The facilitation of a constant, seamless flow of data is necessary for competitive production. Regulations that hinder cross-border data movement risk creating disruptions in efficiency.
Sweden’s National Board of Trade’s (“NBOT”) 2015 study maps the transfer of data in global value chains (“GVCs”), with a focus on tasks that relate to the actual production of goods. As a result of advances in information and communication technology (“ICT”) and the Internet, today’s production is largely conducted across disjointed and geographically dispersed GVCs. This requires large quantities of data to be moved frequently and securely, usually cross-border.
The NBOT provides five main reasons as to why a well-functioning production process requires data transference: i) for overarching control and coordination of geographically-fragmented production, ii) to undergo R&D in the pre-production phase, iii) to ensure efficiency in the flow of goods, services and capital used in production, iv) to manage production output and final assembly, and v) to monitor the products sold. The types of data transferred include employment data, customer data, technical product data and data generated during product usage.
The movement of data is currently influenced by legislation, with implications for the whole manufacturing industry. Two such types of measures include forced localization and restrictions on cross-border data transfers (including export restrictions). Government intervention and censorship poses further burdens on a free-flowing exchange. Such measures can affect the set-up of GVS, including where, how and by whom such production processes are established. They runs the risk of creating inefficiencies in processing, including increasing costs, delays and poorer functionality.
The ease of movement of data is fundamental to operating an efficient GVC and production process. As production becomes increasingly digitized, this need will become even more pressing. Regulators are encouraged to recognise that embracing and facilitating this transformation will support companies’ competitiveness, and to keep the changing needs of firms in mind when formulating data regulation. Furthermore, the NBOT suggests that substituting data regulation for the use of trade agreements could be helpful in supporting adequate digital infrastructure, creating cyber security solutions and avoiding forced localization.