Cross-Border Data Flows Enable Growth in All Industries

February 24, 2015

The importance of cross-border data flows is not confined to high-tech industries. Increasingly, firms in a wide array of industries, from mining and retail to finance and manufacturing, have operations, suppliers, or customers in more than one country and rely on the data that come from these other countries. The benefits of sharing data across borders are realized by consumers in a myriad of ways: from cheaper, safer, and more environmentally friendly products to personalized services. Unfortunately, many countries have begun creating policies that impede cross-border data flows. Such policies are likely to backfire and hurt these nations’ own domestic firms.

This report offers several examples of how cross-border data flows are vital to not only technical industries, but traditional industries as well. It argues that countries should avoid protectionist rules that limit data exchange across borders, such as data residency requirements that confine data to a nation’s borders. This report explains why protectionist data policies—whether they are intended to enhance security or privacy, or foster economic activity—tend to backfire in the long run.

Finally, this report recommends six ways to roll back anti-competitive trade practices for data:

  1. International organizations should develop mechanisms to track data-related localized barriers to trade, making it easier to quantify the economic impact of those measures.
  2. International organizations, such as the World Bank, should push pack against countries that create barriers to cross-border data flows.
  3. The United States could negotiate its trade agreements, such as the Trans-Pacific Partnership (TPP) agreement, to eliminate these barriers.
  4. The United States should use international forums, such as the World Trade Organization (WTO), to propose a treaty to reduce member states’ incentives to pursue data-related localized barriers to trade. This agreement could be called a “Data Services Agreement”.
  5. All future U.S. trade promotion authority legislation that the U.S. Congress produces should push back on data protectionism by directing U.S. negotiators to do so.
  6. The United States should engage its trading partners in a “Geneva Convention on the Status of Data” to resolve international questions of jurisdiction and transparency regarding the exchange of data.

Only by creating a global trade system that respects the free flow of data can countries fully realize the benefits of a data-driven economy.