Note: In this post, we will use cross-border data flow and global data transfer interchangeably.
Global trade depends on cross-border data transfer and the exchange of data. Global data transfer and digital trade are projected to grow quicker than the overall rate of intercontinental trade. Data exchange generates value, yet many organizations can only take full advantage of that value when information can move unrestricted across nations. Despite this, a rising number of countries are deterring the transfer of information across borders. That makes inter-nation data transfer more expensive and time-consuming, if not unlawful. The barriers to data transfer, whether based on privacy concerns or fears of losing commercial value, are hurting the countries which enact them as well as the global economy. In this post, we will discuss the basics of global data transfer, why it is important, the consequences of blocking data flow and what can be done to improve the situation and to create and capture value for all participants.
What is cross-border data flow and why is access to data essential?
Cross-border data flow happens when organizations transfer information internationally across national borders. The growing digitization of companies, the use of cloud technology, and the ever-increasing use of data analytics has driven the transfer of data abroad .
Businesses depend on information for many reasons. Such reasons include:
- Data is needed to maintain business operations in real-time
- It is used to monitor an organization’s infrastructure performance
- Information helps employers oversee international employees
- Data allows agencies to work, collaborate with their vendors and partners
- Businesses must have access to gather and use their customers’ personal information so they can serve them better. Without access to the clients’ data (e.g., addresses, billing information, names) commerce and delivery of goods and services is impossible.
Why is cross-border data transfer necessary?
Besides the overall need for data as a whole, there are several other reasons why the transfer of information internationally is essential for organizations. First, the ability for businesses to transfer data abroad helps increase financial growth. A study conducted in 2012 found a 22% higher growth in revenue amongst small and medium-sized organizations that use the INTERNET. Furthermore, the study concluded that companies that use the INTERNET to do business have a growth rate that is double that of their offline competitors .
The second reason cross-border information is necessary is that it improves social value. Estimates indicate that 5 billion people will have access to the INTERNET by 2020. With that large number of INTERNET users, information movement is vital because data analytics have improved overall productivity and have modernized business procedures, therefore overall quality of life will improve.
Lastly, the global data transfer is vital because it boosts digital trade between nations. A recent study estimates that INTERNET commerce is an $8 trillion a year industry. The benefits reach major sectors such as health care, manufacturing, education, and finance. Such traditional industries generate 75% of value-add on because of cross-border data transfer. Furthermore, the ability to exchange data on a global-scale gives small organizations a way to gain millions of prospective clients that they would not have had access to otherwise and allows them to vie for new customers based on the quality of their products rather than proximity alone .
What barriers are being used to restrict global data transfer?
Despite the far-reaching benefits of global data transfer, countries are blocking cross-border information flow are using several different deterrents to hinder free flow of information. Some of these deterrents used are:
- Nations are making it illegal to do so. The act is also known as data localization. Localization of data is when a country restricts information from leaving its borders. Many nations who choose to make data transference illegal do so for a number of reasons: they have a desire to protect their commercialism, there are privacy concerns and fears about national security 
- Some countries are inhibiting the transfer of data by making it extraordinarily time-consuming
- Nations block data flow by making it very costly. By making transference expensive, it makes it extremely difficult for small, internet-based companies to maintain their clients since they do not have the capital to deal with nations who restrict access to data flow .
What types of data are restricted?
- The types of information that are restricted are:
- Financial, accounting and tax data
- Personal data
- Public and government information
- Communications data .
What are potential problems companies face?
There are several problems that international and global companies face when it comes to global data transfer. The first one is time zone differences. It is not uncommon for major corporations to have locations all over the world. Without the ability to accurately and quickly move information on a global scale, there are a variety of consequences. Businesses need to be able to exchange information and data analytics to make decisions. In fact, data exchange can be a matter of life and death. As discussed in a previous post, imagine the necessity that doctors have for accessing patient records. If data transfer is restricted or is slow and inefficient, the physicians in charge could potentially make a fatal decision.
In addition to problems associated with time zones, restricted, faulty or ineffective data transfer solutions affect knowledge sharing and work flow. For example, a medical company that takes x-rays may need to share the information across the globe, or a business located in New York may need parts manufactured in Berlin. In either of these cases, it is essential for organizations to be able to access and communicate information with one another. If they are unable to do so, they can not share relevant knowledge and thus interrupts not only decision-making capabilities but also the flow of work.
Other reasons why data flow restrictions are problematic are:
- It hinders users from being able to access data using the highest quality technologies despite their location
- Data flow limits or decrease productivity
- It raises costs for local businesses
- Localization stops organizations’ customers from having open access to goods and services of their choosing
- Restrictions impede the expansion and entry of companies
- Data localization can increase cyber security threats. Because when a nation forces its organizations to keep their information within its borders, the organization is then forced to utilize smaller, less secure data centers which increase the threats associated with data breaches .
What are the solutions to global data transfer?
Given the necessity of cross-border information movement, it is imperative that organizations use effective strategies to promote secure and automated global data transfer. Plans include:
- Limit the localization of data 
- Promote international trade agreements to abolish cross-data transfer barriers 
- Concentrate on the importance of the global digital economy 
- Pursue greater data protection measures and global inter-operability 
- A clear explanation of the problem of government access to information and the separate issue of global data transfers in a commercial setting 
- Sending responsibility for the safety of personal information to those who use the data 
- Making sure the data and file transfer solutions are done with top security features enabled.
- Making sure data is accessed only on a need to know basis by authorized users.
1. Cory, Nigel (May 2017). “Cross-Border Data Flows: Where Are the Barriers, and What Do They Cost?”. Information Technology & Innovation Foundation. Retrieved 9 February 2018.
2. “Business Without Borders: The Importance of Cross-Border Data Transfers to Global Prosperity”. US. Chamber of Commerce. 2014. Retrieved 9 February 2018.
Contact EnduraData if you need assistance with automated secure data movement within data centers, between offices, cities, countries or between continents.