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ICC policy statement – WORKING DRAFT
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Introduction
Many ICC member companies are concerned about the growing international trend to impose
restrictions on cross-border and international data flows. The flow of information over the Internet has
proven itself to be a key driver of economic development and job creation, especially in developing
economies. Internet services are central to the 21st century economy, ICC urges governments to
assure that any barriers to the free flow of information online are narrowly tailored to address
compelling public policy goals and consistent with the General Agreement of Trade in Services
(GATS) obligations to assure that all citizens and companies can realize the full potential of the
Internet as a platform for innovation and economic growth.
Trade implications of data flows
Global value chains (GVCs) have become a dominant feature of today’s global economy, and as a
result there is growing evidence and recognition that the nature of trade is changing. World trade is
now characterized by the international globalization of production driven by technological progress,
cost, and access to resources and markets. While 80% of global trade occurs in GVCs coordinated by
multinational enterprise (MNEs), local small- and medium-sized enterprises (SMEs) contribute
approximately 40-50% of export value added as suppliers within these chains.1 Participation of SMEs
in GVCs is especially important in the developing world, where smaller firms can represent as much as
80-90% of total employment.2
This international globalization of production necessitates the movement of electronic information
across borders. GVCs depend on seamless and uninterrupted information flows across companies
and countries. Cross-border data flows have increased economic efficiency and productivity, raising
welfare and standards of living.3 This increased importance of data flows to companies and citizens
has also increased the topical relevance of data flows in trade-related negotiations.
Economic implications of data flows
The Internet, and the data flows that support it, has accounted for 15-20% GDP growth in many
countries, including developing countries.4 Approximately 50% of all traded services are enabled by
the technology sector, according to recent UNCTAD estimates.5 With Internet of Everything (IoE)
growing fast, machine-generated data is seen to contribute to a projected 50-fold increase in Internet
traffic between 2010 and 20206 with 1 trillion connected objects and devices on the planet generating
data in 2015.7 Companies that have harnessed big data have been seen to increase their operating
1
Progress report on Analysis of Global Value Chains: Challenges, Opportunities and Implications for Policy (Paris, OECD, 12 March 2014)
Wignaraja, “Can SMEs Participate in Global Production Networks: Evidence from ASEAN Firms” in D.B. Elms and P. Low (edited), Global
Value Chains in a Changing World, (Geneva: WTO, 2013) available at www.wto.org/english/res_e/booksp_e/aid4tradeglobalvalue13_e.pdf
3
OECD Internet Economy 2012, 143
4
McAfee, Andrew and Erik Brynjolfsson,”Big Data: The Management Revolution” (2012).
5
Information Economy Report, United Nations Conference on Trade and Development, 2009 p. xvii, available at
http://unctad.org/en/Docs/ier2009_en.pdf
6
The International Data Corporation (2012). “The Digital Universe in 2020: Big Data, Bigger Digital Shadows, and Biggest Growth in the Far
East.” Sponsored by EMC Corporation. Available at www.emc.com/collateral/analyst-reports/idc-the-digital-universe-in-2020.pdf.
7
IBM (2013). “IBM 2013 Annual Report.” Available at www.ibm.com/annualreport/2013/index.html.
2
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margins by 60%.8 The International Data Corporation (IDC) expects the overall big data and analytics
market to reach $125 billion worldwide in 2015.9 McKinsey estimates that mobile Internet applications
could generate economic value of $2–5 trillion annually, nearly half from developing economies.
Data flows, within and across borders, have an undisputed impact on large-scale economic
developments and also contribute to the improvement of the day-to-day management of companies of
all sizes through business innovation (information technology and back-office consolidation, digitalized
human resources services, supply chain management, etc.), economic growth and job creation.10
Implications of trust and data flows
Data has become the raw material of the digital economy and its importance on the whole economy is
rising constantly. With the growing importance of data, questions and problems arise regarding data
privacy and data security, especially while moving personal data across borders and in light of the
increasing numbers of breaches and issues related to surveillance. Since the level of data protection
and security is not comparable across different jurisdictions of the world, difficulties arise to ensure an
appropriate level of protection of personal data across borders. While we emphasize the need to
avoid limitations to data flows, except where necessary, companies must still be aware of and take
appropriate steps to comply with applicable policy frameworks and regulations related to the security
and protection of personal data. It is important for trust that companies apply a sufficient level of
protection to personal data regardless of where it is stored, processed or transferred.
