localising data in a globalised worldlocalising data in a globalised world javier lopez gonzalez,...
TRANSCRIPT
Localising data in a Globalised World
Javier Lopez Gonzalez, Trade and Agriculture Directorate, OECD
Conference on the Use of Data in the Digital Economy 2-3 October 2017, WTO, Geneva
2 Trade and Agriculture Directorate | Organisation for Economic Co-operation and Development (OECD) | www.oecd.org/tad | [email protected]
• The ubiquitous exchange of data across-borders has led to the emergence of regulations seeking to address concerns ranging from security and protection of individual privacy through to regulatory and audit reach.
• The implications of these ‘data localisation’ measures are not well understood and have led to a polarised debate.
• Different countries reach their own understanding of the nature and importance of privacy and security within their own cultural and political contexts.
• Analysis can help better unpack some of the issues
Context
3 Trade and Agriculture Directorate | Organisation for Economic Co-operation and Development (OECD) | www.oecd.org/tad | [email protected]
• To contribute to debate by filling some informational gaps by: 1. documenting the nature, reach and evolution of the
emerging measures; 2. shedding some light on how firms use data and how they
perceive the emerging measures 3. by identifying the possible opportunity costs involved in
terms of foregone economic activity
• To provide policy-makers with information to assist in weighing some of the trade-offs involved in finding the balance between ensuring important public policy objectives and maintaining the benefits from free flows of data.
Aim of the paper
UNDERSTANDING THE NATURE AND EVOLUTION OF DATA
MEASURES
4
5 Trade and Agriculture Directorate | Organisation for Economic Co-operation and Development (OECD) | www.oecd.org/tad | [email protected]
• Identified pieces of legislation, regulation or policies that are implemented by governments and currently in force.
• To be included, measures must treat foreign senders/receivers differently from domestic equivalents, or explicitly regulate the geographic location of data storage.
• Over 100 measures across 68 economies identified (not exhaustive).
• Analysis of measures informs a broad taxonomy.
• Measures fall into two categories: • Cross-border flow restrictions (75) • Local storage requirements (41)
Data regulation database
6 Trade and Agriculture Directorate | Organisation for Economic Co-operation and Development (OECD) | www.oecd.org/tad | [email protected]
Taxonomy of cross-border data transfer measures
Conditional
Free / No specific
mention
One-of
Private sector safeguards Actionable
Non-actionable
Government safeguardsDomestic focus
International focus
Combination
Private sector safeguardsActionable
Non-actionable
Government safeguardsDomestic focus
International focus
Prohibition
General level of restrictiveness
7 Trade and Agriculture Directorate | Organisation for Economic Co-operation and Development (OECD) | www.oecd.org/tad | [email protected]
Evolution and nature of data transfer restrictions
0
10
20
30
40
50
60
70
80
1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 2013
Nub
mer
of m
easu
res
Prohibition
Conditions - Combination
Conditional - One of
Personal60
Financial6
Telecommunications3
Health3
Public2
All data1
• Growing in number and in complexity… • Mainly horizontal and involving personal data, but also
health, financial, public and telecom data
8 Trade and Agriculture Directorate | Organisation for Economic Co-operation and Development (OECD) | www.oecd.org/tad | [email protected]
Evolution and nature of local storage measures
0
5
10
15
20
25
30
35
40
45
1972 1976 1980 1984 1988 1992 1996 2000 2004 2008 2012
Num
ber o
f mea
sure
s
Compulsory
Conditional
• Increasingly compulsory (and combined with prohibition) • Often transpositions of traditional tax or audit requirements to a
digital context • Type of data: Telecoms, Financial, personal, health and public. • Affected sectors, 50% horizontal, but also finance, public,
telecom and health
Personal7
Financial15
Telecommunications14
Health2
Public2
All data1
FIRM PERCEPTIONS
9
10 Trade and Agriculture Directorate | Organisation for Economic Co-operation and Development (OECD) | www.oecd.org/tad | [email protected]
• Aims to identify how firms use data and gauge the nature and rationale of concerns related to emerging data localisation regulation.
• 259 firms with headquarters distributed over 48 countries and representing 21 sectors.
• Mix of multiple choice and open ended questions
• Delivered on-line with link distributed by business associations.
• Many caveats, sample selection, representativeness, still useful to get information where there is very little knowledge of how firms use data.
Business Questionnaire
11 Trade and Agriculture Directorate | Organisation for Economic Co-operation and Development (OECD) | www.oecd.org/tad | [email protected]
Importance of personal data varies by sector but stronger for services
Bars show the share of respondents by answer given across sectors. This figure is based on answers from 159 firms and only sectors for which we have more than 3 respondent is represented. Coal oil gas mining and Construction: 3; Heavy manufacturing: 4 Other manufacturing: 5; Agriculture and Insurance: 7; Trade: 10; Other machinery and equipment: 11; Other financial services: 13; Communications: 19; Other business services: 26; ICT services: 41.
