Data localisation, what is it and what are its potential implications? (JAPAN)

Arguments

Transparency is crucial in implementing new policies and regulations

Topics: Policy, Regulation

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Sectors like government services, financial, medical are sensitive and need to ensure policy space for storing data

Topics: Government Services, Financial Sector, Medical Sector, Data Localization

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Developing countries might have appetite to impose data localization requirement for digital realizations

Topics: Developing countries, Data Localization, Digital Realizations

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Emphasizes the importance of feedback loops in policy making.

Supporting facts:

• Investment approvals process initially encouraged data localization indiscriminately.

• Due to feedback, the process now offers more front-end planner to present their data management plans.

Topics: Policy making, Feedback loops

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Data localization measures have not impeded the economy that owns in market cap terms, two-thirds of the internet, which is U.S. big tech.

Supporting facts:

• U.S. big tech is surviving well despite these 100 data localization measures.

• They have an army of ex-diplomats and trade officials to navigate the complex bureaucratic requirements in countries.

Topics: Data localization measures, Economy, U.S. big tech

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An Australian trade negotiator would never argue against the unfairness of agricultural subsidies, because they approach trade negotiations from a position of equality.

Supporting facts:

• Australia is engaging in talks at the WTO which includes many developing and least developed countries.

Topics: Trade negotiations, Agricultural subsidies, Equality

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In parallel with digital economy rules, Australia is also working on a consumer protection rule that deals with redress questions and the misleading and deceptive activity on the internet.

Supporting facts:

• This consumer protection rule is the most ambitious Australia has ever committed to.

• It also involves giving information around goods sold on the internet, thereby aiming to improve the misleading and deceptive activity online.

Topics: Consumer protection, Digital economy rules, Internet

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Trade rules only targeting the most egregious data localization measures should consider the non-conforming measures for the services and investment chapters

Supporting facts:

• Non-Conforming Measures (NCMs) provide significant policy space not only for existing legislation and measures but also policy space in a variety of public policy areas such as health, education, investment screening

Topics: Trade Rules, Data Localization, Public Policy

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Negotiating in trade dynamics are felt more acutely in a bilateral negotiation rather than in a group negotiation environment

Supporting facts:

• Over two-thirds of the 90 members that are negotiating digital rules in WTO are developing countries, changing the overall power dynamics

Topics: Trade Negotiations, Bilateral Relations, Power Dynamics

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Report

Transparency is crucial in the implementation of new policies and regulations, especially in sectors like government services, finance, and healthcare that deal with sensitive data. It is important to ensure that these sectors have the necessary policy space for securely storing and managing data.

Developing countries, in their pursuit of digital advancements, may impose data localization requirements, meaning that data generated within their borders must be stored locally. Australia is a country that respects data localization measures. They hold childcare and healthcare records locally, demonstrating their commitment to protecting sensitive information.

Additionally, Australia focuses on minimizing barriers that hinder global trading by adopting rules on data localization to enhance trade. Australia values both non-binding norms and principles as well as binding rules. They have negotiated with countries like Singapore and the European Union to find common ground and achieve flexible and cooperative policy development.

Feedback loops are essential in the policy-making process. Australia emphasizes the importance of receiving input and learning from experiences to improve. Their investment approvals process has evolved to provide more opportunities for front-end planners to present their data management plans based on feedback.

Contrary to concerns, data localization measures have not significantly hindered the U.S. big tech economy, which holds two-thirds of the internet’s market cap. These companies have effectively navigated the complex bureaucratic requirements in different countries with the help of their resources, including ex-diplomats and trade officials.

In trade negotiations, Australia advocates for equality and engages in talks at the World Trade Organization (WTO) to address issues such as unfair agricultural subsidies. They are committed to achieving fair and equitable trade agreements. Consumer protection is another priority for Australia.

They are working on rules to combat deceptive online activities and improve the transparency of goods sold on the internet. Their ambitious consumer protection initiatives aim to enhance the overall online shopping experience and address concerns about misleading practices. Trade rules often target severe data localization measures, but it is important to consider non-conforming measures (NCMs) that allow significant policy space in areas such as health, education, and investment screening.

By taking these measures into account, trade rules can strike a balance between data localization concerns and broader public policy objectives. Power dynamics in trade negotiations are changing, with developing countries representing over two-thirds of the members involved in negotiating digital rules at the WTO.

