Source: Organization of Economic Cooperation and Development, “Economic Implications of Data Regulation: Balancing Openness and Trust” ( report by OECD, February 10, 2025).
Commentary: The flow of data across borders is a necessity for today’s economies. A recent OECD report analyzed outcomes from the OECD-WTO business Questionnaire and results from econometric estimations using the WTO Global Trade Model to examine the economic impact of changes in data policies. More specifically, the report analyzed the economic impact of data flow regulation, or the movement of data, and data localization measures, or regulations explicitly mandating local data storage and processing, on trade and gross domestic product (GDP).
With regards to data flow regulation, the report examined four scenarios where regulation is 1) non-existent, 2) open or with pre-authorized safeguards, 3) more stringent against different geopolitical blocs, and 4) restricting data flow globally. It found that the no regulation scenario led to less trust in economic transactions, resulting in less exports and a decline in GDP. Meanwhile, when regulations are open or with pre-authorized safeguards, global exports are expected to rise by 3.6 percent and global GDP is expected to increase by 1.77 percent. When regulations are more stringent against different geopolitical blocs, global exports are expected to decline by 1.76 percent while GDP is expected to fall by 0.94 percent. Finally, regulations that prohibit the flow of data also have a sizable impact with exports declining by 8.45 percent and GDP declining by 4.53 percent. High income economies would experience the largest losses in this scenario.
For data localization measures, the report also analyzed four scenarios: all regions have 1) non-existent data localization measures, 2) horizonal local storage restrictions, 3) apply sector specifical local storage requirements and flow restrictions to the financial, ICT, and telecommunications services sector, and 4) local storage combined with flow restrictions in all sectors. It found that when regions do not have data localization measures, GDP is expected to increase exports by 0.26 percent and GDP by 0.18 percent. Scenario 2 would have increased globally exports by 0.19 percent and GDP by 0.04 percent. Scenario 3 would have reduced exports by 0.95 percent and GDP by 0.56 percent. Lastly, when storage and flow prohibitions are enacted for all sectors, GDP losses would be 4.63 percent.
Given these results, the report concludes by noting that governments should focus on promoting “regulatory approaches that enable the movement of data while, at the same time, ensuring that, when data crosses a border, it receives the desired protection, safeguard or oversight.”
