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Nigeria National Information Technology Development Agency’s Guidelines for Nigerian Content Development in Information and Communications Technology require ICT companies to host all consumer and government data locally within the country.
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Such a change poses a mortal threat to the new kind of international trade made possible by the Internet—information services such as those supplied by Bangalore or Silicon Valley. Barriers of distance or immigration restrictions had long kept such services confined within national borders. But the new services of the Electronic Silk Road often depend on processing information about the user, information that crosses borders from the user’s country to the service provider’s country. Data localization would thus require the information service provider to build out a physical, local infrastructure in every jurisdiction in which it operates, increasing costs and other burdens enormously for both providers and consumers and rendering many of such global services impossible.
Efforts to keep data within national borders have gained traction in the wake of revelations of widespread electronic spying by United States intelligence agencies. Governments across the world, indignant at the recent disclosures, have cited foreign surveillance as an argument to prevent data from leaving their borders, allegedly into foreign hands. As the argument goes, placing data in other nations jeopardizes the security and privacy of such information. We define “data localization” measures as those that specifically encumber the transfer of data across national borders. These measures take a wide variety of forms—including rules preventing information from being sent outside the country, rules requiring prior consent of the data subject before information is transmitted across national borders, rules requiring copies of information to be stored domestically, and even a tax on the export of data. We argue here that data localization will backfire and that it in fact undermines privacy and security, while still leaving data vulnerable to foreign surveillance. Even more importantly, data localization increases the ability of governments to surveil and even oppress their own populations.
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The issue is critical to the future of international trade and development, and even to the ongoing struggle between democracy and totalitarianism. Data localization threatens the possibility of outsourcing services, whether to Bangalore, Accra, Manila, or even Silicon Valley. The theory of this Article expands the conversation about international Internet regulation from efforts to prevent data from flowing in to a country through censorship, to include efforts to prevent data from flowing out through data localization. A simple formula helps demonstrate what is stake: censorship + data localization = total control.
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Closely related to the goal of avoiding foreign surveillance through data localization is the goal of protecting the privacy and security of personal information against nongovernmental criminal activities. As the country studies above show, the laws of many countries make it difficult to transfer personal data outside of national borders in the name of privacy and security. While these laws are not explicitly designed to localize data, by creating significant barriers to the export of data, they operate as data localization measures.
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The worry about the impact of data localization is widely shared in the business community as well. The value of the Internet to national economies has been widely noted. Regarding Brazil’s attempt to require data localization, the Information Technology Industry Council, an industry association representing more than forty major Internet companies, had argued that “in-country data storage requirements would detrimentally impact all economic activity that depends on data flows.” The Swedish government agency, the National Board of Trade, recently interviewed fifteen local companies of various sizes across sectors and concluded succinctly that “trade cannot happen without data being moved from one location to another.”