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UN Digital Trade and Economy Report
By Sharanya

A Summary of the UN Digital Trade and Economy Report 2021

November 23, 2021

Rapid digitalization is affecting almost all aspects of life which include the way people interact, shop, work, or receive services to create or exchange values. Digital data is one of the key factors of the economic sustainability of the world, as a whole. It has also become a major strategic asset for both social and private value. The commerce of today’s time mostly is based on an organization’s ability to move data across borders, without any restrictions. The fact that one can do so automatically generates positive outcomes for organizations, countries, and citizens. This has made cross-border data flows increasingly crucial.

The COVID-19 pandemic has suddenly accelerated the process of digital transformation and added urgency for the Government to respond. This has, in turn, posed a challenge for the officials to ensure the surge in digital data can be harnessed for the global good. The recently released UN Digital Trade and Economy Report of 2021 brings to the fore innovative approaches to governing the data and flow of data all the while addressing various concerns and risks. It offers a holistic approach in a natural platform to reflect the interlinked multiple dimensions of data by involving the relevant stakeholders. Today, let’s take a brief look at what the report contains and exclaims.

Data Flows Are Growing Fast, Although Hard to Measure

If you sit to measure data traffic, you will find it to be extremely challenging. However, based on one forecast, the Global Internet Protocol (IP) traffic in 2022, including both domestic and international aspects, is stated to exceed all internet traffic up to 2016.

By 2026, the monthly global data traffic might surge from the 230 exabytes of 2020 to almost 780 exabytes. The use of the internet is 90% developed economies with 20% LDCs. However, it is interesting to note that the data-driven digital economy is evolving amid huge divides in terms of digital readiness with 23% of the population in LDCs having no access to mobile broadband.

global data traffic
global digital market

When it comes to cross-border data flows, though, the commonly used measure is of the total used capacity of the international internet bandwidth that shows the amount of data flowing in bytes but isn’t able to show the direction, quality, and nature of data flows. By 2025, however, the connected industry is all set to represent over half of the total revenue opportunity, followed by 23% of the total represented by smart homes. 15% will go to consumer electronics whereas 5% and 4% will be held by connected vehicles and smart cities, respectively.

Objectives & Risks of Restrictions on Cross-Border Data Flows

Data cannot be termed as just an economic resource. They are related to issues with human rights and privacy in general, let alone security. In this way, data can be misused and abused to affect the democracy or political systems, especially when travelling across borders. The restrictions, thus, set on cross-border data flow can fulfil the following objectives:

  • Ensure data privacy and protection
  • Create and improve automation and processes
  • Reduce any data security risks
  • Create a few local data champions in larger economies
  • Facilitate the easier enforcement of claims against foreign companies in domestic laws
  • Enable stronger regulatory oversight, especially when it comes to the sensitive sectors
  • Reduced latency and bandwidth costs of long-distance data transmission

However, on the other hand, the risks associated with the same cannot be missed out, and that includes:

  • Increase in the uncertainty of business
  • Increase in the compliance costs for the companies, especially when it comes to the unaffordability for MSMEs
  • Costlier to monitor and implement
  • Probable increase in the consumer prices in less competitive markets
  • Facilitation of illegal government surveillance & violation of privacy rights, individually
  • Make it difficult for detecting fraud

Data is a Special Resource that is Different from Goods & Services

A data-related divide which means a gap between those who have the resources to access & use government data and those who cannot is now adding to the long-standing digital divide that the world has been facing. The acceleration of digitalization, all thanks to the pandemic, has made these digital divides more imperative. It has thus become important to regulate the data-driven digital economy at all aspects – national, international, and regional.

Data can be categorized into several dimensions, majorly bordering across 3 categories – personal, trade, business. Cross-border data flows are not trade and thus need to be governed holistically, only after factoring in all dimensions first. Having said that, the World Bank characterizes data using only two terms – public or private intent data.

Public policies, when it comes to cross-border data flows, are required at the moment for a few reasons that include:

  • Maximizing the gain from the data economy and minimizing the risk involved
  • Ensuring an equitable distribution of benefits
  • Considering the complexity of policy trade-offs

In lieu of this, global data governance needs to take a multidimensional holistic multi-stakeholder approach to bring middle-ground solutions and meet all requirements. For development purposes, you need to understand the difference between digital intelligence (data products) and raw data. Data, for instance, can be seen as a commodity that can be traded, but the potential tradability of the same is debatable, especially when we talk about raw data.

