diginomica/government recently reported on the publication of a report from the Information Technology Innovation Foundation (ITIF) – “Cross Border Data Flows: Where Are the Barriers and What do They Cost?”
The report made a number of recommendations aimed at stopping the practice of data localisation.
The Information Technology Innovation Foundation describes itself as a not for profit “top ranked think tank in America for science and technology policy”. Unsurprisingly though, many of the Silicon Valley heavy-weights sit on its board, along with a smattering of lobbyists, academics and politicians.
It’s perhaps also unsurprising that the report has been released only a couple of months after Peter Thiel, one of the few technology oligarchs that supported Trump during his pre-election campaign, told Silicon Valley that, “The tide is going out on globalisation”.
The ITIF blames data localism on what itt calls mistaken rationales about privacy and cyber-security and “digital mercantilism”. The report explores the damage to the US and other national economies that data localisation causes. The practice is described as “data protectionism”.
The report dismisses privacy issues on the basis that US companies will establish a “legal nexus” by putting data within the jurisdiction of its country of origin. It talks about contractual limitations on voluntary data disclosure, but does not discuss involuntary data disclosure. The ITIF simply parks issues around surveillance and law enforcement for another time. I guess they are still working on that one.
The main argument is that data protectionism puts foreign companies at a disadvantage in domestic markets. For example, US companies increasingly need to establish data centres in the countries they are trading with.
The report is at pains to state how little a local data centre will benefit a local economy, given that so few jobs will be created (something our own government in the UK conveniently forgot when applauding the “investment” made by Microsoft, AWS and others in establishing UK regions for their cloud services).
So, if the cost and economic benefit of a local data centre is so low, why does the cost of a digital service rise so much? The cost of regulatory compliance is key. European (and other) data protection regulation is cited as an unnecessary and very costly element of “data protectionism”. The European Union’s General Data Protection Regulation (GDPR) is held up as a shining beacon in this respect.
Whilst I wouldn’t argue with some of the report’s recommendations (such as developing better measures of the digital economy and trade), we should all be worried that the report recommends that the Trump administration “should negotiate trade agreements that prohibit and eliminate digital barriers” and “initiate enforcement cases against countries, such as China, that have enacted digital protectionism policies”.
Brexit will force the UK to rely heavily on a trade deal with the US, GDPR comes into force next year, and the UK cannot afford to damage its UK-EU dataflows.
It remains to be seen whether the Trump administration takes the report on board, but I do agree with the conclusions of the diginomica/government analysis of this report – the self-interest on display is blatant, and its time for a grown-up and properly informed debate.
Image credit - UKCloud