How Barriers to Cross-Border Data Flows Are Spreading Globally, What They Cost, and How to Address ThemData-localization policies are spreading rapidly around the world. This measurably reduces trade, slows productivity, and increases prices for affected industries. Like-minded nations must work together to stem the tide and build an open, rules-based, and innovative digital economy. Information Technology and Innovation FoundationITIF_d4d5fca8-64ec-11df-9d4b-945c7a64ea2aThe Information Technology and Innovation Foundation (ITIF) is a nonprofit, nonpartisan research and educational institute focusing on the intersection of technological innovation and public policy. Recognized as the world’s leading science and technology think tank, ITIF’s mission is to formulate and promote policy solutions that accelerate innovation and boost productivity to spur growth, opportunity, and progress. For more information, visit us at www.itif.org.Nigel CoryCo-Author ~ Nigel Cory (@NigelCory) is an associate director covering trade policy at ITIF. He focuses on cross-border data flows, data governance, and intellectual property, and how they each relate to digital trade and the broader digital economy.Luke DascoliCo-Author ~ Luke Dascoli is the economic and technology policy research assistant at ITIF. He was previously a research assistant in the MDI Scholars Program at the McCourt School of Public Policy's Massive Data Institute. He holds a B.A. in Political Economy from Georgetown University.IT Industry CouncilThis report was made possible in part by generous support from the IT Industry Council.Javier Lopez GonzalezThe authors thank Javier Lopez Gonzalez (senior trade policy analyst, OECD) and Erik van der Marel (senior economist, ECIPE) for their advice, encouragement, and good humor.Erik van der MarelRob AtkinsonThe authors also wish to thank Rob Atkinson, Stephen Ezell, Daniel Castro, and Malachy McLaughlin and the many government officials, private sector representatives, trade associations, academics, and others who helped build the list of data localization measures and to understand the changing nature and impact of data localization around the world. Any errors or omissions are the authors’ responsibility alone.Stephen EzellDaniel CastroMalachy McLaughlinAn open, rules-based, and innovative digital economy_ed9d8516-e9a2-11eb-bef0-f1422c83ea00To stem the spread of data-localization policies around the world_ed9d86c4-e9a2-11eb-bef0-f1422c83ea00DataOpennessTrustInnovationData-driven innovation and digital trade are only going to become more central to the global economy.RulesGovernments need to update laws to address legitimate data-related concerns that arise, but this should be done in a considered way so that people, firms, and governments can maximize the enormous societal and economic benefits of data and digital technologies. Restricting the movement of data does nothing to help improve societal or economic outcomes.ReciprocityThe recommendations show how like-minded countries can develop shared governance arrangements that can work across legal systems, create reciprocity and nondiscrimination, and build-in independent redress and oversight, all the while allowing data flows.NondiscriminationCooperationMeanwhile, digital protectionists and scofflaws such as China and Russia refuse to support digital free trade or join global efforts to improve law enforcement cooperation on cybercrime.ResourcesWhat is particularly crucial is that countries that support shared digital governance need to dedicate far more resources to help the many “swing states” that have not enacted localization and have not yet decided to follow the EU or China’s model of restrictions and control.IntegrationThe success or failure of this engagement and these new agreements and legal mechanisms will go a long way toward shaping the Internet of the future and whether it remains open, integrated, and innovative or closed, fragmented, and based on state control.ProductivityData GovernanceWork together to build an open, rules-based, and innovative global digital economy_ed9d87aa-e9a2-11eb-bef0-f1422c83ea001Former Japanese Prime Minister AbeFormer Japanese prime minister Abe deserves a lot of credit for putting data governance and localization on the global agenda with his concept for “data free flow with trust,” which is a vision wherein openness and trust exist in symbiosis, not as contradictions. However, it is still conceptual and has not been defined.Cooperating CountriesCountries that support this goal will need to work together to develop new norms, rules, cooperation mechanisms, and agreements to address legitimate concerns raised by cross-border data flows while supporting the free flow of data. These initiatives can then form the foundation for broader debate, adaptation, and adoption to expand to more issues and countries. It will be challenging to develop a common agenda, even among core countries such as Australia, Canada, Chile, Japan, New Zealand, Singapore, the United Kingdom, and the United States.AustraliaCanadaChileJapanNew ZealandSingaporeUnited KingdomUnited StatesDigital ProtectionistsIt will be difficult, if not impossible, to make meaningful progress in any forum that involves China, Russia, and others that support digital protectionism and control.ChinaRussiaEuropeIt’s hard to include Europe given its inability to genuinely