restrictions under this exception. Recently, this exception has been invoked by the Russian
Federation in a dispute involving transit restrictions that Moscow imposed on Ukraine in
January 2016 (Palmer, 2018). More generally, however, several countries are referring to
the security exception when imposing new regulatory measures, especially those related to
the digital economy. The most recent case is Vietnam’s Cybersecurity Law passed in June
2018. The lawmakers of the country havemade clear that the new measure is justified under
the security exception in WTOtexts and other free trade agreements (Nguyen, 2018).
Vietnam’s law is an example of a new wave of restrictions affecting digital trade (Ferracane
). In their public pronouncements or related laws and regulations, many
countries have cited national security as a rationale to restrict digital trade, although it is not
yet clear whether, in practice, the restrictions contribute to improved national security
(Peng, 2015;Sargsyan, 2016). Examples of measures that create thick digital borders
include bans to the use of certain digital productsin the public sector, security screening
on investment (European Commission,2017a, 2017b) and measures requiring data to be
kept locally (Ferracane, 2017).
The uncertainty surrounding the digital economy increases the policy space of countries to
impose protectionist measures,as it is not always clear whether in practice these measures
are needed to protect important non-economic interests or whether there are less trade-
restrictive alternatives. When a WTO member considers that a certain measure is actually
designed to restrict trade rather than to achieve its stated non-economic objective,
including national security, it can challenge the measure under the WTO dispute system.
Such a dispute is the topic of this paper. In particular, this paper focuses on disputes
related to restrictions on data flows. While some scholars have looked into potential
disputes related to cybersecurity threats connected to certain digital goods (Peng, 2015),
no papers have yet addressed potential disputes related to restrictions on data flows and
These restrictions can have a serious impact on the capacity of businesses to operate and
provide services to their customers, and it is therefore not unlikely that a WTO member
might challenge data flows’ restrictions as a violation of a member’s WTO commitments on
services. Already in 2015, the European Commission’s Report on Trade and Investment
Barriers and Protectionist Trends criticized China for restricting data flows “on the
ostensible grounds of ‘national security’” going “beyond essential national security
concerns”, and generally risking “imposing unnecessary restrictions on commercial
activities” (European Commission, 2016).
This paper therefore explores the national security implications of a potential for a WTO
dispute on data flow restrictions. It proposes a basic conceptual framework to assess data
flows’ restrictions under WTO security exception and, in particular, under the General
Agreement on Trade in Services (GATS), which enshrines obligations and disciplines on
commercial services that apply to all WTO Members. In doing so, the paper intends to fill
a gap in the literature by clarifying how these restrictions could be assessed under the
existing WTO language.
Ultimately, the decision of a country to start a dispute on data flows restrictions remains a
political one and its impact will go well beyond trade. The deadlock on negotiation of digital
trade commitments reflects the uncertainty on whether the current structure of the WTO is
well suited to judge on issues of privacy, security and, ultimately, internet governance. The
WTO members might want to refrain from bringing claims on digital issues which are not
explicitly covered by current WTO language until this uncertainty is settled. The likelihood
for such a claim will depend on whether one or more members want to take a political
stance on internet governancein a forum that is meant to address trade issues.
This paper remains nevertheless relevant even if a WTO dispute on data flows neverarises.
On the one hand, an analysis on how data flows restrictions may influence, in practice, the
VOL. 21 NO. 1 2019 jDIGITAL POLICY, REGULATION AND GOVERNANCE jPAGE 45