Cross-border data flows are an increasingly essential element of international trade. Data flows not only support trade in goods, making production and distribution more effective and less costly, but such flows are in fact the vehicle for trading digital services across borders. As trade in global digital services has increased dramatically in recent years, so have global data flows.
How big are global data flows?
In 2020, global internet traffic was estimated to be more than 3 zettabytes, or 3,000,000,000,000 gigabytes (GB). This is an unimaginable big and abstract number, but it translates roughly into the equivalent of:
- 32 GB for each person on the planet per month, or 1 GB per person per day
- 100,000 gigabytes per second
- 325 million households watching Netflix simultaneously, at all times.
By 2022, yearly total internet traffic is projected to increase by about 50 percent from 2020 levels, reaching 4.8 zettabytes, equal to 150,000 GB per second. The growth in global internet traffic is as dazzling as the volume. Personal data are expected to represent a significant share of the total volume of data being transferred cross-border.
Growth of global internet traffic in the past 30 years
Source: WDR 2021 team calculations and Cisco Visual Networking Index: Forecast and Trends, 2017–2022.
How do data flows relate to trade in digital services?
Together with improved internet infrastructure, data flows in the form of greater bandwidth are strong drivers of trade in services provided over digital networks: so-called data-related or digital services. Such services cover, for instance, computer network maintenance, entertainment, and broadcasting, as well as financial management. In 2018, these digital services amounted to US$2,700 billion globally. Their corresponding share in global services trade has increased significantly over the years, from 20 percent two decades ago to 50 percent today.
Change in the growth and composition of trade in services over four decades
Source: WDR 2021 team calculations based on WITS (World Integrated Trade Solution) database.
How can cross-border transfers of personal data be regulated?
While high-income countries dominate the global digital services trade, developing countries can also profit from digital trade driven by data. Yet, several countries are restricting data transfers, especially for personal data. These restrictions are usually driven by noneconomic concerns such as privacy and national security, but can have economic effects. Flexible regimes for cross-border data flows would allow businesses from developing countries not only to benefit from offering services to global markets, but also from receiving competitive digital services in return.
For instance, a Bangladeshi firm, Augmedix, offers remote assistance to medical doctors in the United States. These doctors wear smart glasses allowing their Bangladesh-based assistants to “witness” patient consultations and create associated medical records. This two-way exchange of data, and the associated high value added services Bangladeshi assistants provide, are possible only because both countries—the United States and Bangladesh—allow for such sensitive and personal data to move across borders.
However, because of privacy and other wider noneconomic concerns, not all countries allow personal data to cross borders, and in fact some have adopted conditions for cross-border data transfers. Strict regulations on cross-border data flows could outlaw business models like that of Augmedix. Yet, some of these regulations aim to protect personal data and can in fact promote trade in digital services by strengthening consumer trust in digital markets.
Regulating flows of cross-border personal data typically comes with upfront costs: companies, as well as other organizations, need to invest in resources to comply with regulations, and governments need to install authorities to enforce these regulations.
How do countries handle cross-border transfers of personal data?
Many countries are currently regulating cross-border transfers of personal data. While regulations of personal data diverge widely, countries around the world are pursuing three broad approaches : (1) open transfers of data; (2) conditional transfers; and (3) limited transfers. These three data models have become a reference for many other countries when defining their rules on personal data.