Defending Digital Globalization - Foreign Affairs
Defending Digital Globalization - Foreign Affairs
Defending Digital Globalization - Foreign Affairs
Over the last 25 years, the Internet has become a conduit for trillions of
dollars in commerce, transforming industries, national economies, and the
nature of globalization itself. Today, as global trade in goods and services
has plateaued and global financial flows have declined dramatically, cross-
border data flows are exploding in volume. Data flows in and out of the
United States alone are estimated at 80 terabytes per minute—eight times
the size of the entire print content of the Library of Congress. Since 2005,
they have increased by a factor of 80, from just 5 terabits per second to an
estimated 400 per second.
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1,500,000
1,000,000
500,000
0
’05 ’07 ’09 ’11 ’13 ’15 ’17 ’19
Data: Telegeography and McKinsey Global Institute Share
All of this activity has a real payoff. MGI estimates that between 2004 and
2014, global flows of data, finance, goods, people, and services raised world
GDP by at least 10 percent compared to a hypothetical world without
them, adding $7.8 trillion to the world economy in 2014 alone. Remarkably,
cross-border data flows—which were negligible just 15 years ago—
accounted for $2.8 trillion of this value, surpassing the impact of the global
goods trade, which has evolved over centuries.
DIGITAL PROTECTIONISM
There are three major categories of policies that restrict data flows: data
localization requirements, general barriers to the free cross-border flow of
data, and national standards of data privacy.
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The third category is the most diffuse, covering the variations in national
data privacy requirements. Different countries have different views on the
appropriate amount of privacy for consumer data. The EU, for instance,
places sharp restrictions on the ability of companies to commercialize or sell
consumer data, whereas the United States is more lenient. For global
companies, however, complying with myriad national rules can be
cumbersome. Harmonizing privacy requirements, or creating international
regulatory or legal frameworks to deal with country by country variation,
would be hugely beneficial. The U.S.-EU and U.S.-Swiss Privacy Shield
Framework, for example, is an agreement that creates standards for how
U.S. companies should handle personal data on EU citizens, in order to
facilitate transatlantic commerce while addressing European privacy
concerns. The agreement sets out rules about U.S. government access to
personal data and creates dispute-settlement mechanisms for individuals
who feel their data has been misused. U.S. companies register for the
program, and the U.S. Department of Commerce conducts reviews to
ensure compliance. Registration is voluntary, but companies that don’t join
are open to prosecution by the EU for failure to comply with their digital
privacy laws.
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Another trade deal that might address data flows is the proposed Trade in
Services Agreement (TISA), a 23-party trade deal that includes the United
States, the EU, Japan, and Australia. Today roughly half of global trade in
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services occurs digitally, and that share is growing rapidly. This makes TISA
an important agreement for advancing rules on free digital trade. The
agreement currently being negotiated includes proposals to open markets
and to establish clearer rules in industries such as licensing, financial
services, telecommunications, and transportation. It would be a small step
to expand TISA to include proposals for protecting the free flow of data.
These multilateral trade deals are not the only avenues for setting rules of
the road. The Information Technology and Innovation Foundation (ITIF),
for example, has argued for a data services agreement at the WTO that
would commit countries to protecting cross-border data flows. The ITIF
also suggests coming up with so-called Geneva Conventions for data. Just
as the Geneva Conventions set international rules for warfare, the
hypothetical data conventions would establish a standard set of protocols
for handling and securing data—and respecting privacy—that network
administrators, IT professionals, and government regulators around the
world would be expected to adhere to. Such conventions would codify
procedures and help nations create greater regulatory transparency for
companies.
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