WASHINGTON—Countries around the world offer a range of excuses for why they are insisting that data stay within their borders, but none are truly justified, said Nigel Cory, trade policy analyst at the Information Technology and Innovation Foundation (ITIF), in testimony today before the U.S. International Trade Commission.
“The ability of businesses to transfer data across borders is essential to today’s digital economy, yet a rapidly growing number of countries are enacting harmful policies that lock it behind their borders,” said Cory. “While countries use a range of excuses—from protecting privacy to stimulating economic growth—none hold up under scrutiny. U.S. policymakers, and those from likeminded trading nations, should step up their efforts to prevent and roll back these unwarranted barriers to modern trade. We should appeal to other nations’ self-interest: These policies won’t help them reach their privacy or security goals, and they’ll cause self-inflicted wounds by undermining the foundations of their own digital economies.”
Cory explains that concerns about privacy, cybersecurity, law enforcement, and economic growth are the main reasons countries give when they institute these policies. As he details, though, these rationales are faulty:
- Companies are bound to a nation’s privacy and data protection laws merely by doing business there—thereby establishing a legal nexus—so a firm cannot escape complying with a nation’s privacy laws simply by transferring data overseas.
- The security of data does not depend on where it is stored, only on the measures used to store it securely. A secure server in Laos is no different from a secure server in Brazil. If anything, by allowing data to leave its borders, a country allows its companies and individuals to store their data with companies that use the most advanced measures to protect the data, regardless of where it is physically stored.
- While governments obviously need a legal process to facilitate legitimate requests to access data for law enforcement and national security purposes, they should focus on ensuring that the process by which countries request assistance to transfer evidence from other countries is functioning properly, which would negate the argument for mandating data stay within borders.
- Countries are mistaken in believing that if they restrict data flows they will gain a net economic advantage from companies relocating data-related jobs to their nation. As data centers have become more automated, the number of jobs associated with each facility, especially for technical staff, has decreased. Conversely, by allowing local companies to store data anywhere in the world, these countries can reduce costs and make their firms and workers more productive, bolstering the local economy.
“Data is increasingly important to both high-tech and traditional sectors of the economy,” concluded Cory. “Rather than build virtual walls at their borders, countries should embrace principles of digital free trade. The United States and other likeminded countries should oppose data localization policies and work to halt these corrosive practices, including in future trade agreements.”