engage and collaborate with counterparts unless its privacy preferences prevail over everyone else’s.Building an open, rules-based, and innovative global digital economy will depend on a small group of proactive and ambitious countries working together. This path ahead reflects the fact that there is no global forum for cooperation and progress on data issues—and nor should there be at this stage.Personal DataProvide multiple mechanisms to transfer personal data_ed9da780-e9a2-11eb-bef0-f1422c83ea001.1GovernmentsCountriesGovernments should provide multiple mechanisms for the cross-border transfer of personal data. These mechanisms should be accessible to firms of all sizes. Countries should explicitly mention acceptable frameworks and standards for transfers.Consumer TrustEncourage firms to improve consumer trust through greater transparency about how they manage data_ed9da88e-e9a2-11eb-bef0-f1422c83ea001.2FirmsConsumersGovernments should encourage businesses to improve transparency on how they manage data, including on a global basis, such as by regularly disclosing information about government requests for data.Data StandardsSupport the development of global data-related standards_ed9da974-e9a2-11eb-bef0-f1422c83ea001.3GovernmentsMulti-Stakeholder ForumsIntergovernmental ForumsOECDGovernments should support global, market-led, voluntary, and consensus-based efforts to develop and use data and digital technology standards, such as via multi-stakeholder forums and intergovernmental forums (e.g., OECD).Government Data & ServicesProtect cloud-based government data and services_ed9daa64-e9a2-11eb-bef0-f1422c83ea001.4GovernmentsCloud ProvidersGovernments should protect cloud-based government data and services by ensuring that cloud providers are audited and certified against national and international standards, sector-specific regulations (such as health care and financial), national certifications (e.g., U.S. FedRAMP, Germany C5, Australia IRAP), and global accreditations (e.g., ISO 27001 and ISO 27018).Developing CountriesProvide more assistance to developing countries to help with digital economy policy_ed9dab4a-e9a2-11eb-bef0-f1422c83ea001.5Developing CountriesDeveloped EconomiesDeveloped economies should provide technical assistance and capacity-building assistance to developing economies to help them build their data governance framework.Digital TradeSupport digital free trade_ed9dac30-e9a2-11eb-bef0-f1422c83ea002Digital free trade: Policymakers should support rules that protect data flows, prohibit data localization, and only allow narrow exceptions to these provisions at e-commerce negotiations at the World Trade Organization (WTO). Policymakers should also create new tools to enact retaliatory measures against countries that enact data localization and other digital protectionist rules. Policymakers should encourage national and global bodies to conduct surveys about the firm-level impact of data localization. Trade negotiators should develop transparency and good regulatory practices provisions to ensure opaque regulatory rulemaking can’t be used to enact barriers to data flows and digital trade.RulesSupport rules that protect data flows, prohibit data localization, and only allow narrow exceptions to these provisions at e-commerce negotiations at the World Trade Organization (WTO)._ed9dad2a-e9a2-11eb-bef0-f1422c83ea002.1World Trade OrganizationSupport an ambitious outcome on data flows at the e-commerce negotiations at the WTO, including an explicit prohibition on data localization and narrow and detailed exceptions. The United States and others should exclude China and Russia and others that do not support ambitious outcomes. A weak result may be worse than no deal at all.Retaliatory ToolsCreate new tools to enact retaliatory measures against countries that enact data localization and other digital protectionist rules_ed9dae1a-e9a2-11eb-bef0-f1422c83ea002.2Digital Free-Trade CountriesDigital Protectionist CountriesFirmsTo create reciprocity, policymakers from digital free-trade countries should develop new countermeasures against countries that enact data localization and other digital protectionist measures. Firms from digital protectionist countries shouldn’t benefit from open digital markets.SurveysEncourage national and global bodies to conduct surveys about the firm-level impact of data localization._ed9daf0a-e9a2-11eb-bef0-f1422c83ea002.3PolicymakersNational BodiesGlobal BodiesFirmsPolicymakers should encourage national, regional, and global organizations to conduct detailed surveys about the impact of data localization and other barriers to cross-border data transfers.Transparency & Regulatory PracticesDevelop transparency and good regulatory practices provisions to ensure opaque regulatory rulemaking can’t be used to enact barriers to data flows and digital trade._ed9db00e-e9a2-11eb-bef0-f1422c83ea002.4Trade NegotiatorsDigital free-trade countries should advocate for transparency and good regulatory practices as part of trade agreements, such as allowing parties to request the publication of impact assessments to ensure that digital regulations are appropriate, proportionate, and effective.2021-07-192021-07-20https://itif.org/publications/2021/07/19/how-barriers-cross-border-data-flows-are-spreading-globally-what-they-cost?mc_cid=031638e072&mc_eid=131f75a87fOwenAmburOwen.Ambur@verizon.net