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Cross-border data flows: Designing a global architecture for growth and innovation

Digital, data and cyberReportJune 16, 2022

Data is central to the global economy. It propels innovation in business models and solutions to challenges. Our new report looks at the various opportunities that could derive from easing cross-border data flows.

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Data is central to the increasingly digitalizing global economy. And cross-border data flows are the lifeblood of this new economy, which will continue to grow – it is estimated to reach 65% of global GDP by end of 2022 – and holds great promise for businesses and people. However, jurisdictions are increasingly restricting cross-border data flows: the number of countries that have enacted data localization requirements has nearly doubled within four years, from requirements for U.S. government agencies to use U.S.-based cloud services, to the new suite of data regulations passed by China in 2021.

Such regulations increasingly threaten to undermine the benefits of cross-border data flows, including:

Productivity
Cross-border data flows enable new and more scalable B2B and B2C business models, new kinds of customer support, and access to new markets around the world with benefits felt especially for micro, small, and medium enterprises (MSMEs) through easier market access and less costly (digital) marketing and distribution. Indeed, digital trade is the fastest-growing area of global trade over the past decade, growing 5.4% per year on average.

Resilience
Cross-border data flows can strengthen resilience, notably in international supply chains, enabling real-time monitoring and traceability; they can also reduce vulnerability to single points of failure when data is stored locally. The freedom to transfer and store data to optimize cybersecurity also boosts resilience.

Employment
Cross-border data flows can improve remote learning, give companies access to remote talent, and enable workers to access a global pool of employment opportunities and work from where they live – with benefits especially for women and workers with special needs.

Innovation
Cross-border data flows enable knowledge and data sharing and collaboration on research and development across all sectors, including in areas such as health tech and pharmaceutical development and in accelerating solutions for climate change mitigation and adaptation.

Key takeaways

  1. International data flows are key to driving growth and innovation in both advanced and emerging economies as well as resilience.
  2. The growing number of restrictions suggests increasing fragmentation of international data flows, which would limit benefits.
  3. An international architecture for managing cross-border data flows is necessary to future-proof economies and safeguard the benefits of digitalization.

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