Era of borderless data coming to an end

By DAVID MCCABE and ADAM SATARIANO

Every time we send an email, tap an Instagram ad or swipe our credit cards, we create a piece of digital data. The information pings around the world at the speed of a click, becoming a kind of borderless currency that underpins the digital economy. Largely unregulated, the flow of bits and bytes helped fuel the rise of transnational mega-companies like Google and Amazon and reshaped global communications, commerce, entertainment and media. Now the era of open borders for data is ending.

France, Austria, South Africa and more than 50 other countries are accelerating efforts to control the digital information produced by their citizens, government agencies and corporations. Driven by security, privacy concerns, as well as economic interests and authoritarian and nationalistic urges, governments are increasingly setting rules and standards about how data can and cannot move around the globe. The goal is to gain “digital sovereignty.”

Consider that: In Washington, the Biden administration is circulating an early draft of an executive order meant to stop rivals like China from accessing American data. In the European Union, judges and policymakers are pushing efforts to guard information generated within the 27-nation bloc, including tougher online privacy requirements and rules for artificial intelligence. In India, lawmakers are moving to pass a law that would limit what data can leave the nation of almost 1.4 billion people. The number of laws, regulations and government policies that require digital information to be stored in a specific country more than doubled to 144 from 2017 to 2021, according to the Information Technology and Innovation Foundation.

While countries like China have long cordoned off their digital ecosystems, the imposition of more national rules on information flows represents a fundamental shift in the democratic world and alters how the internet has operated since it became widely commercialised in the 1990s.

David McCabe, who reports from Washington, and Adam Satariano, who reports from London, cover how tech laws and regulation are changing globally. The repercussions for business operations, privacy and how law enforcement and intelligence agencies investigate crimes and run surveillance programs are far-reaching. Microsoft, Amazon and Google are offering new services to let companies store records and information within a certain territory. And the movement of data has become part of geopolitical negotiations, including a new pact for sharing information across the Atlantic that was agreed to in principle in March.

“The amount of data has become so big over the last decade that it has created pressure to bring it under sovereign control,” said Federico Fabbrini, a professor of European law at Dublin City University who edited a book on the topic and argues that data is inherently harder to regulate than physical goods. For most people, the new restrictions are unlikely to shut down popular websites. But users might lose access to some services or features depending on where they live. Meta, Facebook’s parent company, recently said it would temporarily stop offering augmented reality filters in Texas and Illinois to avoid being sued under laws governing the use of biometric data.

The debate over restricting data echoes broader fractures in the global economy. Countries are rethinking their reliance on foreign assembly lines after supply chains sputtered in the pandemic, delaying deliveries of everything from refrigerators to F-150s. Worried that Asian computer chip producers might be vulnerable to Beijing’s influence, American and European lawmakers are pushing to build more domestic factories for the semiconductors that power thousands of products. Shifting attitudes toward digital information are “connected to a wider trend toward economic nationalism,” said Eduardo Ustaran, a partner at Hogan Lovells, a law firm that helps companies comply with new data rules.

The core idea of “digital sovereignty” is that the digital exhaust created by a person, business or government should be stored inside the country where it originated, or at least handled in accordance with privacy and other standards set by a government. In cases where information is more sensitive, some authorities want it to be controlled by a local company, too. That’s a shift from today. Most files were initially stored locally on personal computers and company mainframes. But as internet speeds increased and telecommunications infrastructure advanced over the past two decades, cloud computing services allowed someone in Germany to store photos on a Google server in California, or a business in Italy to run a website off Amazon Web Services operated from Seattle.

A turning point came after the national security contractor Edward Snowden leaked scores of documents in 2013 that detailed widespread American surveillance of digital communications. In Europe, concerns grew that a reliance on American companies like Facebook left Europeans vulnerable to U.S. snooping. That led to protracted legal fights over online privacy and to trans-Atlantic negotiations to safeguard communications and other information transported to American firms. The aftershocks are still being felt.

While the United States supports a free, unregulated approach that lets data zip between democratic nations unhindered, China has been joined by Russia and others in walling off the internet and keeping data within reach to surveil citizens and suppress dissent. Europe, with heavily regulated markets and rules on data privacy, is forging another path. In Kenya, draft rules require that information from payments systems and health services be primarily stored inside the country, according to the Information Technology and Innovation Foundation. Kazakhstan has said personal data must be kept on a server within its borders.

In the European Union, the personal data of Europeans must meet the requirements of an online privacy law, the General Data Protection Regulation, which took effect in 2018. Another draft law, the Data Act, would apply new limits on what corporate information could be made available to intelligence services and other authorities outside the bloc, even with a court order. “It’s the same sense of the sovereign state, that we can maintain knowledge about what we do in areas that are sensitive, and that is part of what defines us,” Margrethe Vestager, the top antitrust enforcer of the European Union, said.

Companies have adjusted. Microsoft said it was taking steps so customers could more easily keep data within certain geographical areas. Amazon Web Services, the largest cloud computing service, said it lets customers control where in Europe data is stored. In France, Spain and Germany, Google Cloud has signed deals in the last year with local tech and telecom providers so customers can guarantee that their data is overseen by a local company while they use Google’s products. “We want to meet them where they are,” said Ksenia Duxfield-Karyakina, who leads Google Cloud’s public policy operations in Europe.