On the Internet data localization laws
Historically, and unlike China, as an example, the US has often opposed data localization laws. But this stance seems to be changing very fast in the wake of the trade war between the US and China. For example, over the past seven or so weeks, the Trump administration in the US has ordered that TikTok, a social media app developed by the Chinese company ByteDance and which is very popular among teenagers, be sold to a U.S. buyer; and declaring that the U.S. government would take a share of the sale. Mr. Trump has also demanded that TikTok’s proprietary algorithms should be transferred to a US company. In addition, he announced a US ban on downloading the app.
Mr. Trump’s wish may not materialize, according to Sam duPont of NExtgov.com, on 22 September 2020: “Instead, Oracle and Walmart will take a minority stake in TikTok. The algorithms that make TikTok tick will continue to be owned by TikTok’s Chinese parent company, ByteDance. Walmart’s CEO will get a seat on TikTok’s reshuffled board, and Oracle has won the right to sell cloud services to TikTok, meeting the U.S. government’s demand that TikTok user data be stored in the United States.”
The real issue though is not whether Mr. Trump’s proposal will be able to withstand the myriads of checks and balances that exist in the US. The dawn of a new era is being heralded, on the other hand; an era where the US is embracing China’s own vision of digital sovereignty, which is to say an internet that is walled off along national borders, blocking the free flow of data. I hear Americans saying, “this is not who we are!”
It’s not going to be business as usual in terms of the US’ long-standing and signature commitment to open, global Internet. The Internet was developed by the US and the country made it available to all other countries of the world, open and free. However, in apparent annoyance over the way China controls Internet data, and in the face of the trade war between the US and China, the US - at least under the current government - seems to engage in a tit-for-tat with China on matters concerning Internet data localization. The resolution to the TikTok issue is an endorsement of the kind of digital policies that China has long advocated and the United States has long opposed.”
Mr. duPont notes that “requiring domestic data storage as a solution to the risks presented by TikTok is right out of China’s own playbook for the internet, which it has been advocating around the world.” He also says that governments in Russia, Indonesia, Saudi Arabia, Turkey, Vietnam and elsewhere have imposed or considered replicating data localization requirements akin to China’s own, which is against US’ long-standing policies on these issues.
The US current data localization playbook seems to be embodied in the new Clean Network initiative of the US government, which started around April of last year. According to the US government, “the US Clean Network program aims to safeguard the nation’s assets including citizens’ privacy and companies’ most sensitive information from aggressive intrusions by malign actors, such as the Chinese Communist Party.” The program addresses the alleged longterm threat to data privacy, security, human rights and principled collaboration posed to the free world from authoritarian malign actors. The Clean Network is said to be rooted in internationally accepted digital trust standards, representing the execution of a multi-year, all-ofgovernment, enduring strategy, built on a coalition of trusted partners, and based on rapidly changing technology and economics of global markets.
To be sure, one can certainly argue for the US Clean Network initiative. For example, China is accused daily, with substantiated evidence in some cases, of stealing intellectual properties of advanced US companies and government agencies. The ability to do this is heavily aided by the Internet, and so some control of the Internet may be in order if these allegations against China are true. Michael Mehaan, on 21 September 2020, also in NExtgov.com, is strongly in favor of the motive behind Clean Network: “Consumer data in the United States is protected by a scattershot of local laws that are inconsistently enforced. The U.S. is also the only country in the Organization for Economic Co-operation and Development (OECD) that does not have a data protection agency. This needs to change.”
However, as pointed out by duPont, data security depends on a range of factors, such as the physical location of the servers that store data, which he says – though I am not entirely sure about this is well down the list in importance. Mr. duPont’s opinion is that data localization requirements do little to improve the privacy or security of data, while costing a fortune to implement when one considers data storage and processing costs. The win-win opportunity that an open network presents is emphasized: “When a small Korean company can take advantage of cloud computing services provided by a U.S. company with servers located in Singapore, everybody wins. But where data localization laws require redundant data storage and processing facilities in every market, the economic advantages of digitalization diminish rapidly.”
Ordinarily, I personally prefer the open Internet framework. The reality though is that there are a few global threats that tend to undermine it.