This document discusses the importance of cross-border data flows for businesses and the economic impacts of restrictions on such data flows. It notes that information and communication technologies (ICT) have driven globalization and productivity growth. However, some countries impose restrictions on transferring customer or employee personal data across borders or require local data storage. This can negatively impact company revenues and increase costs of service through reduced efficiency, scalability, and ability to innovate quickly. The document recommends lessening such restrictions to facilitate international digital trade and establishing efficient cross-border data transfer regimes.

1. BUSINESS IMPACT
RESTRICTIONS ON CROSS BORDER DATA FLOWS
Director Government & Industry Relations Rene Summer

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Ict shaping the SOCIETY
FUNDAMENTAL TECHNOLOGY DRIVERS
MOBILITY BROADBAND CLOUD DIGITIZATION

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Sources: Chalmers Institute of Technology, Arthur D Little,
OECD Broadband and the Economy, Future of Internet 2008
Significance of ICT
 Increased global market reach
expanding trade but also
intensified competition,
 General increase in economic
efficiency and labor productivity,
 Increased pace of knowledge
diffusion and increased positive
spill-over effects,
 Revised view of the role of
innovation (innovation-led growth)
Economic Impact of ICTChanging Economic Thinking > ICT
Source: Jati Sengupta, Understanding Economic Growth, Springer 2011
DIRECT INDIRECT INDUCED

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› A two-way relationship: technology drives trade and trade
drives technology innovation
› Equalizing effect on countries’ trade composition, causing
more economic integration
› Increased participation of developing countries in trade
› Regional tech-capability cohesion effect, technology
spillovers, resulting in regional convergence in capabilities
ICT impact on trade
Source: WTO , World Trade Report 2013
Driving globalization and a key
source of productivity growth

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The Data factor in ICT
› Growth of connectivity
– IP traffic
› Growth in stored data
› Advances in Processing:
– Automation, (IT -1960s)
– Scope (new uses as existing services go digital)
› Social Networking
– Insight (analytics driven services/models)
› Attention Economics, (advertising)
› Virtualization (efficiency):
– BYOD
– Cloud
– SDN
› Business Process Outsourcing (specialization)
› Global data flows (economies of scale)

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The common interest
›Continued digitization of the society
›Data processing is the backbone of a
knowledge based society
›Non-ICT and ICT industries growth
›End users trust is a must
›It falls upon the industry and policy makers
to provide adequate protective measures

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Drivers of restrictions to
cross border data flows
SOCIETY PEOPLEBUSINESSculture

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TYPE OF RESTRCTIONS to
CROSS BORDER DATA FLOWS
ABSOLUTE BARRIERS
ECONOMIC
DISINCENTIVES
TC*
*TC = TRANSACTION COSTS

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› Forced localization of IT/Server infrastructure.
› Prohibitions to transfer customer personal data to third
country.
› Restrictions to transfer employee personal data to third
country.
› Extra-territorial regulatory dilemmas, compliance in one
jurisdiction causes non-compliance in another.
› Lengthy and burdensome transfer agreement approval
process by DPA.
› IPR-enforcement mechanism, insufficient immunities for
caching and hosting data in third country.
Examples of cross border
data flow restrictions

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Revenues
› Service
Adaptation
› New Services
› Agile innovation
› TTM
Business impact of cross
border data flow restrictions
Cost of Service
› Efficiency
› Scalability
› Complexity
Compliance Costs
› Direct compliance
costs not significant
for Large companies,
but very significant for
specific projects or
SME.
› Indirect impact on
revenues and cost of
service, significant
NEGATIVE IMPACT ON REVEUES AND COST OF SERVICE

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› Lessening restrictions
– Allow cross-border flows facilitating commercial data processing
– Eliminate requirements on locally based servers / IT infrastructure
– Clear roles, responsibilities and non-transferable statutory liabilities
› Efficient cross border transfer regime
– Promote CBR/Safe Harbor like instruments
– Minimize restrictions on employee data cross-border flows
– Where CBR/Safe Harbor ARE available additional approvals of DPA
should not be required, and where NOT available, institute efficient
administrative transfer processes
– No additional IPR enforcement measures beyond (TRIPS/GATT)
› International harmonization
– Accountability regime
– Risk-based approach
– Global trade promotion of commercial/digital services
Key Principles: cross
border data flows (CBDF)