0% 20% 40% 60% 80% 100%
AgricultureCoal oil gas mining
ConstructionElectronic equipment
FoodInsurance
Lumber and paper…Other government…
UtilitiesOther machinery…
TradeICT services
Other financial…Other business…
Other manufacturingHeavy manufacturing
Communications
Total
Majority or all Significant amount Small amount or none
12 Trade and Agriculture Directorate | Organisation for Economic Co-operation and Development (OECD) | www.oecd.org/tad | [email protected]
Separating personal from non personal data can be costly
Bars show the share of respondents by answer given across sectors. This figure is based on answers from 165 firms. Including 18 answering “I don’t know”. Lumber and paper products, Motor vehicles and transport equipment, Recreation and other services, Textiles wearing apparel and leather, Transport air water and other are represented by a single firm; Electronic equipment, Food, Other government services, Utilities (2 firms); Construction (3); Coal oil gas mining and Heavy manufacturing (4); Insurance (5); Agriculture (6); Other machinery and equipment and Trade (10); Other financial services (12); Communications (15); Other business services (22) and ICT services (38).
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Recreation and other servicesTrade
AgricultureOther financial services
InsuranceElectronic equipment
Other government servicesUtilities
Other business servicesOther machinery and equipment
ICT servicesCoal oil gas mining
Heavy manufacturingCommunications
ConstructionFood
Lumber and paper productsMotor vehicles and transport equipment
Other manufacturingTextles wearing apparel and leather
Transport air water and other
Costly and very costly Somewhat costly Not at all costly
13 Trade and Agriculture Directorate | Organisation for Economic Co-operation and Development (OECD) | www.oecd.org/tad | [email protected]
Data used for domestic and international purposes
Score is created from the frequency and occurrence and the ranking among the three most prevalent data management tasks. This figure is based upon answers from 195 firms
0 0.2 0.4 0.6 0.8 1
Dealing with affiliates
Other internal operations
Dealing with external suppliers
Dealing with compliance standards
International production/processing…
Domestic production/processing…
International client related activities
Personnel activities (HR etc)
Domestic client related activities
Data management activity
14 Trade and Agriculture Directorate | Organisation for Economic Co-operation and Development (OECD) | www.oecd.org/tad | [email protected]
Some firms think they will gain from measures others are concerned about losses
Indi
cato
r of E
xpos
ure
to d
ata
Perception of impact of measures Optimistic Neutral Pessimistic
15 Trade and Agriculture Directorate | Organisation for Economic Co-operation and Development (OECD) | www.oecd.org/tad | [email protected]
High Low
Sector Data Transfer Storage Data Transfer Storage
(as share of total costs)
(as share of ICT costs)
(as share of total costs)
(as share of ICT costs)
Agriculture 0.31% 34% 0.00% 25% Coal oil gas mining 0.63% 1% 0.00% 0% Motor vehicles and transport equipment 0.01% 21% 0.00% 12% Electronic equipment 2.29% 21% 1.13% 12% Other machinery and equipment 5.07% 31% 3.91% 22% Utilities 2.31% 21% 1.15% 12% Construction 6.51% 23% 5.35% 14% Communications 7.50% 34% 6.34% 25% Other financial services 3.88% 24% 2.72% 15% ICT services 3.37% 22% 2.21% 13% Other business services 3.85% 19% 2.69% 10% Recreation and other services 2.46% 21% 1.30% 12%
Perceived costs of measures (selected sectors)
Transfer shocks are applied as an NTM on exports while storage shocks are applied on the use of ICT inputs (and thus they are presented as a share of total costs and ICT costs respectively. * identifies missing data which is instrumented by the average across all sectors but checked against other variables in the questionnaire to ensure consistency of responses. Throughout, the lowest response values from the Business Questionnaire were taken to reduce upward bias from respondents. The figures for the low scenario are obtained by subtracting the sample mean minus the standard deviation from the high-scenario values. When this causes the value to be negative, this is replaced by zero. Lumber and paper products, Construction, Motor vehicles and transport equipment, Recreation and other services, utilities are represented by a single firm; Electronic equipment, Coal oil gas mining, Other government services (2 firms); Communications, other financial services, other machinery equipment (4); The remainder by 5 or more with; Other business services (10) and ICT services (16) being most represented in terms of firm coverage.
IDENTIFYING THE TRANSMISSION MECHANISMS AND OPPORTUNITY COST OF
DATA REGULATION
16
17 Trade and Agriculture Directorate | Organisation for Economic Co-operation and Development (OECD) | www.oecd.org/tad | [email protected]
• Modelling impact of measures is complex: • Dearth of statistics • Cost increases hard to identify • Choice of assumptions and modelling techniques
• Different ways of modelling reflect different views on the role of
data for economic activity. Is data pervasive or just ICT budget?
