Data Localization, Other Measures Would Affect Global Trade, New Paper Says

Data localization and other constraints on data flows would have negative impacts on the global digital economy and would increase security risks, consequences that need to be addressed, said the Business and Industry Advisory Committee (BIAC) to the Organization for Economic Cooperation and Development (OECD) in a paper released Monday. It said cross-border data flows will accelerate as roughly 10.2 billion IoT devices come online over the next five years, resulting in nearly 4 billion people -- more than half the world's population -- connected to the Internet. But "forced localization policies" in the manufacturing and services sector "are a disproportionate response and more trade restrictive than necessary" and would reduce global trade by $93 billion annually, the paper said. "Limiting data movement will increase costs, reduce the business competitiveness across the globe and fragment the internet." Companies can work with governments to take "reasonable steps" to protect personal data, with governments providing a "proportionate response" through laws and regulations that strike a balance between fundamental individual rights and cross-border data flow, the paper said. BIAC issued a half dozen recommendations to OECD such as collecting more evidence about the impact of forced localization and other measures on cross-border data flows, documenting the impact of localization policies on trade and investment, and providing guidance on how governments can enforce existing trade rules against the proliferation of data localization.