This shift highlights the need to consider a broader range of perspectives and priorities in trade discussions. Lastly, persistence and ongoing engagement are crucial in the negotiation process to achieve visible outcomes. Group dynamics in negotiations provide more opportunities and a better understanding of different policy dimensions.

In conclusion, transparency, respect for data localization measures, minimizing trade barriers, and a commitment to equality and consumer protection are key aspects of Australia’s approach. By embracing both binding rules and non-binding norms, and actively seeking feedback and input, Australia strives for effective and well-rounded policy-making in the global context.

Arguments

Data localization and data flows should not be written language in trade agreements

Supporting facts:

• Risks of such language pertaining to data in trade deals exacerbating imbalances of power and resources between countries

• Current complexity and lack of understanding surrounding data issues

• Example of disproportionate agricultural subsidies highlighting how complexity often works against less powerful countries

Topics: Data Localization, Trade Agreements

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The regulation of data and its flow needs to be nuanced

Supporting facts:

• Different types of data have different imperatives

• Current evolution of dialogue towards more nuanced understanding of data and its flow

Topics: Regulation, Data Flows

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Lack of transparency and enforcement in terms of data use

Supporting facts:

• The regulations and policies are not efficient enough

• Data handling often remains unknown until there’s a data breach or whistleblower interference

• The Information Commissioner’s Office in the UK recently tried to fine Clearview AI over the breach of GDPR

Topics: Data privacy, Transparency, Enforcement, Data breach

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The necessity of improvement in transparency of data treatment

Supporting facts:

• Accountability issue mentioned by Amy

• Problem with breaches occurring in another jurisdiction

Topics: Data privacy, Transparency, Data treatment

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Challenges of cross-border enforcement and consumer redress

Supporting facts:

• Issue with jurisdiction – local courts ruling ICO didn’t have jurisdiction over a breach case as the data had been used in a third territory

Topics: Cross-border enforcement, Consumer redress, Data privacy

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Need for more discussions with technologists to enable data flows of non-private data

Supporting facts:

• The speaker mentioned that while privacy-enhancing technologies are becoming more integrated in certain arrangements, data sorting still presents a huge difficulty.

• The speaker is a policy fellow and a lawyer in Geneva raising the topic on technology and digital trade in question.

Topics: Digital Trade, Privacy, Data Localization, Technology

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Data localization rules could infringe upon privacy

Supporting facts:

• Daniel Rangel disputed the notion that only the most egregious forms of data localization are targeted by trade rules

• He suggested that all categories of data localization could potentially be deemed illegal under certain trade rule proposals and models, such as the TPP and JSI, and even the EU model

• Daniel raised the concern that a panel could then decide on whether a democratically decided policy is necessary and if it’s the least trade-restrictive alternative, which may compel a country to amend its own policies

Topics: trade rules, JSI, EU privacy regulations

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Technological development should be taken into account in trade negotiations

Supporting facts:

• Economy is more likely to shift to digital economy.

• More SMEs are likely to become digital SMEs.

• SMEs would require diversity of digital technology to innovate and scale across the region.

Topics: trade negotiations, technological development, SMEs, digital economy

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Different stages of countries should be considered in trade negotiations

Supporting facts:

• Question was raised by people from Kenya

Topics: trade negotiations, development stages

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Report

During the discussion, several key points regarding data localization, data flows, and data privacy in trade agreements were explored. One argument focused on the potential risks of including language pertaining to data localization and data flows in trade agreements. It was highlighted that such language could exacerbate power imbalances between countries.

The complexity and lack of understanding surrounding data issues were also cited as contributing factors. To illustrate this point, the example of disproportionate agricultural subsidies was given, demonstrating how complexity often works against less powerful countries. On the other hand, there was a call for more nuanced regulation of data and its flow.

It was emphasised that different types of data have different imperatives, necessitating a more nuanced understanding of how data should be regulated. The evolving dialogue towards this more nuanced understanding was highlighted as a positive development. Concerns were raised about the lack of transparency and enforcement in terms of data use.

It was stated that regulations and policies in place are not efficient enough, and data handling often remains unknown until there is a data breach or whistleblower interference. The recent example of the Information Commissioner’s Office in the UK attempting to fine Clearview AI over a breach of GDPR was mentioned as evidence of this problem.

