Data Localization Laws Bad for Trade, Internet, Say Administration Officials

Obama Administration officials outlined the threat to international trade stemming from data localization laws in foreign countries, at a Brookings Institution event Thursday (here). Some countries have sought to restrict the flow of data across borders in reaction to NSA surveillance activities revealed by former contractor Edward Snowden, said Richard Salgado, Google law enforcement and information security legal director. Those policies can harm the U.S. economy and hamper the open Internet standards the administration seeks to secure, said administration officials.

Global data flows are increasingly important to U.S. gross domestic product, said Assistant U.S. Trade Representative Christine Bliss. The most significant challenge to data flows are data localization requirements that are "tied" to the Internet, which have "enormous costs," she said. Other challenges include countries that store data within their own borders and who favor "indigenous" technologies and standards, the latter of which can "deter investment," said Bliss. The "lack of inoperability" between "privacy regimes" is another challenge to data flows, she said.

"Cross jurisdictional" issues between foreign governments are the "biggest challenge" to international data flows for trade, said Daniel Sepulveda, U.S. deputy assistant secretary of state for economic and business affairs. Another problem is that some countries believe the Internet "disproportionally benefits" the U.S., which can produce "traditional protectionist tendencies," he said. Countries have tried to "force production in a given market" to create an "Internet economy" within their borders, said Sepulveda. Such policies view the Internet not as a "platform for development, but as a source of development," he said. "It's a piggy bank rather than a bank account."

Trade and surveillance have "collided ... in an undeniable way," said Google's Salgado. The data localization laws enacted by foreign countries present "very significant problems" for Google and its users, he said. The "irony" of data localization laws is that they hurt the businesses governments purport to be assisting, he said. Some foreign government's have responded to the Snowden disclosures by attempting to construct surveillance regimes that match the scope of the NSA, but those laws are often "extraterritorial," said Salgado. The USA Freedom Act (S-2685) (HR-5196) and the Law Enforcement Access to Data Stored Abroad (Leads) Act (S-2871) would help address concerns about data collection and surveillance, he said.

Sens. Chris Coons, D-Del., Orrin Hatch, R-Utah, and Dean Heller, R-Nev., introduced the Leads Act last week (here). The bill would require U.S. authorities to get a warrant before obtaining data stored abroad on non-U.S. citizens. Microsoft -- and many technology companies -- have been seeking such a law. The act would reform surveillance statutes in the Electronic Communications Privacy Act that Salgado called "way out of date." The USA Freedom Act would help to address concerns about "aggressive" U.S. data collection practices under the Foreign Intelligence Surveillance Act, said Salgado.

Whether and how the Internet's infrastructure applies to a nation's sovereignty is a "big philosophical battle" currently underway, said James Mulvenon, Defense Group Inc. intelligence division vice president. Countries like Russia and China believe they have a "right to not only protect the network, but also to police the content on that network," he said. Such debates also influence how Internet and IT standards can be used as "trade weapons," he said. -- Joe McKnight