Data localisation and barriers to crossborder data flows

Event report

[Read more session reports and live updates from the 12th Internet Governance Forum]

In his opening remarks Mr Richard Samans, Member, Managing Board, World Economic Forum, gave some context for the roundtable about the importance of data flows for the digital economy, and the necessity to find the right approach for policymaking. In other words, ‘How best to strike a balance between competing legitimate concerns on the economic side or social side, and how in particular to maintain the globally interoperable nature of the Internet while addressing those legitimate concerns.’ He split the discussion into two parts. The first was devoted to how data localisation is currently occurring, while the second part looked at three suggested approaches to data flow regulation in terms of participating parties.

Mr William J. Drake, International Fellow and Lecturer, University of Zurich, introduced a report prepared for the WEF in 2017 on data flows and the digital economy. Digital trade is an increasing part of the global policy agenda and data flows are becoming absolutely essential to the global economy. He said, ‘Much of the world’s data, that’s an estimated 90%, has been created in the past couple of years, and data flows are becoming key to the way value chains work in a variety of economic sectors.’ Many governments are looking to project territorial authority over the Internet and requiring data stores to be within their borders. In some cases, these policies also include restrictions on the cross-border movement of certain categories of data, or the prior consent of such transmissions.

Mr Drake explained variation in data localisation policies by 1) motivations stated/unstated, and 2) type of data under consideration. He also pointed to cross-border data flow barriers such as censorship and ‘digital protectionism’ adding that, ‘75 restrictions in 59 countries are based on privacy protection that prohibits the transfer of data.’ These policies greatly influence national and global suppliers, Micro, Small, and Medium Enterprises (MSMEs), national GDPs and economic development, and end users. At the close of the first part of his presentation Mr Drake asked the question as to how trade rules alone can help to deal with these issues, mentioning the Comprehensive and Progressive Trans Pacific Partnership (CPTPP). He said trade rules have considerable drawbacks:

1. Political issues – governments in transitional/developing countries; procedural concerns about closed intergovernmental processes and substantive concerns on privacy and intellectual property protection.
2. Institutional issues – binding treaties generate slow negotiation processes; issue-linkage and trade-offs for extraneous matters.

The moderator then asked the panel a question – How fit is the trade regime to address data localisation?

Mr Vint Cerf, Google, warned the audience to avoid the mistake of making analogies with the physical world, taking the example of ship containers that carry goods and comparing these with data packages, saying that these are not the same thing.

Ms Lee Tuthill, World Trade Organization, noted that trade is a tiny part of the overall picture. ‘What do Internet people need to know about the WTO? They talk about privacy and set the standards for rules that are made which can, if they need to, even break the WTO. This is what people in the Internet community need to understand about trade. What trade people want to know, is what are the solutions being proposed, and how damaging might they be to trade?’

Ms  Marietje Schaake, Member of the European Parliament, the Netherlands, said that trade rules are not sufficient alone. ‘I run into a misunderstanding by a lot of people, not least in Civil Society, that trade is facilitated only when there’s an agreement.  But trade is there with or without rules around it. And I believe that the public interest is better served when there is a framework of rules around that trade, including increasingly, digital trade. So I do not think that trade agreements will be setting norms as such.’

Mr Raul Echeberria, Internet Society, said, ‘The global economy today is mostly based on things that happen in the digital world. So anything that we do that can affect the free flow of information and security of information, could have a real effect. We really don’t anticipate how huge the impact would be on economic stability.

Ms  Anriette Esterhuysen, Association for Progressive Communications, brought attention to the issue of developing countries. ‘They are attracted to the idea of data localisation because they see opportunities in facing the threat of a globalised e-market, platforms that are huge monopolies, and which make it very hard for new entrants.’

Mr  Ricardo Meléndez-Ortiz, CEO, International Centre for Trade and Sustainable Development, spoke about frameworks of trade systems. ‘Today we have the frameworks with principles and norms to address the concerns that we’re presented with. However, countries are not using these. They’re not using them when it comes to protecting or ensuring access to data flow.’ He questioned the adequacy of such frameworks for insuring access, use, and protection of data.

Ms Hong Xue, Beijing Normal University Institute for Internet Policy & Law, agreed that localisation should not be imposed on developing countries. She mentioned a new WTO programme called “Inclusive Trade,” that aims at lowering barriers for MSMEs and individuals to access the global market. She noticed that localisation of data is also very costly for MSMEs in terms of building data centres.

Ms Mary Uduma, Nigeria Internet Governance Forum, raised the security issue of data localisation, ‘For instance, even as we speak, data from my country is being profiled. If you want to pay with your credit card when you buy via e-commerce, some companies will not accept a credit card from Nigeria.’

Mr Thomas Schneider, Federal Office of Communication, Government of Switzerland, spoke about fear as a motivation for data localisation. ‘So many people are afraid of losing control, of losing their economic basis, of losing the world they grew up in. And politicians are afraid of losing control too. At least, those who are looking for control are afraid of losing it.’ This situation is supported by security issues. Some suppose that the way is to go back to national systems models, ‘because the world is not secure, the internet is not secure and we can protect you only if you trust us as government within our borders’.

At the end of the session Mr Drake concluded his report by introducing three tracks to tackle the issues of data localisation:

1. Non-binding intergovernmental processes – trying to institutionalise the agenda within different governmental ministries and other processes, and NGOs and the private sector.
2. Multistakeholder processes – to facilitate the development of the global community of expertise of practice that is interdisciplinary, and that can bring together different parties that have interests and expertise here, perhaps establishing expert grouping that could be a focal point of contact for intergovernmental processes. 
3. Digital trade processes – ‘If there are going to be digital trade agreements, they should be stand-alone rather than intermingled with other trade issues,’ Mr Drake said. 

By Ilona Stadnik