Emerging technologies such as big data, cloud computing and the IoE provide great promise of
enhanced economic growth and the potential for substantial societal benefit to health, the environment
and many other facets of life. The benefits of these emerging technologies, however, will only be
realized if they are implemented. Concerns related to trust anchored in both privacy and security need
to be addressed appropriately. As we consider how to enable cloud, IoE and data analytics business
models that rely on cross border data flows and access to large amounts and various types of data,
we must therefore appropriately consider and assure an overall security and the protection of data to
maintain and build user trust.
Data is the currency or the new oil of our digital economy. The Internet is an essential platform for
global, regional and local economic growth and societal interaction. Data flows within and across
borders – over the public Internet and through private networks – are important for individuals,
organizations and economies to obtain the economic and societal benefits outlined above. With the
objective of enhancing trust of users and certainty for companies, and thus trade in goods and
services, it is essential that companies comply with all applicable laws and regulations related to data
protection and data security. We support and emphasize the importance of enabling such data flows
and reject the notion of blanket data flow limitations. Global companies face significant challenges as
a result of emerging data and server localization requirements in third countries. However, we
8
Brookings Institution (2014). “Supporting the Internet as a Platform for International Trade — Opportunities for Small and Medium- Sized
Enterprises and Developing Countries.” Global Economy and Development. Available at www.brookings.edu/~/media/research/
files/papers/2014/02/internet%20international%20trade%20meltzer/02%20international%20trade%20version%202.pdf.
9
The International Data Corporation (2014). “IDC Predictions 2015: Accelerating Innovation — and Growth — on the 3rd Platform.” Available
at www.idc.com/getdoc.jsp?containerId=252700.
10
Brookings Institution (2014). “Supporting the Internet as a Platform for International Trade.”
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recognize instances where public policy interests exist that can cause governments to take legitimate
actions to limit data flows. Any such limitations should be consistent with agreed GATS commitments.
Where there are multiple ways of being compliant possible, companies should be able to use the least
burdensome but equally efficient method of compliance.
Economic impact of restricting data flows
Forcing production in one country can reduce production in other countries, which may encourage
third countries to pursue their own localization policies. Companies develop global supply and value
chains on the logical needs of companies and customers, the presence of resources both human and
logistical and general efficiencies and economies that such arrangements can provide. Creating
artificial constraints to such planning through data or server localization restrictions could increase the
costs of doing business and may diminish the attractiveness of the location for investment or inclusion
in such value chains. In some cases, local data storage regulation might lead to higher costs for the
local companies – including small and medium-sized enterprises – that depend on Internet (cloud)
computing and other Internet resources to operate and to reach global markets. In other cases, local
companies could be denied services altogether, because the costs of local data storage for some
companies may be too great and result in the companies not offering services in the domestic market.
Some research has focused on potential negative economic impact of recently proposed or enacted
legislation on GDP. For example, the European Centre for International Political Economy estimates
GDP losses due to data localization policies in Brazil at -0.2%, China at -1.1%, the European Union at
-0.4, India at -0.1%, Indonesia at -0.5%, Korea at -0.4% and Vietnam at -1.7%.11 While these figures
are based on implications to costs of doing business as well as possible implications of costs and
administrative burdens to investment, there may be some level of increased technology adoption or
sectoral investment which may not be fully captured in the given figures if the policy or regulatory
framework is seen by users to enhance trust. The research focuses solely on the costs of doing
business in those jurisdictions. These studies argue that these losses have the potential to eliminate
any GDP gains expected from already negotiated or under negotiation trade agreements, such as the
Transatlantic Trade and Investment Partnership (T-TIP) and the Trans-Pacific Partnership (TPP).12
At the global level, more countries are starting to impose restrictions on cross-border data flows.
Restrictions might impede effective adoption of innovative technologies and create fragmentation and
often legal uncertainty. This involves extra costs, skills gaps, degraded operating efficiency and
administrative burden for companies. Moreover, restrictions may have an adverse impact on the
possible benefits detailed above, to the point of even reversing benefits already gained. Many IoE
innovations could be crippled without cross-border data flows as fragmentation and increased
complexity caused by restrictions significantly complicate machine to machine deployment.
Big data analytics are most effective when based upon very large volumes of information that reflect
the populations served, such as patient disease and treatment data within ethical research protocols.
This would become impossible if valuable input is isolated by national restrictions. Benefits gained
through back-office consolidation (e.g. to hire, pay and administer benefits to foreign workers) can also
11
12
ECIPE, No. 3/2014 at www.ecipe.org/app/uploads/.../OCC32014__1.pdf
Ibid at 7.
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be lost if impeded by laws preventing the use of shared services. Much collaboration and many
business opportunities and chances to join global supply chains would be missed if cross-border data
flows are inhibited, which hits developing nations and economies hardest as they are most dependent
on foreign direct investment.
Policy recommendations
[Additional input needed]
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