Spread of Data Localization Measures Strangles Free Markets

May 28, 2020

Data localization measures require, either through a de facto or a de jure system, data from economic transactions or other subject matter to be stored and processed on in-country servers.   The measures are proposed as a means to safeguard national security or consumer privacy. In a digital world, security of data depends on software and the cloud architecture storing the data, not where servers are physically located. Instead, data localization measures act more as an industrial strategy as their steep compliance costs require foreign forms to hire, outsource, transfer knowledge, and deliver a poorer quality of service depending on how data is to be used.

Research suggeststhat lifting these barriers would increase global service imports by 5 percent and increase total factor productivity by 4.5 percent.  As a result, PRA’s Trade Barrier Index adopted components of ECIPE’s Digital Trade Restrictiveness Index to incorporate data localization measures as well as a other digital policies that result in a reduction of global trade flows. This report is a non-exhaustive list of countries and the data localization measures they impose on free-trade.