Data and Digital Trade Law
Balancing rules, policy space, and development
As data becomes central to digital trade and economic growth, governments are increasingly challenged to balance the benefits of openness with the need for regulatory oversight. This paper examines emerging trade rules on cross-border data flows, their implications for development and economic opportunities, and the specific challenges faced by developing countries.
Key Messages
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Governments regulate data to pursue a range of policy objectives (e.g., privacy, social cohesion, national security). To achieve these, they may adopt measures such as limits on data transfers or conditions on where data is processed, which can have important implications for cross-border trade.
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The diversity of policy objectives contributes to regulatory heterogeneity across jurisdictions. This can lead to digital market fragmentation, affecting firms’ ability to access cross-border markets and increasing compliance costs.
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Many governments are at a critical stage in defining their data governance approaches, seeking to balance the benefits of open data flows with the regulatory space needed to pursue national preferences and domestic policy objectives. Trade agreements are increasingly shaping these choices.
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Developing countries face additional challenges, as access to data and its benefits remains unequal and increasingly concentrated. They must navigate geopolitical pressures and the risk of digital interdependence being weaponized, while addressing the data divide and seeking to secure greater value.
This report explores how governments regulate data—including rules on cross-border data flows and data localization—while examining the role trade agreements play in shaping these frameworks. The primer also highlights the challenges developing countries face as they seek to balance the benefits of open data flows with the policy space needed to pursue development, security, and regulatory objectives, and offers practical insights for policy-makers and trade officials.
The report is part of a policy primer series, funded by the Swedish International Development Cooperation Agency (Sida), aimed at deepening understanding of the key policy and regulatory foundations that shape today’s digital economy.
This is the fourth report of the Building Blocks of Digital Trade Regulation series. You can continue exploring the series here:
- Report No. 1: Consumer Protection and E-Commerce: Issues for Developing Country Policy-Makers
- Report No. 2: Cybersecurity and International Trade: Understanding the Policy Landscape
- Report No. 3: Setting International Technical Standards to Shape Digital Trade Policy: Approaches, Challenges, and Opportunities for Developing Countries
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