Data Localization

China and the United States (US) have the opportunity to ensure seamless flow of data between the two economies as they negotiate the US-China Bilateral Investment Treaty (BIT), a hallmark agreement that would create binding rules governing foreign investment.

The information age has unlocked productivity and growth in economies throughout the world, with the ubiquity of data actively driving contributions to GDP, job creation, and innovation. Multiple industries rely upon unimpeded data flows to drive insight in their core business while companies of all sizes and sectors – ranging from IT, to manufacturing, to mining, to banking, and many others – require seamless data flows on a daily basis to perform basic business operations.

Despite these dynamics, jurisdictions around the world are implementing regulations that seek to restrict data flows in order to address national security concerns and to protect the personal data of citizens. While these motivations are understandable, requirements for companies to build or use local infrastructure and/or restrictions on transferring or processing data abroad are counter-productive in achieving these objectives. In fact, data localization policies have much potential to inadvertently curtail business activity and economic growth, while also creating harmful global trade barriers and significant unintended impacts to critical business segments – all while not adding any meaningful additional levels of protection.

China and the United States (US) have the opportunity to ensure seamless flow of data between the two economies as they negotiate the US-China Bilateral Investment Treaty (BIT), a hallmark agreement that would create binding rules governing foreign investment. Both countries have expressed a strong intention and a firm commitment to a more open investment environment, based on the principles of “non-discrimination, fairness, openness, and transparency”. To meet these goals, the BIT should include clear language that expressly guarantees the seamless flow of data across borders, preventing data localization policies from becoming a barrier to trade and impeding global economic growth.

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