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G7 Leaders Must Overcome Differences to Ensure Continued Free Cross-Border Data Flow

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G7 Leaders Must Overcome Differences to Ensure Continued Free Cross-Border Data Flow

G-7 leaders must find a common framework for a globally interoperable system for safe, trusted data sharing. The future of the world’s digital economy depends on it.

G7 Leaders Must Overcome Differences to Ensure Continued Free Cross-Border Data Flow
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The Data Free Flow with Trust (DFFT) concept was proposed at the World Economic Forum in 2019 to facilitate trust-based cross border data transfers. As the host of the upcoming G-7 Summit in Hiroshima and the Digital and Tech Ministers’ Meeting in Gunma, Japan will lead discussions among world leaders around how DFFT may be implemented. Even as each country has its own views and policies on the free flow of data and data sharing, G-7 leaders must seek to overcome these differences and find a common framework for a globally interoperable system for safe, trusted data sharing. The future of the world’s digital economy depends on it.

The free movement of data across international borders is fundamental to digital trade and the development of the Asia-Pacific’s digital economy. Southeast Asia’s digital economy alone is poised to reach $600 billion to $1 trillion in gross merchandise value in 2030, powering digital trade, job creation, innovation, and productivity. The benefits are particularly pronounced for SMEs – the free flow of data across borders enables them to use common infrastructure and state-of-the-art tools to scale and expand globally.

Today, modern traditional industries – everything from mining to manufacturing, energy to infrastructure, and education to medicine – rely on global data flows for critical operations such as fraud prevention, cybersecurity, and research and development. Restricting cross-border data flows has real and significant impact. According to a 2021 report by the Information Technology & Innovation Foundation, a one-unit increase in a country’s Data Restrictiveness Index results in – cumulatively, over a five-year period – a 7 percent decrease in its volume of gross output traded, a 1.5 percent increase in its prices of goods and services among downstream industries, and a 2.9 percent decrease in its economy-wide productivity.

Since January 2020, the Digital Policy Alert has recorded over 3,200 digital policy or regulatory changes affecting cross-border digital trade. Such regulations, even if well-intentioned, can lead to regulatory fragmentation and challenges for business, especially for SMEs that lack the resources to navigate the panoply of differing digital regulations.

The enactment of data restrictive policies is often driven by a lack of trust and concern about the security and privacy of data once it is moved abroad. DFFT thus plays a crucial role in addressing such fragmentation and building digital trust by establishing policy mechanisms for interoperability and concrete tools for businesses while promoting a common understanding of trust between like-minded countries and businesses.

To advance and operationalize DFFT in an inclusive and concrete way, G-7 countries should work toward establishing elements of cyber governance that characterize data free flow with trust, including: (1) strong and interoperable privacy and data protection practices, (2) shared principles on government access to data held by the private sector, (3) shared criteria to assess trustworthiness of digital infrastructure suppliers, and (4) risk-based approaches to cybersecurity.

For each of these elements, G-7 countries should draw reference from existing international best practices such as the APEC Cross Border Privacy Rules and the OECD Principles on Government Access to Personal Data Held by Private Sector Entities. In operationalizing DFFT, G7 countries could explore how adherence to these digital trust elements could help promote trusted coalitions of like-minded countries beyond G-7, or even recognition of trusted private sector actors that align with such elements.

The concept of DFFT is not new to the region, where we have seen high interest in harnessing digital trade rules that enable trusted cross border data flows. Singapore is leading the way in developing digital trade rules that align with the DFFT concept via its various Digital Economy Agreements. DFFT is also evident in the high-standard e-commerce rules of the Japan-U.S. Digital Trade Agreement and the Japan-U.K. Economic Partnership Agreement. In the broader region, there are expectations for high standard and commercially meaningful digital trade rules in the ongoing negotiations of the ASEAN Digital Economy Framework Agreement and the U.S.-driven Indo-Pacific Economic Framework for Prosperity.

As an industry organization made up of some of the world’s largest technology companies, the Asia Internet Coalition (AIC) is committed to working closely with governments, experts, and our peers across the industry on the paths toward free and trusted data flows. Tech companies bring to the table in-depth knowledge and expertise on the available tools to complement the ongoing intergovernmental discussions. Privacy enhancing technologies, data encryptions, and data loss prevention are some examples of technological tools that enable businesses to extract value from data while ensuring protection for personal data and against cybersecurity threats.

Collaboration between the public and private sectors is indispensable when developing a well-balanced policy framework for secured cross border data flows as part of the DFFT mandate. The Japanese government has a strong will to reach a global consensus on accelerating institutional cooperation and technological responses to DFFT, while also proposing an international framework for public-private partnership. This institutional arrangement will be an important step in strengthening evidence-based policy making for DFFT.

The digital economy has been a lifeline during the pandemic and is a catalyst for global economies to overcome the current challenges of inflation and debt crisis, trade wars, and geopolitical tensions. As digital ministers converge in Gunma this weekend, they have an unprecedented opportunity to make DFFT a reality and unleash the full potential of the digital economy for growth and prosperity.