The necessity for improvement in the transparency of data treatment was also highlighted. The issue of accountability, as mentioned by one of the speakers, was emphasised, as well as the problem of breaches occurring in another jurisdiction. Furthermore, challenges in terms of cross-border enforcement and consumer redress were raised.

There was a specific mention of a case where local courts ruled that the Information Commissioner’s Office (ICO) did not have jurisdiction over a breach because the data had been used in a third territory. The discussion also touched on the need for more discussions with technologists to ensure the enabling of data flows of non-private data.

Although privacy-enhancing technologies were acknowledged as a starting point, there was a call for more comprehensive security measures over data transfers, which could involve technological inputs. One speaker disputed the notion that only the most extreme forms of data localisation are targeted by trade rules.

It was suggested that all categories of data localisation could potentially be deemed illegal under certain trade rule proposals and models. This raised concerns about privacy infringement. The power dynamics in digital trade negotiations were highlighted as having the potential to disadvantage certain countries, particularly those in the Global South.

Despite knowing the value they bring to the negotiation table, other factors may still place them at a disadvantage. The example of Kenya was cited, where pressure is being exerted to change laws to allow free flows of health data, despite the country’s existing law allowing for data localisation in the health sector.

The importance of considering technological development in trade negotiations was underscored. It was noted that as the economy shifts to a digital economy, more small and medium enterprises (SMEs) are likely to become digital SMEs. In order for these SMEs to innovate and scale, diverse digital technology needs to be taken into account in negotiations.

Lastly, the necessity of incorporating a “necessity test” for language on legitimate public policy (LPP) or language in the Trade in Pharmaceutical Products (TPTP) context was emphasised. This point was raised as a common question from members. In conclusion, the discussion highlighted the various complexities and challenges surrounding data localisation, data flows, and data privacy in trade agreements.

While there were arguments for the regulation of data and nuanced understanding, there were also concerns about transparency, enforcement, and the potential infringement upon privacy. The power dynamics in digital trade negotiations and the importance of considering technological development were also acknowledged.

The need for improvement in mechanisms for transparency, enforcement, and consumer redress was emphasised, as well as the consideration of different stages of countries in trade negotiations. Overall, the discussion underscored the importance of finding a balance between promoting data flows and protecting data privacy in trade agreements.

Arguments

Data localization raises compliance costs, creates due diligence obligations, and restricts access to key digital tools

Supporting facts:

• New cybersecurity mandate in certain regions requires localization of all citizen data forcing companies to overhaul their digital infrastructure

• Indonesia’s recent amendment of GR71 requires personal identifiable information to be stored in government data centers, creating challenges for small businesses

Topics: Data Localization, Data Protection, Cybersecurity

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Importance of transparency and certainty for businesses

Supporting facts:

• Certainty allows businesses to plan and strategize

• Sudden policy changes can threaten business sustainability

• Limited response time impacts SMEs ability to provide valuable input during consultation processes

Topics: trade policy, digital agreements, consultations, SMEs

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Data localization requirements pose a compliance burden on small medium enterprises

Supporting facts:

• Even if the requirement is just a copy stored locally, this is still an additional compliance burden on a lot of small medium enterprises.

• It could incur additional costs and shrink profit margins.

Topics: Data Localization, Compliance Burden, Small Medium Enterprises

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Report

Data localization has become a major concern for small and medium enterprises (SMEs) in Southeast Asia. Recent cybersecurity mandates, like Indonesia’s amendment of GR71, requiring storing personal identifiable information in government data centers, have posed challenges for SMEs. These challenges include increased compliance costs, due diligence obligations, and restricted access to digital tools.

Consequently, the sentiment around data localization is mostly negative. To address SME concerns, policymakers need to engage with them to understand their limitations and worries regarding data localization. SMEs do not seek to avoid regulations but require advance notice and consultation during the regulation-making process.

The withdrawal of a draft executive order on data localization in the Philippines highlights the importance of stakeholder engagement and consultation. Transparency and certainty are crucial for effective business planning and sustainability. Abrupt policy changes can harm businesses, including SMEs.

Therefore, greater transparency in the regulatory process and clear guidance for businesses are needed. Improvements in the consultation process, particularly for SMEs, are necessary. Limited response time and abrupt consultations hinder SMEs from providing valuable input. Southeast Asian governments have room for improvement, ensuring SMEs have sufficient time and resources for effective participation.

