Quick Win No. 4

Foster a predictable regulatory environment for data flows 

The digital transformation of international trade has brought about significant changes in international trade, lowering the cost of trading across borders, and allowing smaller companies easier access to the gains from participation in global value chains. An essential component of digital trade is the ability of data to flow across borders. Yet, the number of countries imposing barriers to the free flow of data has nearly doubled over the past four years. 

These restrictions are often identified by firms as being among the most burdensome barriers to trade. Recent research shows that small firms established during the COVID-19 pandemic have increasingly relied on exports to grow. Barriers to digital trade could seriously hurt these small businesses, particularly during economic headwinds, negatively impacting trade in services, productivity, innovation, and overall GDP. Compounding the economic costs, restrictions on data transfers can also limit privacy and freedom of expression.

To date, countries have established binding rules in digital trade through preferential trade agreements and digital economy agreements. The DEPA, the US-Canada-Mexico Agreement and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership have afforded their parties a common understanding of the importance of data in the digital economy. Commitments include prohibiting data localization, initiatives towards interoperability and cooperation in areas essential to digital innovation such as digital identity and fintech solutions. While such preferential commitments represent an important step forward in the regulation of a crucial asset in the digital economy, they risk creating a spaghetti-bowl through which companies must navigate. 

Meaningful, binding commitments on data flows are needed for countries to fully realize the potential benefits of digital transformation. Open and secure data flows will serve to accelerate this transformation and will play a vital role in driving innovation and ensuring the continued dynamism of the digital economy. A multilateral agreement with binding commitments on data flows will not only enable economic growth, but ensure this growth is inclusive and sustainable.

We call for the establishment of a task force composed of researchers, policymakers, and private sector leaders to encourage cooperation at the multilateral level on the important topic of cross-border data transfers. The objectives of this task force should be to:

• Enhance understanding of the consequences of restrictive policies on data flows; 

• Address the concerns and legitimate policy objectives that lead to data restrictions, by identifying capacity building and targeted technical training programs for government institutions and local companies on new skills for the digital economy;

• Develop programs to support innovation through incubators and accelerators for startups and innovative companies;

• Issue a call to action by high-level government officials for ongoing digital economic cooperation and for the WTO to initiate discussions towards a multilateral digital trade agreement with binding commitments on data flows.

These actions will contribute to the goal of fostering a predictable regulatory environment for data flows in digital trade.