The Framework

Saudi Arabia’s Personal Data Protection Law (PDPL) and Transfer Regulations mandate that organizations cannot transfer personal data outside the Kingdom unless they meet stringent requirements including explicit data subject consent, adequacy assessments of recipient countries, implementation of approved safeguards like Standard Contractual Clauses or Binding Corporate Rules, and conducting mandatory risk assessments for continuous or large-scale transfers of sensitive data.[1] The Saudi Data and Artificial Intelligence Authority (SDAIA) requires companies to demonstrate that recipient countries have equivalent data protection standards, functioning supervisory authorities willing to cooperate with Saudi regulators, and legal frameworks that don’t conflict with Saudi law—while reserving the right to immediately halt transfers affecting national security or the Kingdom’s vital interests.^[2] Organizations face administrative fines up to SAR 5 million ($1.3 million) that can double for repeated violations, imprisonment up to one year and fines of SAR 1 million ($267,000) for unauthorized cross-border transfers, and must appoint licensed Saudi representatives if operating from abroad while maintaining detailed records of all transfer activities subject to regulatory inspection.^[3]

Implications for U.S. Technology Leadership

Saudi Arabia’s data transfer restrictions represent a textbook case of digital mercantilism—using ostensibly legitimate policy justifications to extract value from U.S. technology companies while favoring domestic and regional competitors. Limiting cross-border data flows has become a primary tool for nations seeking to disadvantage American firms that lead in digital technologies and services, with these discriminatory measures having “a disproportionate negative impact on U.S. jobs, export earnings, and companies.”^[4] The Saudi regulations force American platforms to invest in redundant infrastructure, create bespoke compliance processes specific to the Saudi market, and divert engineering talent from innovation to managing transfer mechanisms that offer no operational benefits—costs that smaller regional competitors can avoid by limiting their operations to domestic markets or structuring services to minimize cross-border data flows.

The vague adequacy standards and broad discretionary powers granted to SDAIA exemplify how digital mercantilism operates under the guise of privacy protection while actually serving protectionist ends. American technology companies face ongoing legal uncertainty about whether data can move across borders, with the constant risk of having transfers halted based on opaque national security determinations that competitors backed by state resources or operating within politically aligned regions can navigate with greater certainty.^[5] This regulatory fragmentation systematically undermines the competitive advantages U.S. companies derive from their global reach and advanced data analytics capabilities, forcing them to compete on regulatory arbitrage rather than innovation and service quality, precisely the outcome that digital mercantilist policies are designed to achieve.

Endnotes