Data localization requirements burden SMEs with compliance costs and shrink profit margins. Even if it is just a copy stored locally, it still adds to the compliance burden. SMEs have to allocate additional resources to comply, impacting their profitability. In conclusion, data localization has significant implications for SMEs in Southeast Asia.

Policymakers must engage with SMEs to understand their concerns. Transparency, certainty, and improved consultation processes are necessary. However, the compliance burden on SMEs should be acknowledged. Considering these aspects will facilitate a smoother transition to data localization and better support SMEs in the digital age.

Arguments

Data is a lifeblood of the digital economy

Supporting facts:

• The seamless flow of information achieves economies of scale, resulting in greater efficiency and economic gains

Topics: Data flow, Digital economy, Cloud computing

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Data gains much value when applied to solve specific problems

Supporting facts:

• When data flows, it supports new products, business models, and industries

Topics: Data utilization, Problem solving

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Cloud computing can democratize access to technology

Supporting facts:

• Companies can have access to essential tools and data needed to leverage technologies like AI through the cloud

Topics: Cloud computing, Democratization, Access to technology

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Data localization can undermine cybersecurity

Supporting facts:

• Data localization can prevent sharing of data to prevent IT system vulnerabilities and help firms detect cyberattacks

• Data localization undermines best practices like sharding, improving security, and resilience

Topics: Data localization, Cybersecurity

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Trust and understanding of new technologies are essential factors in implementing data localization measures

Supporting facts:

• Many barriers are driven by a lack of digital trust and understanding of new technologies

• Measures put in place are often not fit for purpose, undermining stated policy objectives

Topics: Trust, Understanding, New technologies, Data localization

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Trade policy or trade agreements should not be an end for in and of itself, it should be used as a means to an end. It should be employed thinking about different policy considerations and priorities which varies from country to country.

Supporting facts:

• Larger countries with exisitng infrastructure may have different calculations to those of smaller countries when it comes to cost of data localization.

Topics: Trade Policy, Trade Agreements

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Different developing countries have different circumstances affecting trade agreements.

Supporting facts:

• The value of having a certain rule in trade agreements can vary depending on the country and their situation.

Topics: Trade Agreement, Developing Countries

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Digital agreements are important for technological cooperation and interoperability

Supporting facts:

• Singapore and Australia have pioneered digital agreements

• These agreements involve more than just rules, they also facilitate technological cooperation

• Interoperability in using new technologies is being promoted through these agreements

Topics: Digital Technology, Trade Agreements

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Report

Data plays a crucial role in the digital economy as it enables the seamless flow of information, leading to greater efficiency and economic gains. The availability of data allows businesses to achieve economies of scale and optimize their operations. Furthermore, data gains significant value when it is applied to solve specific problems.

By leveraging data, companies can develop new products, business models, and industries, contributing to the growth and innovation of the digital economy. Cloud computing is another important aspect of the digital economy as it can democratize access to technology. Through the cloud, companies can have access to essential tools and data needed to leverage technologies like artificial intelligence (AI).

This accessibility promotes inclusivity and reduces inequalities, allowing businesses of all sizes to harness the potential of advanced technologies. However, the practice of data localization can pose challenges to the digital economy. Data localization refers to the requirement for data to be stored within a specific geographic location.

While this measure aims to protect data and prevent vulnerabilities in IT systems, it can undermine cybersecurity. Data localization prevents the sharing of data across borders, limiting the ability to detect and prevent cyberattacks. Moreover, it undermines best practices like sharding, which distribute data across multiple locations to enhance security and resilience.

Trust and understanding of new technologies are essential factors in implementing data localization measures. Many barriers to the flow of data are driven by a lack of digital trust and understanding of new technologies. Measures put in place to regulate data flows are often not fit for purpose and can hinder policy objectives.

Therefore, building trust and promoting digital literacy are crucial in developing effective data localization strategies. Instead of restricting data flows through measures like data localization, it is important to promote accountability and implement high data protection standards. This approach ensures that data can flow securely and be trusted by users and businesses.

