Trade Policy in the Surveillance Economy: Data Localisation and Pathways to Pragmatic Policymaking

Nikita Melashchenko · NZACL Yearbook · (2020) · paper · source ↗︎

The proliferation of cyber sovereignties is changing the meaning of data in international relations. Digital trade and national security affairs are no longer easy to distinguish. Data is essential for both commercial and government surveillance. However, the geographic imbalance in data access forces states to adopt unconventional solutions such as data localisation policies. This raises a critical question: what does it take to believe that such measures help achieve chosen policy objectives? This article argues that radical pragmatism provides the answer. By contextualising policymaking on data flows, this paper traces the origin of data localisation policies to surveillance capitalism and unfolds the narrative behind tightened data regulations. It connects this context with existing international trade rules established under the WTO and examines principles of radical pragmatism to explore the balance of interests in international digital trade. Ultimately, the article suggests that initiating a dispute within the WTO system may constitute a pragmatic way forward.

Key points

• The global digital economy divides states into data recipients (technology-exporting states that accumulate surveillance capabilities) and data donors (states whose nationals’ data flows to foreign platforms), creating a structural knowledge and power asymmetry.

• Surveillance capitalism is the dominant model of digital commerce that bundles products and services into integrated ecosystems that depend on cross-border data flows, turning user attention into predictive behavioral data; home-state governments can leverage legal instruments such as the US CLOUD Act to access this data regardless of storage location.

• Data donors, unable to match surveillance capabilities through conventional means, have turned to surveillance anti-capitalism: using technical and legal data localisation measures to reassert jurisdictional control over data generated within their borders.

• WTO non-discrimination and market access obligations (GATS arts II and XVII, art XVI) uphold packaged digitalism — restrictions on data processing components of bundled digital products can constitute prohibited flat restrictions or discriminatory treatment, exposing data localisation measures to WTO challenge.

• The article introduces radical pragmatism as the analytical framework: rather than seeking universal solutions or new multilateral instruments, ask what it takes to believe a given set of means achieves chosen ends within current background conditions, evaluated across four steps:

  • assess existing means;
  • prioritise context;
  • reveal value commitments; and
  • critically assess ends and means together.

• Russia’s blocking of Telegram is analysed as an unpragmatic data localisation measure: collateral damage to legitimate internet resources, arbitrary enforcement, no demonstrated causal nexus with security ends, and exposure to claims under the ECHR and WTO Agreement.

• Mutual Legal Assistance Treaties are considered as an alternative to data localisation but rejected as generally unavailable, given that data-recipient states hold superior negotiating leverage and data-donor states cannot rely on timely or acceptable results from cross-border legal cooperation.

• The WTO necessity test (applied under GATS art XIV and GATT art XX) is pragmatic at its core. It requires a causal nexus between the measure and the stated policy end, weighs the measure’s contribution against its trade restrictiveness, and compares it with reasonably available alternatives, a framework that critically assesses data localisation without requiring new treaty obligations.

• Data localisation fails the necessity test in many instances: measures covering publicly available data lack a privacy nexus; horizontal sovereign-internet measures impose trade costs that outweigh security contributions; and alternatives such as state-owned storage or data-as-a-service procurement are often reasonably available.

• Data pragmatism within current background conditions, where major data-distributing states are unlikely to accept new binding multilateral disciplines, calls for initiating WTO disputes over specific data localisation measures rather than pursuing new global instruments, using the existing necessity test as the neutral forum for critical value-based assessment.