• Premature to measure impact of current measures but hypothetical exercise can help illustrate the direction of potential effect and transmission channels.
• Likely importance of inter-linkage effects and global nature of impact favours use of CGE model (GDP captures digitally enabled transactions even if it does not single these out).
Modelling approach
18 Trade and Agriculture Directorate | Organisation for Economic Co-operation and Development (OECD) | www.oecd.org/tad | [email protected]
• Cross-border flow restrictions: • Impose compliance cost when exporting (iceberg cost)
related to splitting personal and non-personal data or cost of compliance associated with meeting requirements of a conditional flow restriction.
• Storage restriction (or x-border restriction if data=ICT
budget): • Cost increase modelled as increase in input costs from
domestic data service sector (modified local content requirement).
• Hypothetical exercise introduces measures horizontally
across all sectors to identify transmission mechanisms.
measures
19 Trade and Agriculture Directorate | Organisation for Economic Co-operation and Development (OECD) | www.oecd.org/tad | [email protected]
• Cross-border data transfer measures: • Varies across countries and regions • Highest in sectors more reliant on export markets or
engaged in GVCs • Spillover effects likely to arise (countries might be
affected by measures in other countries) • Local storage requirement (or x-border restriction if
data=ICT budget): • Positive impact on domestic ‘data’ service sector; • but negative impact on all other sectors which see their
competitiveness fall (on aggregate negative outweighs positive)
• Very small (negligible) spillover effect.
Observations from hypothetical analysis
20 Trade and Agriculture Directorate | Organisation for Economic Co-operation and Development (OECD) | www.oecd.org/tad | [email protected]
• Given global nature of internet and escalating costs from patchwork of differing approaches to data regulation value in efforts towards a common global understanding on how to deal with data.
• Premature to define what this might look like, but useful work and
experience to draw on (OECD principles for internet policy-making or experience with SPS and TBT issues at WTO).
• Value of processes and dialogue to identify common objectives and principles.
• Important to involve a multi-stakeholder discussion taking advantage of technological knowledge of business community and involving civil society to help governments tackle the genuine privacy and security concerns in a way that that preserves the significant economic and trade benefits flowing from data-enabled business
Conclusions
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22 Trade and Agriculture Directorate | Organisation for Economic Co-operation and Development (OECD) | www.oecd.org/tad | [email protected]
Taxonomy of local storage requirements
Compulsory
Free/No specific
mention
Conditional • Guarantee of
government • Time specific storage
requirement• Foreign storage is
necessary
Compulsory & prohibitive
data restriction
Compulsory & other data restriction
General level of restrictiveness
23 Trade and Agriculture Directorate | Organisation for Economic Co-operation and Development (OECD) | www.oecd.org/tad | [email protected]
• Data measured in bits and bytes, some files ‘heavier’ by nature (audio, video) does not equate with greater value.
• 100 personal shopping entries might occupy same memory as 100 personal health records, but
• Value will depend on the perspective of final user (whether a supermarket or a health service).
• Value can increase when data merged (greater that the sum of parts).
• Information not used today can become valuable tomorrow (inherent/potential value – think Tesla).
• Data increasingly seen as a ‘natural resource’, is non-rivalrous
and copies at marginal cost.
But value of data hard to measure
24 Trade and Agriculture Directorate | Organisation for Economic Co-operation and Development (OECD) | www.oecd.org/tad | [email protected]
What is ‘international’ data used for
Score is created from the frequency and occurrence and the ranking among the three most prevalent data management tasks. Figure is based upon answers from 165 firms.
0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1
After-sales service
Human Resources (back office)
Sales
Administrative functions (contracts, etc.)
Operations (supply chain management) (incl.…
Operations (Data analytics and processing)
Strategy development
To what degree does data originating from other countries matter to the various parts of your business
25 Trade and Agriculture Directorate | Organisation for Economic Co-operation and Development (OECD) | www.oecd.org/tad | [email protected]
How do firms report to make their data storage and analysis decisions?
Score is created from the frequency and occurrence and the ranking among the three most prevalent data management tasks. Figure based upon answers from 181 firms.
0.0 0.2 0.4 0.6 0.8 1.0
Client preferences for…
Regulations favourable…
Government…
Human capital (access…
Accessibility (physical…
Performance /…
Infrastructure (utilities)
Financial cost (fixed…
Security (including…
Data storage location decision
0 0.2 0.4 0.6 0.8 1
Government…
Regulations…
Client preferences…
Accessibility…
Performance /…
Infrastructure…
Security (including…
Human capital…
Financial cost (fixed…
Data analysis decisions