USA TODAY US Edition

LinkedIn is latest to push back on data rule

Company abandons Russia after it insists on use of local servers

- Roger Yu @ByRogerYu USA TODAY

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

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