The Case for Free Flow of Data

December 13, 2016

Think global – that’s what startups do from day one. To do so, they require a healthy mix of access to finance, talent, market, education, culture and startup-friendly regulations, which constitute a ecosystem. A borderless internet is one core component of this environment – and that requires free flow of data.

We’ve been here before. The 2013-Startup Manifesto  called for the removal of requirements for data providers to store information in any given country, a call that was repeated in 2016. The Commission recognized that more and more EU countries are building data borders: a fact-finding exercise in found that removing existing borders “would bring EU GDP gains of up to €8 billion p.a.” Another study went further: preventing future data localisation measures will create even more gains. They calculated that the economic loss of EU-wide data barriers would be €52 billion per year. It seemed like an open-and-shut-case, or as Vice-President Ansip’s commented:  “Data localisation is a dead end.”

After years of discussion in Europe, we don’t have less but more data barriers. Banning these would be the first step to stop hurting ourselves. Ironically, the leaked Communication explicitly acknowledges this. But the Commission prefers to keep collecting more arguments and ‘elevating the level of discussion’ through a ‘strong communication’ this January.

Besides macroeconomic data, the case for free flow of data is even more compelling when looking at it through the eyes of a startup. It’s simple: The internet is borderless-by-design. It’s a platform for a new generation of companies to grow and reach users across the world. Digital Startups would get short shrift if data across markets had to be stored in each respective jurisdiction. How would you explain to BlaBlaCar that they need to buy into 22 ‘national clouds’ and process payments and profiles in 22 separate locations, now that they have scaled to these markets? What if you share a ride from Paris to Brussels. Should the resulting data be stored twice, half-half or in a Franco-Belgian cloud?!

In fact, it has been hard to find tenable reasons for data localisation. Data protection is already separately governed by the new data protection rules – it’s misleading to assume that data stored in a certain location is safer simply because of legal requirements. The Communication underlines this paradox. The debate surrounding free flow of data should neither be a distraction from, nor a substitute for a debate about data security. For startups, data security is paramount and best addressed through IT management and encryption –  never through data localisation.

To put matters into context, most Member States are against ‘data borders’ too. On 2 December, 14 EU governments positioned themselves in favor of free flow of data. On the other side, as little as 1 ½ EU States are reportedly in favour of artificial data borders. Non-EU examples of data nationalism include Iran’s idea of the Halal-Internet or Russia’s obligation to store information about Russians on the territory.

The EU’s biggest achievement so far is a single market with the freedom of travelling and doing business. Free flow of data is the backbone of a digital single market. It enables startups and innovators to help the European economy to thrive. Ultimately, data should flow freely around the globe to democratise entrepreneurship and create an accessible and inclusive economy.

Read here what entrepreneurs have to say on free flow of data.