WTO and OECD Report Highlights Economic Impact of Data Flow Regulations and Localisation Measures

Using insights gathered from a comprehensive business questionnaire and detailed data flow analysis, the publication aims to assist policymakers in making informed regulatory decisions.

A newly released report, "Economic Implications of Data Regulation: Balancing Openness and Trust," published on February 10 by the World Trade Organization (WTO) Secretariat and the Organisation for Economic Cooperation and Development (OECD), delves into the economic effects of regulatory systems governing cross-border data flows and data localisation.

The report underscores the critical role that data flows play in modern social and economic interactions while drawing attention to the increasing number of regulations that condition data flows or mandate domestic storage and processing. It emphasizes that although these regulations are becoming more common, their full economic implications remain poorly understood, particularly concerning the balance between facilitating data movement and ensuring adequate data safeguards.

Using insights gathered from a comprehensive business questionnaire and detailed data flow analysis, the publication aims to assist policymakers in making informed regulatory decisions. The findings reveal both the potential costs associated with restrictive data flow regulations and the benefits derived from increased trust in economic transactions conducted within robust data protection frameworks.

Key findings from the report include:

1. Benefits of Open Regimes with Safeguards: The report highlights that adopting open data regimes with proper safeguards could lead to significant economic gains. If such frameworks were implemented globally, exports could increase by 3.6%, and global GDP could rise by 1.77%. Low and lower-middle-income economies stand to benefit the most, with potential GDP growth exceeding 4%.

2. Risks of Full Fragmentation: Conversely, the report warns against "full fragmentation," where all economies fully restrict data flows. This scenario could result in a 4.5% decline in global GDP and an 8.5% reduction in exports, illustrating the severe economic consequences of overly restrictive data policies.

3. Challenges of Unregulated Data Flows: The absence of any data flow regulation is also problematic. While it may lower trade costs, it would simultaneously erode trust in digital transactions, potentially leading to adverse economic outcomes.

4. Impact of Data Localisation Measures: The report specifically examines measures mandating local data storage or processing. It notes that the economic impact of these measures varies based on their implementation type. Developing economies, in particular, would gain significantly from the removal of data localisation requirements, facilitating greater participation in global digital trade.

Overall, the report calls for global solutions that balance the free flow of data with the trust benefits provided by safeguards. Such balanced approaches are expected to yield superior economic outcomes across all levels of development, fostering both growth and security in the digital economy.