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HOME NRI JOURNAL Takahide Kiuchi's View - Insight into World Economic Trends :
Development of international rules for data distribution led by Japan

NRI JOURNAL

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Takahide Kiuchi's View - Insight into World Economic Trends :
Development of international rules for data distribution led by Japan

Takahide Kiuchi, Executive Economist, Financial Technology Solution Division

Feb. 12, 2019

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Japan is taking the lead in creating new international rules for cross-border data distribution. We believe that this takes into account the responses to the conflicts that have arisen in this field between the United States and China.

Discussion on international rules for data distribution at the Osaka G20

There is a sense that the rules of the free trade system that were built up since the end of World War II have been weakened by the Trump administration under the principle of protectionism. Against this backdrop, rather than the traditional international trade in goods and services, there has been a trend to develop new international rules for data distribution across national borders, and Japan is bidding to lead this.
At the World Economic Forum Annual Meeting (the Davos Conference) held in January in Switzerland, Prime Minister Abe proposed the creation of new international rules on cross-border data distribution, and called for the start of consultations on unified data management at the G20 held in Osaka in June. In his speech, he strongly emphasized the importance of data utilization and distribution, including: "Growth engines are no longer powered by gasoline but by digital data," "It is digital data that will bring about growth in the coming years," and "The free distribution of data will lead to economic growth and the elimination of the gap between the rich and the poor." However, it does not seem that the aim is to uniformly encourage the free movement of all data across national borders. The Prime Minister states that while it is important that useful anonymized data, such as medical and industrial data, travel freely across national borders, it is also necessary to carefully protect personal information, intellectual property, and security secrets. This indicates their intention of defining different rules for different types of data.
One aspect behind Japan's proposal for the creation of international rules for data distribution may be a consciousness of China. Since the end of World War II, developed countries have led international trade in goods and services. However, in China, where e-commerce and e-payment systems have grown rapidly, enormous amounts of data have been accumulated. Accordingly, the China Internet Security Law was enacted in June 2017 due to which China has taken the lead in developing rules for the use of such data. It therefore seems that developed countries intend to take back their lead in the creation of international rules for data distribution.

Consideration of the United States’ criticism of China

In addition, serious conflicts have arisen between the United States and China over cross-border data distribution. The Chinese government prohibits the export of customer information obtained by foreign companies operating domestically, and requires the disclosure of source code corresponding to the blueprint of the program. The United States strongly criticizes this as it allows the Chinese government to capture information from foreign companies operating in China. It also strongly criticizes them for capturing important technologies through Chinese companies operating abroad.
By accumulating and analyzing big data domestically, China has dramatically increased the accuracy of AI technology in areas such as self-driving and image recognition. It is possible that the US intends to weaken China's technological advantage in AI by transferring such Chinese big data abroad. On the other hand, they also intend to check the outflow of technical and personal data to China by curbing the transfer of data from the US and other countries to China. By advocating for the creation of international rules, Japan may aim to alleviate the conflict between the United States and China over the distribution of data.
In May 2018, the European Union (EU) enacted the GDPR (General Data Protection Regulations) to strengthen the protection of personal data. This GDPR may become a de facto global standard for rules for the distribution of personal and other data. Developed countries such as the United States, Japan, Canada, and New Zealand have already been certified by Europe as having adequate levels of personal data protection, and can transfer personal data in the European region to themselves through relatively simple procedures.
On the other hand, China is unlikely to be recognized as having personal data protection legislation of the same level as the GDPR in Europe. With the GDPR as a standard, the freedom to distribute personal data will expand further among developed countries, while China may continue to restrict the transfer of data from developed countries.
However, if new international rules for data distribution were to be developed in such a way as to restrain China, it would create a new framework for confrontation between China and developed countries, and China could strengthen its protectionist tendency in this field. In light of the philosophy that the free flow of data across national borders will boost global growth, Japan will be required to proceed carefully with the creation of new international rules while taking China's intentions into consideration.

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Contact

Nomura Research Institute, Ltd.
Corporate Communications Department
E-mail: kouhou@nri.co.jp

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