The Inequitable Impacts of Data Localization

More than 60 countries have data localization measures in place that restrict or prohibit the flow of certain types of data across their borders to other jurisdictions. A new CGD working paper by David Medine makes clear that these restrictions may have their greatest impact on smaller economies including many African countries, limiting access to the capacities, efficiencies and greater security of international cloud computing services, and that designing national data regulations to minimize these effects is vital in those countries.

The African Union has recognized this challenge. The AU Data Policy Framework, endorsed by the AU Executive Council in February 2022, sets out a shared continental vision to cooperatively enable data to flow across Africa and pave the way to the achievement of the Digital Single Market. The first recommendation is to “cooperatively enable data to flow on the continent while safeguarding human rights, data protection, upholding security and ensuring equitable sharing of the benefits” including coordination of regulation of data-driven business and personal data protection. The Framework also suggests “developing a Cross Border Data Flows Mechanism.”

At the same time, smaller economies are often “rule takers,” forced into compliance with regulatory regimes designed elsewhere because the cost of noncompliance would be too high—think of US Federal Aviation Authority regulations on airlines effectively implemented by all airlines that fly internationally, or European regulation of genetically modified crops and, indeed, data under the General Data Protection Regulation. While this is perhaps inevitable and sometimes beneficial, it is also inequitable. And it speaks to the need for global institutional structures governing decisions where discussion and agreement can be more inclusive.

The World Trade Organization is one such institution and yet the WTO Joint Statement Initiative on Electronic Commerce, designed to create a global agreement on issues from online consumer protection through cross-border data flows, now has 89 WTO members but only seven African countries (although Nigeria has proposed data flow/localization carve-outs for developing countries and least developed countries). Again, discussion of cross-border sharing of tax data with regard to data enterprises is limited to the G-24. As the United Nations Conference on Trade and Development notes, “global data governance would help enable global data-sharing,” not least because data sharing rests on a foundation of trust.

Cross border flows of goods, services, people, and (as this paper demonstrates) data are even more important to quality of life in smaller economies than they are in large economies. But that does not mean smaller economies should have no say in the mechanisms governing those flows. Stronger global data governance is one mechanism that would help ensure such an outcome.


CGD blog posts reflect the views of the authors, drawing on prior research and experience in their areas of expertise. CGD is a nonpartisan, independent organization and does not take institutional positions.

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