Civil society proposals to reconcile trade rules with the need for regulatory action


When governments adopt new legislation, they need to check if their plan is in line with international agreements they signed up to. Consumer and digital rights organisations from the EU and the US are concerned that rules in trade agreements could deter domestic regulation that is in the public interest. To address this, the Heinrich-Böll-Stiftung and Transatlantic Consumer Dialogue organised a discussion between NGOs, public officials, parliamentarians, and academics. The NGOs aimed to raise awareness and find solutions to prevent trade rules from discouraging government action and ensure improved protection for citizens writes Léa Auffret.


What do trade rules have to do with law making? Within the international trade bubble, the principal institution is the World Trade Organization. To put it simply, it is a club of 164 countries that agree on common rules to facilitate how they trade products and services between them. These rules are just like a contract: countries must respect the clauses they agreed to, and if not, they risk getting ‘sued’ by another country. This is called the trade dispute settlement system. This logic also applies to international trade agreements countries have signed with one another: some of the rules are legally binding and must be respected.

Why is this problematic?

Trade rules are designed to achieve a simple objective: make the flow of products and services across the globe as easy as possible. And to make this happen, a majority of countries have agreed not to adopt laws that would be more ‘burdensome than necessary’ to avoid creating barriers to trade. Most of these rules were written in the 1990s, before the era of digitalisation and the increased scientific consensus about the climate crisis.

And yet the rules agreed back then are still the ones governments need to respect whenever we legislate today. The risk of litigation is like a sword of Damocles hanging over legislators, especially in the European Union (EU), which is very attached to the multilateral rules-based system.

Lessons learned from the US

Some US Senators and Big Tech companies have recently sent letters to US President Biden, asking him to ‘do something’ against the implementation of new EU digital laws that aim to regulate them. They argue that these laws are creating unnecessary barriers to trade. A few days ago, they reiterated their call in another letter addressed to US President Biden, arguing this time that these laws discriminate against US companies. What they imply is that the EU does not respect the clauses of the contract it signed in the World Trade Organization.

These letters illustrate well how trade rules are used as a tool against domestic regulations. Consumer and digital rights groups on both sides of the Atlantic are calling to stop this negative trend.

Artificial Intelligence (AI) Act limited by trade rules

Now let’s have a look at how the trade deal between the EU and the UK influenced the writing of the EU’s AI Act, which is being negotiated as I write these words. This future law aims to protect citizens from the potential harms of artificial intelligence. This requires a certain level of scrutiny, meaning that authorities and other experts must check if certain algorithms, more specifically how they are written into source code, comply with the law.

The problem is that in recent EU trade agreements, new clauses have been included on this matter. They stem from complaints made by some companies that they are forced to disclose their source code when they want to obtain a license to operate in certain countries, especially in China, Russia and others. Quite often, this results in intellectual property theft. So, some companies have requested more protection, through trade agreements, to make sure that foreign counties will not be able to oblige them to show their source code. This is now also part of the EU–UK trade agreement.

The drafters of the AI Act initially wanted to provide broad access to source code for authorities and independent auditors to evaluate if high risk AI systems might cause harm. But they had to modify their initial plan and narrow down the access to source code in order to comply with the rules of the trade agreement between the EU and the UK.

The unintended consequence is that it makes it very complicated for authorities and third parties to do their job to protect citizens. All of that just to provide an additional layer of protection for a few companies, on top of intellectual property protections they already have in other international trade deals.

Digital rights: a commodity to exchange for the UK

Now that the UK has left the EU, its objective seems to be to sign as many trade agreements as possible. Digital rights activists are concerned because they see that in order to attract foreign investments, the government seems to be ready to trade UK citizens’ digital rights away.

They witness the influence of UK trade agreements in the lowering of UK data protection and privacy law, or even in not regulating artificial intelligence. They are worried that trade negotiators and legislators in the UK might not realize what uncarefully designed trade rules mean for the future ability to regulate and protect citizens.

What should be done to prevent unintended consequences of trade rules?

At a recent expert workshop organised by the Heinrich-Böll Stiftung and TACD, most participants considered that the way we are designing trade rules today is outdated. We need to make sure that the protection of the public interest comes first, not the need to make products and services flow as easily as possible. This can no longer be the status quo. This applies not only to digital policies but also to policies needed to fight against climate change.

Many of the participants recommended writing trade rules in a way that can be adapted to any future situation, especially when talking about rapidly evolving technologies like artificial intelligence. Others argued that the wiser decision would be to not include rules in trade agreements when the risks are higher than the benefits for society as a whole.

Participants discussed the need for all branches of governments to agree on what can and cannot be done in trade agreements. Given the fact that trade rules condition how countries can regulate, their design should not be solely managed by trade negotiators.

At the workshop, civil society organisations, government officials and parliamentarians agreed that there is a collective responsibility to find solutions. This is a consensus to be built upon without delay.