Frontier’s report for the Department for Digital, Culture, Media and Sport (DCMS), modelling the economic impacts of data localisation measures for a selection of countries (including the UK) has been published.

Digital sectors have been a major driver of international trade and investment flows in recent years, and this has been facilitated by cross-border flows in data. At same time, governments have also shown an inclination to restrict flows in cross-border data flows. This could be done through requirements that data needs to be stored in facilities within the jurisdiction, and by imposing various conditions on accessing, transmission or processing of data on a cross-border basis. Some jurisdictions are also pursuing or maintaining measures that impose absolute restrictions on cross-border data flows. Such measures come under the broad heading of data localisation.

Data localisation measures may be pursued for a number of reasons, including privacy of personal data national security, dealing with market power, sectoral regulation matters, and industrial policy. While many of these broader reasons have both political and economic legitimacy, their pursuit through data localisation generates costs by increasing the fragmentation of global data governance, which in turn can impose costs on trade and investment. Our report shows that these costs can be significant, and that for the same reason, international collaboration that seeks to reduce fragmentation and restrictiveness can generate benefits.  Such collaboration can take the form of provisions in Free Trade Agreements (FTAs), arrangements negotiated under the auspices of the WTO (such as the current Joint Statement Initiatives) and in bespoke bilateral data agreement. These provisions can seek to ensure that measures taken to promote wider policy objectives are no more restrictive on trade than is necessary

Specific findings in our report include:

• International trade agreements can help to lock in existing levels of liberalisation, create more transparency and predictability in relation to policy affecting cross-border data flows, and promote further liberalisation;
• Cross border data flows play a significant role in stimulating trade. Like many major economies, the UK would face adverse impacts from an upswing in restrictiveness on cross-border data flows;
• Qualitative evidence suggests significant gaps in understanding and preparedness by businesses concerning data localisation requirements.

For more information and to access the full report, please click here.