data localization

The Siren Call of Data Nationalism

The Siren Call of Data Nationalism

The notion that building a larger stockpile of “data” and denying it to other countries will give one a relative advantage is misguided. Countries implementing data nationalism in Asia are some of the most populous countries in the region/world, i.e. they already produce a large amount of data. What would be more helpful is for them to maximize their existing supply of reusable data by getting more firms to use ICT to generate, collect, and analyze data. Having a large cache of raw, unprocessed data is itself not helpful. What is important is how that data is leveraged to generate insights and unlock value. To this end, countries should focus on how to assist local firms, MSMEs in particular, to understand how they can generate and create value from data, including information they create and collect themselves. This should be complemented by efforts to increase data literacy among workers and improve digital infrastructure. As more firms use ICT services, more data can be generated, collected, and analyzed. This will lead to the sort of virtuous cycle of growth that countries need to propel their data aspirations.

Unpacking the Digital Economy Partnership Agreement (DEPA)

Unpacking the Digital Economy Partnership Agreement (DEPA)

The DEPA sits in the middle.  It sets out a series of modules covering a range of topics of relevance to firms that trade digital services, ship goods across borders via e-commerce, or are otherwise involved in the digital and technology space.  These modules are meant to be building blocks.  Countries could opt to dock directly onto the DEPA, expanding the agreement with new members.  Or governments could decide to pick up and use modules, in whole or in part, in various settings.  These include slotting them directly into other trade agreements or opting to align domestic policies to DEPA. The significance of DEPA does not sit with the current three members, who have largely already agreed to uphold the same commitments and principles in the agreement under their Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) membership.  Instead, DEPA matters if and when more governments agree to use the modules or align domestic policy with its framework and structure.  The spread of DEPA is key—if non-members who are considering problematic rules on the digital economy could be encouraged to join, the agreement will be seen as a critical turning point for policy on digital issues.

Comparing Digital Rules in Trade Agreements

Comparing Digital Rules in Trade Agreements

Parties signing free trade agreements (FTAs) have begun adding new rules to regulate and harmonize provisions of importance to companies trying to operate across multiple jurisdictions.  The latest Issue Paper, from the Asia Business Trade Association, highlights the similarities and differences between this set of cutting-edge agreements in some of the keys areas of interest to digital trade.  Table 1 identifies sixteen key digital provisions across seven FTAs. All seven FTAs, described more fully below, have only two provisions in common.  All contain provisions to include the elimination of customs duties on digital products or electronic transactions, and cooperation elements.  The remaining 14 elements, however, show variation across the FTAs under examination. The United States/Canada/Mexico (USMCA) and Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), show the most advanced provisions under review in this paper.  Both agreements, as an example, include safeguards to protect developers’ rights over their software source code against the demands of disclosure. In addition, the USMCA incorporates source code-related algorithms into the subject of protection, which makes this FTA distinct from previous agreements. This amendment should facilitate implementation by providing greater clarification on source code.

Taking Data Seriously

These individual pressures have to be balanced with the needs of companies.  To effectively scale, firms are increasingly interested in building infrastructure that does not always match geographic boundaries of countries.  Citizen data and information of all sorts can be moved across borders and firms generally desire more movement rather than less.  Businesses have strong reputational reasons for wanting to protect customer information.  Governments, of course, are deeply concerned about protecting the rights of their own citizens and the security of their countries.  Officials have to balance the sometimes competing demands of business and consumer privacy or business and national security issues.  Toss into this volatile mix rapidly changing technology and a legal structure that moves on a much slower timescale and it becomes clear why rules on managing data flows in Asia has started to fragment. 

The Power of Digital Services for Consumers

The imposition of restrictions on the movement of information, particularly financial data or personal data, also risks changing the landscape.  I could not have booked my hotels or paid for my car rental, if I had been unable to move my own data across borders.  Yet governments are increasingly interested in stopping exactly these types of transactions.  Not simply to keep me from traveling, of course, but a collateral impact of many poorly thought-through policies will be to hamper the freedom of consumers to operate globally and for firms to attract customers from anywhere.  Even restrictions on the location of data servers could impact my ability to book hotels in Greece.  It could easily drive up the costs of delivering services and make it too costly for some smaller firms, like tiny hotels in Arachova, to advertise on some sites.