The Information Technology and Innovation Foundation (ITIF) has urged governments to resist the trend towards restricting data flows between countries.

data localisation servers

By doing so, they can maximise the enormous benefits for economies and society from data and digital technologies.

“Restricting data flows has a statistically significant impact on a nation’s economy: sharply reducing its total volume of trade, lowering its productivity, and increasing prices for downstream industries that increasingly rely on data,” report authors Nigel Cory and Luke Dascoli write.

The ITIF, a Washington-based research and educational institute focused on technological innovation’s overlap with public policy, recommends policy makers should provide multiple mechanisms to transfer personal data and encourage firms to improve consumer trust through greater transparency about how they manage data.

They should also support development of global data-related standards and provide more assistance to developing countries to help with digital economy policy.

Policy makers should support rules which protect data flows, prohibit data localisation and only allow narrow exceptions through e-commerce negotiations at the World Trade Organization (WTO).

“Policy makers should also create new tools to enact retaliatory measures against countries that enact data localisation and other digital protectionist rules,” it added.

Other ITIF recommendations for policymakers include:

  • Focusing on building interoperability between different regulatory systems;
  • Pursuing new digital economy agreements and mechanisms for cooperation, such as those negotiated by Australia, Chile, New Zealand and Singapore; and
  • Making the Asia-Pacific Economic Cooperation’s Cross-Border Privacy Rules (CBPR) a global model for data governance by opening it up to non-APEC members.

The report noted the number of data-localisation measures in force has more than doubled in four years. At present 62 countries have imposed 144 restrictions, while in 2017 it was 35 countries with 67 such barriers. Dozens more are currently under consideration.

China is the most data-restrictive country, followed by Indonesia, Russia and South Africa, according to the report.

“To build an open, rules-based, and innovative digital economy, countries like Australia, Canada, Chile, Japan, Singapore, New Zealand, the United States and the United Kingdom must collaborate on constructive alternatives to data localisation,” it states.

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