It is essential that these measures meet policy objectives, are interoperable, and do not impose undue costs on businesses. By prioritizing security and data protection, the digital economy can thrive while maintaining the necessary safeguards. When it comes to trade policy and agreements, it is important to consider the diverse priorities and circumstances of different countries.

Larger countries with existing infrastructure may have different calculations when it comes to the cost and benefits of data localization compared to smaller countries. Trade negotiations should be based on consultation processes that involve stakeholders and increase awareness of the rules associated with entering new markets.

This certainty provided by trade rules enables businesses to plan and make entries into new markets, stimulating economic growth. Flexibility in data localization rules is necessary to accommodate the specific needs and circumstances of each country. The implementation of data localization should take into account the potential benefits it can bring, such as enabling exports of digital industries.

It is essential for countries to gather all necessary input before entering negotiations and ensure that the safeguards in place are suitable and effective. It is worth noting that big companies may not be significantly impacted by data localization, while smaller businesses can benefit by lowering their costs and entering new markets.

Digital agreements are crucial for technological cooperation and interoperability. Countries like Singapore and Australia have pioneered digital agreements that go beyond just setting rules. These agreements also facilitate cooperation and interoperability in using new technologies. Promoting interoperability allows different systems and technologies to work together seamlessly, enhancing the scalability and efficiency of digital processes.

Lastly, there is a growing appetite for new technologies and trade agreements. In the ASEAN region, digital payments have gained significant traction, and a few countries have collaborated on developing interoperable QR codes, which have proven to be successful pilots for new technologies.

This demonstrates the willingness of countries to embrace innovation and explore opportunities for collaboration in the digital economy. In conclusion, data is the lifeblood of the digital economy, driving efficiency, innovation, and economic gains. While data localization may have potential drawbacks, promoting accountability and high data protection standards can ensure secure and trusted data flows.

Trade policy should take into account the diverse priorities and circumstances of different countries, with consultation processes leading to better trade negotiations and market entries. Flexibility in data localization rules is crucial, and digital agreements facilitate technological cooperation and interoperability.

The appetite for new technologies and trade agreements is growing, as demonstrated by the success of digital payments and QR code technology in the ASEAN region.

Arguments

Data localization is defined as explicit requirements that data be stored and/or processed within domestic territory.

Supporting facts:

• Data localization measures are either on financial sectors, public sector, telecommunication, and cloud computing, with only 32% applying in a cross-cutting way.

Topics: Data Localization, Digital Policy

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Data localization measures increase operational costs.

Supporting facts:

• A survey showed local storage requirements lead to about an increase of 16% in data management costs.

Topics: Data Localization, Business Costs

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Many businesses perceive data localization skeptically.

Supporting facts:

• Businesses believe that data localization does not necessarily enable domestic innovation, increased privacy protection, or increased data security.

Topics: Data Localization, Business Perception

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Most restrictive form of data localization is evolving fastest.

Supporting facts:

• Two-thirds of the measures in place by the beginning of 2023 are the most restrictive form of data localization.

Topics: Data Localization, Digital Policy

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It’s important to find a balance between the policy space for data localization and the free flow of data.

Supporting facts:

• Javier believes that government needs to ask themselves: what is the policy objective they’re trying to achieve and if data localization is the right policy?

• Trade language like ‘proportionate’, ‘non-discriminatory’, ‘least trade restrictive’ can be very useful in ensuring a balance.

• His viewpoint seems to revolve around the idea that data localization measures should be proportional to the sensitivity of the data.

Topics: data localization, trade negotiations, policy making

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Trade agreements play an important role in data localization and data flow

Supporting facts:

• There is a correlation between an increase in data localization measures and data localization provisions in trade agreements

• Trade agreements can provide flexibility for countries to tackle legitimate public policy objectives while maintaining open markets

Topics: Data localization, Trade agreements, Data flow

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Data localization measures should be balanced and not restrictive to open markets

Supporting facts:

• Some data localization measures are seen as excessive for achieving their objectives

• There are examples of countries that have privacy regulation without ring-fencing all data

Topics: Data localization, Open markets, Privacy regulation

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Fascination with the idea of federated learning in artificial intelligence

Supporting facts:

• Federated learning implies that the algorithm is transferred to different places instead of transferring the data

• The need to find a middle ground between fully open and fully closed data sharing mechanisms

Topics: Artificial Intelligence, Federated Learning

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Report

Data localization measures, which require data to be stored and processed within a country’s borders, have been implemented in various sectors, including finance, public services, telecommunications, and cloud computing. However, only 32% of these measures apply in a cross-cutting manner. The impact of data localization measures is debated, with proponents arguing that they can promote domestic innovation, privacy protection, and data security.

