Data Flows’ role in the Global Economy: The importance of Data Transfer Agreements (DTA)

On February 4th of this year the Trans-Pacific Partnership (TPP) was signed by its twelve member countries after 7 years of negotiation. If the agreement is enforced by each of the member countries it will have a significant effect on trade, whether this effect is good or bad is currently being debated heavily in the public. The debate has mostly been focused around the potential loss of jobs and effects on trade of tangible goods. However, what the public might not be aware of is what makes the TPP unique from a modern global economic perspective. Out of the 30 chapters included in the agreement, chapter 14 addresses issues on data and information technology. In today’s global economy, data and information play a key role in ensuring economic growth and innovation for both developed and developing countries.

According to a McKinsey Global Institute (MGI) report published last week, the contribution of data flows to the global economy surpassed that of merchandise trade in 2014. The world has never been more connected, much due to the rapid increase in level of cross-border bandwidth over the last two decades. The presence of e-commerce has allowed businesses of all sizes and traits to become exporters, accounting for 12% of global goods trade. Through the use of data flows businesses are not only able to connect with a wider array of consumers, but also maximize profits through the collection and analysis of data in order to understand their consumers’ needs. The ability to have data move across borders is therefore vital for a business in today’s global market environment, which is why chapter 14 in the TPP agreement is worth discussing.

picture 1.png(source: MGI Digital Globalization report)

Article 14.11 in the TPP agreement addresses the issue of cross-border data transfers and is meant to act as a common ground in data protection laws. Such laws may look very different depending on the country which can, from a corporate perspective, create various hurdles or restrictions. From a data-flow perspective, these obstacles can act as a form of “tariff” which could worsen a corporation’s ability to conduct and improve business through indirect trade restrictions. The enforcement of the TPP would allow cross-border data to transfer with more ease, even when dealing with personal information. Another article that helps ease these issues is article 14.13 which addresses data localization. Many countries require data collection to be stored at local data facilities within the country, something that smaller business might not have the ability to do. The TPP proposes that such requirements not be allowed in order to improve the data-flow ability for all.

Countries have realized that through data inflows and outflows they are not only able to increase trade and productivity, but also grow its economy through shared research and technology. A signal of this is the new data-flow agreement called “EU-US Privacy Shield” which was signed between the United States and the European Union two days before the TPP. It will act as a new framework for transatlantic data transfers, specifically for personal data information. Agreements such as these will make it easier for individuals and corporations to conduct data transfers from a legal stand point. However, even though countries are realizing the advantages of data flows, many are yet to utilize it and some have even imposed restrictions. The MGI report found that even though developed countries are more connected, developing countries are closing the gap slowly. MGI estimates that world GDP would be 13% higher today if these countries would have had the same level of connection over the past decade.

Trade agreements are always a hot topic of discussion, as they should be. They affect all of us, both on a large and small scale. The difficulties lay within our wide spread opinions on such topics. But what most of us can agree on is that some form of trade is good. However, the means of which we conduct trade today look very different from what they did 20 years ago. It is important to find a common ground on how data-flows may be transferred at a low cost in order to encourage trade and allow participation. Agreements such as the TPP and the EU-US Privacy Shield are steps towards such common ground, although these are still far from being enforced by each country involved.


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4 Responses to Data Flows’ role in the Global Economy: The importance of Data Transfer Agreements (DTA)

  1. Siwen Cai says:

    Totally agree with this blog’s opinion that data and information play an important role in generating economic value, and that countries should be better positioned to benefit from the wealth of data. The rapid technological developments of cross border data flows have left international trade laws outdated, so it is critical that ongoing trade negotiations and agreements should help eliminate barriers and promote free data flow by driving the world’s major trading nations to agree on an international framework.

  2. ThanhNguyen says:

    Good point on how free flow of data could immensely improve trade. However, free flow of data raises concerns regarding to personal and national security. Interestingly, today April 18, the Article 29 Working Party “rejected” the EU-US Privacy Shield since the Privacy Shield Agreement does not provide adequate protection to EU citizens. The Article 29 group continued to raise concerns over the possibility of “massive and indiscriminate” bulk collection by U.S. authorities of EU personal data.
    In short, there are lots of works needed to get done to balance the security issue and the benefit of free data flow.

  3. Jonathan Shakerchi says:

    This article really got me thinking about the future of data in trade. The fact that companies in China can instantly trade for data from the US is the marker of globalization. The world is now so technologically advanced that data is a legitimate resource any company can purchase to run their businesses, or government can use to run their countries. With data, countries can study market trends to see what monetary policies work or do not work to solve their countries’ issues. Marketing companies can use shopper preference data to reimagine marketing. By using data as a resource, mankind has entered a new frontier of technological advancement, and we are just now starting to manipulate data and see how the market for data affects the global economy.

  4. Nuria Jordana says:

    Such an interesting blog. Clearly, in the current globalized world, data flow is a powerful tool that allows businesses to connect with customers from around the world and determine public’s needs and interests. I agree with you on the growing importance of information and data transfer on today’s global economy, and how some nations may use data protection laws as an administrative barrier to imports. However, information protection principles can not be violated, and rule of law is what eventually prevails. Further improvements need to be done in this perspective. The world is changing, and so should the regulatory framework.

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