Here, you should note that two countries stand out as the frontrunners in the value of data – China and the US. A key aspect of the regulatory approach of the US on cross-border data flows is maintaining its leadership in the global digital market and yet expanding into the new markets. The fact that data is multidimensional highlights the fact that tidy conclusions on cross-border data flows are challenging to achieve. Having said that, when we talk about the governance of cross-border data flows, there is no ‘one-size-fits-all’ approach to follow.

Data rights are all about the right to access, change, move, or delete data, the right to know who is collecting it, where it is kept, where it is going, for what purpose is it being used, and who has access to it. The GDPR (General Data Protection Regulation) of the European Union (2018) is one of the most thorough frameworks for data protection in the entire world. It also contains extensive requirements to transfer personal data outside the EU region.

A world of divergent data nationalism can only have a few winners but several losers. The established digital economies might emerge as winners because of their advantageous market sizes and prowess in technology, but when it comes to the small and developing economies, they will lose several opportunities to raise their digital competitiveness. In the absence of a properly functioning international regulatory system of cross-border data flows, however, the only option for developing countries is to regulate their data flows at the national level.

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The Digital Agenda of Latin America and the Caribbean, commonly known as eLAC is a strategy that proposes the use of digital technologies as instruments for sustainable development. The digital agenda, in turn, is promoted in cooperation with the Latin American Development Bank. The 7th Ministerial Conference on the Information Society in eLAC held in November 2020 included 8 areas of action that identified 39 specific goals. It also contained a specific chapter that spoke about the fight against the Novel Coronavirus pandemic and the economic recovery from the same.

digital technology

What Does the Future Hold?

A data-driven digital economy can bring significant benefits towards Sustainable Development Goals for sure, but the number of challenges faced during the execution of the same is massive as well. It, therefore, falls upon the shoulders of the policymakers to shape it in ways that solely lead to the development and that is where the future is headed. Data is intangible, non-rival and partially excludable. The value of data is highly contextual when it is used, only increasing through aggregation and in combination. Data can not only generate private profits but social value at the same time.

If we look at a global picture, there are three major approaches to the governance of the data-driven digital economy when it comes to cross-border data flows that includes:

  • The US focuses on the control of the data by the private sector
  • China focuses on the control of data by the Government
  • The EU favours control of data by individuals as per fundamental values & rights

In practice, a data protection framework can incorporate accountability and adequacy in the approach. The current context is more like a tension between China and the US, where the race for leadership in digital technology development is high as it is believed that controlling data and AI will secure strategic and economic power. This has also brought to the fore a risk of digital space fragmentation, also known as splinternet.

However, point to note, since there is no basic policy to regulate cross-border data flow, it will depend on economic, political, technological, cultural, and institutional conditions of different countries. Even though data can be linked to trade to provide strong competitive advantages for those who want to benefit from it, cross-border data flow, in particular, is neither trade nor eCommerce and should not be regulated that way either. Finding the adequate response to the challenge that governing cross-border data flows show requires international collaboration and policy dialogue. It should also have the full involvement of developing countries for a high success rate of implementation.

Data-driven digitalization can create global opportunities and global challenges that ultimately require global solutions to mitigate the negative and harness the positive impacts. The effective global governance of data is now a prerequisite for data to support the attainment of environmental, social, and economic objectives of the 2030 Agenda for Sustainable Development. At the 75th anniversary of the UN, the declaration by the Heads of State and Government representing the people of the world mentioned digital cooperation as a core segment by stating, “Digital technologies have a potential to accelerate the realization of the 2030 Agenda. We must, therefore, ensure safe and affordable digital access for all.”

Ultimately, there is no clear definition of where the data is when we talk about cross border data flows and the varied interpretations of what digital or data sovereignty means has a chance of leading to confusion on data rights which would lead to conflicts in claiming rights to the data. When the relevant taxonomy based on the types of data is agreed upon, countries can start agreeing on the terms of data for each type to facilitate cross-border data flows. To sum it up, policy options across the world highlight the fact that there is an urgent need for an increased international policy dialogue to progress towards a more effective global data governance.

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