LinkedIn is latest to push back on data rule
Company abandons Russia after it insists on use of local servers
LinkedIn recently threw in the towel on operating in Russia.
Unwilling to go along with authorities’ orders to store all Russian users’ data on servers in the country, the social networking company chose to abandon the market rather than comply with the law.
The site, which served about 6 million Russian users, was blocked in the country in November shortly after a Russian court ruling sided with the government’s communications regulator.
The LinkedIn case is perhaps the most prominent example of an emerging legal and trade trend worldwide in which multinational companies are required to store and process country-relevant data locally.
U.S. companies have lobbied and pleaded with foreign governments to relax data restrictions with little success. Most recently, the issue became a priority in the Trump administration’s trade negotiations. President Trump listed the issue as one of his demands in the upcoming renegotiations for the North American Free Trade Agreement.
Seeing data as a desirable currency and a tool in wielding economic and political power, dozens of countries, including China, Russia, Germany, Turkey, Belgium, Brazil and South Korea, have enacted data-must-stay laws in recent years with varying degrees of severity.
Not surprisingly, U.S. companies, especially the ones that handle large amounts of data, are concerned. Cutting-edge tech firms worry about having their intellectual property, such as source codes, stolen. Having to store data locally is expensive for small-to-midsize companies that have to find local server vendors, said Josh Kallmer, senior vice president for global policy at the Information Technology Industry Council.
More broadly, the measures stifle jobs and innovation, the rule’s opponents say. Restricting data movement also can erode the Internet’s vitality in the long run. For example, Americans can no longer look up prospective Russian suppliers or customers on LinkedIn.
“Part of what made the Internet always great and the reason why it’s blossomed is because it was always decentralized and not subject to heavy-handed regula- tions,” said Omer Tene, vice president of research and education at the International Association of Privacy Professionals. “The concern is that the Internet will be splintered into islands.”
Data flowing through international borders generated $2.8 trillion in value in 2014, according to a study by the McKinsey Institute.
“Data needs to flow to create value,” said Nigel Cory, a trade policy analyst at the Information Technology and Innovation Foundation. The data restriction rules make U.S. companies “less efficient and less competitive.”
The rules also could hurt the countries that enact them. Australia requires all health data to be stored in the country. And that would discourage, say, IBM from selling its artificial intelligence platform Watson to hospitals in Australia.
“Australia is then cut off from the innovative services,” Cory said. “IBM is not going to build supercomputers in every market.”
China’s data-localization policies would cost the country as much as 1.1% of its gross domestic product, the European Center for International Political Economy estimated in 2014.
China is seen as a particularly stringent enforcer and purveyor of the rule. Its blocking of some prominent American sites, such as Google and Facebook, and other sources that are critical of the Chinese government is well known.
Still, in 2016, China tightened its data rules by enacting a new cybersecurity law that forces foreign companies in more sectors to store data in the country, said Courtney Bowman, a cybersecurity attorney at international law firm Proskauer.
While cybersecurity might be a purported reason, the real motive of China and others is more mixed.
Having data stored locally eases the governments’ work of citizen surveillance. Companies fear having their local data used by law enforcement or political groups for illegitimate reasons.
“What they see as legitimate doesn’t translate to any one of us in democracy,” Tene said, referring to China’s, Russia’s and Turkey’s data rules.
“If you think they’re driven by privacy, security and human rights, no.”
“Part of what made the Internet always great and the reason why it’s blossomed is because it was always decentralized.” Omer Tene, vice president of research and education at the International Association of Privacy Professionals