Regulation on Market Distortion Caused by Government Data-sharing Policies: Applicability of WTO Agreement on Subsidies and Countervailing Measures

Author Name WATANABE Shota (Nomura Research Institute, Ltd.)
Creation Date/NO. May 2022 22-J-021
Research Project Comprehensive Research on the Current International Trade/Investment System (pt.V)
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As digitalization of the economy progress, data utilization has huge influence on the competitiveness of goods or services. Emerging countries are introducing or planning to introduce data-sharing policies with specific companies, where domestic companies, in most cases, are offered the use of such data for free or at lower than market price. These companies produce products or services based on that shared data. If these goods or services are then allowed to compete with foreign products within a market, that market lacks fair competition. This research analyzed the practical applicability and limits of the WTO Agreement on Subsidies and Countervailing Measures as it relates to these practices, with a focus on trade in goods.

This analysis concluded the following. Data sharing with specific companies can be categorized as a service provided by the government, and if it has specificity and financial benefit, it can be regarded as a subsidy, and if causation and serious prejudice are established, government granting that subsidy shall take appropriate steps to remove the adverse effects or shall withdraw the subsidy.

Some limits were also found in the analysis, including that as there is a large variety of factors that relate to the competitiveness of digital products, including UI/UX, accuracy or efficiency, etc., it is difficult to analyze the impact of data sharing on the competitive advantage of those products via conducting the causation analysis.

In addition, this article suggests several policy implications for trade and digital policies. First, as data sharing has a larger influence on trade in services than in goods, current WTO agreements, which lack regulations related to subsidies for trade in services, cannot fully regulate such market distortions. Second, while many governments, including Japan, are promoting open data policies, they should carefully consider the consequences of such market distortions when designing those policies.