However, businesses are skeptical about these benefits. It is worth noting that the most restrictive form of data localization measures is evolving rapidly. On the other hand, there are concerns about the negative consequences of these measures. Operational costs can increase due to local storage requirements, and data localization can pose risks to cybersecurity and data resilience.

To strike a balance between data localization and the free flow of data, policymakers should carefully consider the policy objectives they aim to achieve. Trade agreements play a crucial role in addressing data localization while maintaining open markets. Alternative solutions, such as federated learning and digital economy agreements, can promote greater data sharing without compromising privacy.

Overall, data localization measures require thoughtful implementation, taking into account various factors and considerations.

Arguments

Data localization is one of the most important and contentious topics in digital policy making

Supporting facts:

• Data localization is a complex issue in the digital trade

• It has been the subject of numerous policy debates

Topics: Data localization, Digital Policy, Data Policy

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The panel is consisted of expertise from various backgrounds including international organizations, industry associations, tech companies, and policymakers

Supporting facts:

• Panel features Mr.Javier Lopez-Gonzalez from the OECD, Mr. Hadley Sopley from Amazon Web Services, Mr. Gareth Tang from the Coalition for Digital Propensity for Asia and Ms. Amy Stewart from the Australian Mission to the WTO in Geneva

Topics: International Cooperation, Policy Making, Digital Trade

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The necessity test of data flow or data localization requirement is a crucial part of negotiations

Supporting facts:

• Everything is determined through negotiations.

Topics: Data flow, Data localization requirement, Negotiations

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There’s a variety of data localization requirements, some mandating data to be only installed in a certain country while in other examples, the data should be stored in that country, but a copy should also be stored in other countries.

Supporting facts:

• Data localization requirement that requests enterprises to have a copy of the data within the country.

• There is certain flexibility for data localization requirement.

Topics: Data Localization, Data Regulation

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Data localization requirements need to be implemented in a clear, objective, and transparent manner.

Supporting facts:

• Policy side has reason to implement data localization.

• From business side, data localization is sometimes required but needs to be clear and transparent in regulatory context.

Topics: Data Localization, Compliance

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Data localization issues need to be negotiated in a trade agreement context.

Supporting facts:

• Sees value and limitation in having data localization in trade agreements.

• Suggests collaboration for better combination in dealing with specific issues like data localization.

Topics: Data Localization, Trade Agreement

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Report

Data localisation is a complex and contentious issue in digital policy-making, with numerous debates and policy discussions surrounding it. The panel on this topic consists of experts from various backgrounds, including international organisations, industry associations, tech companies, and policymakers. This diverse group of participants brings together different perspectives and expertise to address the challenges of data localisation.

The necessity test of data flow or data localisation requirements is a crucial component of negotiations. This test helps determine whether data should be allowed to flow freely across borders or whether it should be stored and processed locally. Understanding the positions of those advocating for strong policy space, such as privacy, is vital in shaping effective data localisation regulations.

There is a variety of data localisation requirements, ranging from mandating data to be stored solely in a specific country to requiring a copy of the data to be stored in multiple countries. The implementation of these requirements should be clear, objective, and transparent to ensure compliance and avoid misunderstandings.

The choice of data localisation measures depends on the policy objective. Some measures aim to restrict access to data from other governments, while others seek to ensure that the government has access to its own data. Identifying the policy objective is crucial in determining the appropriate approach.

Several factors need to be considered when discussing data localisation, including security interests and economic benefits. It is essential to evaluate these factors from both domestic and international perspectives to create effective and efficient regulations. Trade agreements also play a role in addressing data localisation issues.

While there are both value and limitations in including data localisation provisions in trade agreements, collaboration is necessary to find the best approach and deal with specific challenges. In conclusion, data localisation is a complex and important topic in digital policy-making.

It requires careful consideration of various factors, including policy objectives, security interests, economic benefits, and international collaboration. Clear and transparent regulations, based on empirical research and understanding of different viewpoints, are necessary to address the challenges posed by data localisation.