A new report released jointly by the World Trade Organization (WTO) and the Organisation for Economic Co-operation and Development (OECD) explores the significant economic impact of cross-border data flow regulations and data localization policies. Titled “Economic Implications of Data Regulation: Balancing Openness and Trust,” the report emphasizes the substantial benefits of open data regimes that incorporate robust safeguards and highlight the economic advantages of greater convergence in data regulation.
Recognizing data flows as crucial to modern social and economic interactions, the report also acknowledges the increasing prevalence of regulations that restrict these flows or mandate local data storage and processing. It points out that the economic consequences of such regulations, particularly the delicate balance between facilitating data exchange and ensuring adequate safeguards for international transfers, are not fully understood.
Through a business questionnaire and in-depth analysis of data flows, the publication aims to provide policymakers with a clearer understanding of the economic implications of their regulatory choices. It examines both the potential costs of data flow restrictions and the potential benefits derived from increased trust in data protection frameworks.
The report’s key finding is that global solutions harmonizing open data flows with the trust generated by safeguards are likely to yield the best economic outcomes for all countries, regardless of their development level. Specifically, it estimates that universal adoption of open regimes with safeguards could boost global exports by 3.6% and global GDP by 1.77%. The positive impact would be most pronounced in low and lower-middle-income economies, where GDP could increase by over 4%.
Conversely, the report warns that “full fragmentation,” characterized by complete restrictions on data flows in all economies, could shrink global GDP by 4.5% and reduce exports by 8.5%.
However, the complete absence of data flow regulation is also flagged as problematic. While it could lower trade costs, it would likely erode trust, leading to negative economic repercussions.
Regarding data localization mandates, the report stresses that their impact varies depending on the specific measures implemented. It concludes that developing economies stand to gain the most from eliminating such measures.
