set forth in USMCA are meant to restrict governments from prohibiting the cross-border movement of data or from requiring localization of data. As such, a company would no longer need to build new servers within a particular country to store its data. Instead, a company can have all its data stored in a centralized location regardless of the country the servers are in. Governments currently using data localization rules to restrict the flow of data create barriers to entry in their markets due to country-specific server requirements.

USMCA would eliminate the barriers to entry within and between North American markets, which sets a major precedent for data storage. This is huge for cloud-based services such as Amazon and Google. With this agreement, they would not need to build servers in every country where they operate. The restriction of data localization would enable data to flow freely across borders, significantly benefiting digital industries as data becomes more and more important for decision making in business. It would also benefit digital marketers running international campaigns because they could generate insights more efficiently due to easier access to needed data.

Data Privacy Concerns

Although USMCA would allow data to easily flow between countries, data privacy is still a concern. Data localization restricts the flow of data, but some view it as a good tool for data privacy. Restricting the movement of data allows the data to stay close to home and close to the market where the data originates. It is important to note that data localization does not make data more secure from hackers, but rather it makes it more difficult for businesses to access the data. Not only does the USMCA’s restriction of data localization raise concerns about data privacy, it also is at odds with Canadian laws on data localization. British Columbia and Nova Scotia are two Canadian provinces with laws requiring that certain types of citizen data, such as health records, be stored on local servers to prevent it from being accessed for other intentions. This local storage will be forbidden under the new USMCA agreement, making it more vulnerable to access from other countries. For example, due to the U.S. Patriot Act, Canadian data stored within the borders of the United States is accessible to U.S. intelligence officers for national security concerns.

What Marketers Need To Know

For digital marketers, the new USMCA trade deal would make it easier to run successful international campaigns. Allowing data to flow freely across borders would allow digital marketers easier access to data on their campaigns, enabling a more efficient and robust generation of insights. The rules that restrict data localization will also allow cloud services to flourish, which is a big win for Google, Amazon, and other providers of cloud-based services. It is important to note that this agreement has only been tentatively agreed upon. There are still opportunities for changes on this agreement, but at its current state, this agreement appears to be good for digital marketers.

 

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