BSA | The Software Alliance was in Brisbane, Australia this month to lead a group of member companies and partners to participate in the first round of in-person negotiations of the Indo-Pacific Economic Framework (IPEF). Meetings with the IPEF negotiators allowed us to share how cross-border data transfers are critical to economic development, as well as the real costs associated with data localization and data transfer restrictions. That context helped BSA illustrate why it is crucial that the IPEF establishes ambitious and forward-looking rules on digital trade.
Background
As my colleague Joseph Whitlock outlined last week, IPEF consists of 14 partner nations including the United States that are working toward economic agreements that further digital trade policy. BSA represents makers of enterprise software, whose products further digital transformation that changes how we work and adds new value to businesses, employees, customers and communities. Our message at IPEF highlighted how, in industries ranging from financial services to manufacturing or retail, cross-border data transfers and digital connectivity are crucial element of our economy’s continued digital transformation.
Access to Global Markets and Job Creation
First, cross-border data transfers enable Micro, Small and Medium-Sized enterprises (MSMEs) – to access global markets and help create jobs.
A 2020 World Economic Forum study found that, “approximately half of the world’s cross border services trade is enabled by digital connectivity, which has allowed developing countries and MSMEs to export through greater visibility, easier market access and less costly distribution.”
The global economy is no longer limited by geographical boundaries. Through cross-border access to information and cloud-enabled technologies, MSMEs are now able to access markets outside of their own, where they can offer and sell their services and products to the world. They also allow MSMEs to connect with suppliers and other commercial partners more easily. In such an environment, and with the assistance of cloud-enabled productivity tools, MSMEs can scale up their operations more easily, ultimately creating jobs and overall economic growth.
Access to Technology
Second, cross-border data transfers improve access to technology that facilitates innovation and competitiveness.
Cross-border data flows transfers help all businesses access productivity-enhancing software solutions, scientific research, and operational information like manufacturing production information, blueprints and so forth. This is especially important for small businesses, which often depend on the digital infrastructure provided across borders by bigger Cloud Service providers. Restricting data transfers will affect the provision of these services to small businesses.
The workforce of the future also depends on the ability to transfer data across borders, as cross-border data transfers also enable the deployment of tools that facilitate teleworking, virtual collaboration, and online training.
Economic Cost of Data Transfer Restrictions and Data Localization
By contrast, restrictions on data transfers and data localization measures expressly require data to stay in-country or require the use of domestic data centers or other equipment. Some governments have also developed their own standards or certifications for digital services and processes rather than rely on existing, internationally-recognized standards with which businesses are already familiar. While these measures are ostensibly based on privacy or security concerns, they are often more trade-restrictive than necessary to achieve the stated public policy goal.
A 2021 GSMA study suggested these measures could reduce growth by billions of dollars in countries that implement them and could result in investment losses ranging from $4 to $5 billion (USD). The measures also hurt local companies by preventing them from accessing innovative technologies, as well as participating in global supply chains and reaching customers in foreign markets, which result in loss of productivity and stymied job creation.
Closing remarks
The IPEF negotiations represent an important opportunity to establish ambitious and forward-looking rules on digital trade – and this month’s negotiations in Brisbane were only the beginning parts of a broader conversation. BSA was on the ground to make sure negotiators make digital trade issues the highest priority.
To deliver on the IPEF’s promise of shared prosperity and economic opportunity, it is critical that the IPEF contain cross-border data commitments that can help all parties benefit from cross-border access to information, knowledge, markets, and tools.