Data Is the Lifeblood of the Global Economy, but Restrictions on Cross-border Data Flows Are a Reality

When I recently visited a wealthy country in the Middle East, which has an impressive technological infrastructure, I could not call on WhatsApp. I could not make such a call not because of the lack of technological infrastructure, but because WhatsApp calls are banned.

In technical jargon, this means there is no cross-border WhatsApp data flow. What are the implications of cross-border data flow on the economy, human rights etc?

In the current digital era, data is no longer merely a consequence of transactions or engagements; it is an asset, a catalyst for innovation, and a vital component of the global economy.

Data is the lifeblood of contemporary businesses, as it flows across borders and fuels everything from predictive analytics and artificial intelligence to personalized customer experiences. Nonetheless, as the value of data rises, it becomes a focal point of national policy debates, with cross-border data flows at the centre.

Simply stated, cross-border data flows refer to the transfer of information across international borders. Whether it’s a multinational corporation sharing employee data between offices in London and South Africa, a start-up in Nairobi utilising cloud storage in the United States, or a European user viewing a video on a server in Japan, these flows are constant and enormous.

These flows facilitate efficiency, scalability and innovation for businesses. They enable a variety of services, content and technologies for consumers. However, they can challenge governments regarding national security, privacy, and economic interests.

There are legitimate concerns regarding the unrestricted flow of data. Countries are concerned about the privacy of their citizens, fearing data breaches or improper use.

They are also wary of potential economic disadvantages, such as local businesses being overshadowed by multinational tech corporations. National security is also a factor, as data can be utilized for espionage or cyberattacks.

Nevertheless, overly restrictive data flow policies, such as data localisation mandates that require businesses to retain data within national borders, may have unintended consequences.

Cost of restrictions

Restricting data movement can prevent businesses from accessing global markets and utilising the most advanced technological infrastructures. It can raise costs and diminish competitiveness.

Restricting data movement can lead to stagnation of innovation. Many technological advancements, especially in artificial intelligence, require enormous amounts of data. Restricted access to such information can reduce the rate of innovation.

When cross-border data flows are restricted, businesses have less access to the necessary information to create new products and services. This is because most of the world’s data is stored in a handful of countries, particularly the United States and China. If foreign companies cannot access this information, they will be at a competitive disadvantage.

Restrictions on cross-border data transfer can also increase business costs for multinational corporations because companies may need to establish local data centres or pay for costly data transfer services. These expenditures can hinder small businesses’ ability to compete globally.

Businesses are less likely to invest in innovation when they have less access to data and higher costs. This is because innovation is risky and costly, and businesses must be confident in their ability to recoup their investment. Companies that cannot access the data necessary to develop new products and services are less likely to innovate and take risks.

Reduced innovation can impede economic expansion because innovation is a critical driver of economic growth. When businesses are unable to innovate, their productivity and competitiveness suffer. This can result in the loss of employment and a decline in economic output.

Internet accessibility

Restriction of the flow of data leads to Internet fragmentation. The once-universal Internet risks becoming fragmented as countries impose their own laws and regulations. This may result in unique user experiences, diminished connectivity, and a retreat from the vision of a globally connected world.

Various countries have different security standards and privacy regulations, making it challenging for businesses to protect their data and comply with them all. This can cause companies to choose to operate in nations with relaxed security and privacy standards, fragmenting the Internet.

Political tensions between nations can result in restrictions on international data traffic. This is because countries may hesitate to share information with nations they perceive as hostile. This can contribute to the fragmentation of the Internet, as businesses may be unable to operate in nations with political tensions.

Because restrictions on cross-border data traffic can have various negative effects on the Internet, including fragmentation, governments must balance between protecting privacy, security, and national security and ensuring that the Internet remains accessible to all.

Instead of a restrictive approach, nations can adopt principles that foster a unified and balanced regime. First, implement the principle of mutual recognition, where countries can respect one another’s regulatory frameworks, recognising their shared goals despite differing methods.

Second, implementing the principle of interoperability by establishing cross-jurisdictional standards enables data transfer in compliance with local laws. Governments can be transparent about their data policies, giving businesses the necessary clarity to operate.

Third, promoting strong encryption to ensure data security in transit reduces risks and increases confidence.

Fourth, develop a global data flow mechanism that supports the responsible cross-border data flow.

One excellent case study is the Data Free Flow with Trust (DFFT), a concept proposed by the Japanese government in 2019 to promote the cross-border free flow of data while assuring the protection of privacy, security, and intellectual property rights.

Therefore, we must develop a global treaty on cross-border data free flow based on fairness, equity, and human rights principles. The African Union should develop protocols in this regard for the African continent.  

The essence of data is impartial. Its value is realized through its application, interpretation and use. We facilitate progress, innovation, and a globally interconnected community by assuring free and secure cross-border data flows.

In a world striving for digital cohesion, it is essential to ensure responsible cross-border data flows.

This article was first published by Daily Maverick. Read the original article on the Daily Maverick website.