Barriers to digital trade and BSA’s digital trade agenda

A number of countries have adopted or are considering policies that would either significantly restrict the flow of data across their borders or require that data servers be located in their jurisdictions as a condition for serving their local markets. These types of restrictions undercut the enormous efficiencies of scale and economic benefits that come from digital distribution of services.

The network’s defining feature is that it routes data as efficiently as possible. Restrictions on cross-border data flows threaten that basic design.

Cloud computing is also a great example of how digital trade can empower enterprises and consumers with productivity tools deployed across borders. While clouds can be located on premises or contained within a given jurisdiction, cloud computing often involves the storage and processing of data in multiple locations and even in multiple countries. Indeed, many of cloud computing’s primary advantages — such as its reliability, resiliency, economies of scale, and 24-hour service support — can require that data be stored in multiple markets. Mandating that cloud service providers establish servers in every market where they do business will raise the costs for end users who look to the cloud as a cost-effective way to access highly scalable computing capabilities.

Requiring enterprises that offer cloud services to confine data within a particular country also could prevent them from enhancing security by backing up data in multiple locations.

More generally, cross-border transfers of data have become critical to the core operations of both large and small enterprises. Companies need to share product designs, marketing plans, customer records, inventory data and other essential information between offices and among business partners in order to effectively manage their operations. Yet many countries are implementing policies that threaten this business model.

For example, a number of countries — including Argentina, Australia, Brazil, Canada, Chile, China, Colombia, Costa Rica, Greece, Hong Kong, India, Indonesia, Korea, Mexico, Peru, Russia, Switzerland and Vietnam — have adopted or have proposed rules that prohibit or significantly restrict companies from transferring personal information out of their respective domestic territories.

Frequently, such policies are put forward in the name of improving consumer privacy. A key challenge is addressing legitimate concerns while preventing countries from using unwarranted or overreaching policies that block cross-border trade in data-enabled services.

Mandating that cloud service providers establish servers in every market where they do business will raise costs for end users.

Addressed properly, privacy laws and resulting government and company practices can facilitate digital trade by providing a foundation of trust for consumers that their data will be properly protected. At the other end of the spectrum are privacy laws that impose hard mandates on storing data locally, allowing no flexibility for cross-border data trade. Policymakers can ensure that their citizens and businesses are able take advantage of digital services by adopting privacy regimes that work together with those of other countries.

To capture the full benefit of this digitization, we need a comprehensive agenda to modernize outmoded trade rules in ways that enable electronic commerce, promote technology innovation and create level playing fields.

In the light of this, BSA has designed the following digital trade agenda:

Modernize Trade Rules to Enable Digital Commerce

• Ensure data can flow across borders with few restrictions.
• Cover current and future innovative services.

Promote Technology Innovation

• Provide robust intellectual property protections.
• Promote market-led, globally adopted technology standards
• and minimally burdensome technical regulations.

Create Level Playing Fields

• Open up government procurement.
• Keep state-owned enterprises on a level playing field.
• Expand the Information Technology Agreement.