Why We Need Encryption Rules in the TPP and Other Trade Agreements

by Semiconductor Industry Association

A recently published paper, written by Takaaki Sashida, a graduate student at the Harvard Kennedy School of Government and recent research fellow at SIA, provides an in-depth exploration of the importance of incorporating encryption rules in the Trans-Pacific Partnership (TPP) Agreement.   

We use encryption technology every day. For example, encryption is used in websites to ensure security when shopping or banking online; in ATMs and smart cards to validate transactions; in our mobile phones and other wireless devices to ensure privacy of communications; in medical applications to protect sensitive personal information; and even in car keys and garage door openers to prevent against unauthorized access. In fact, encryption is found in nearly every information communication technology (ICT) product. Semiconductors, which provide data processing and storage, are the key device that enables encryption in these products.

The ubiquity of encryption in commercial applications has been driven by consumer demand to protect against unauthorized or criminal activity, and until recently, supported by a largely open global policy environment with little to no regulations governing the importation, use and sale of encryption. However, this trend is changing. An increasing number of governments, including China, Vietnam, India, and Russia, have implemented or are considering implementing new regulations on encryption in the commercial market. These restrictive policies risk serving as non-tariff barriers that threaten the trade in encryption-enabled ICT products on the scale of billions, if not tens or hundreds of billions, of dollars.

This is why semiconductor industries around the world are supporting rules to prevent restrictions on the import, use and sale of commercial encryption technologies in free trade agreements, most notably the Trans-Pacific Partnership (TPP) Agreement and the Trans-Atlantic Trade and Investment Partnership (TTIP).  The World Semiconductor Council – comprised of the semiconductor industries in China, Chinese Taipei, the EU, Korea, Japan, and the U.S. – has developed a set of Encryption Principles that form the basis of the encryption provisions under negotiation in the TPP. These principles were also proposed by SIA and the SIA in Europe to our respective governments for consideration in the TTIP negotiations. 

Mr. Sashida’s paper, entitled “Why We Need Encryption in the TPP,” makes clear that while encryption is not “new,” its use in everyday life has become dramatically more common since the rise of the Internet and proliferation of digital devices, and as a consequence, unnecessary regulations or restrictions could have a dire impact on the global trade of semiconductors and the ICT products that depend on them.

In order to promote economic competitiveness and security, and ensure consumer access to the most secure and innovative products around the world, it is critical for governments to embrace encryption rules in free trade agreements as a 21st century imperative.