With GDPR in the Background, Digital Protectionism Is on the Rise

A protectionist mindset that’s been brewing politically worldwide for quite some time is suddenly at the doorstep of every digital platform and global brand. Marketing players are now making locally-minded data moves that stand to hurt companies of all types; though the business ramifications have yet to be appropriately recognized.

Public policies, such as the EU’s looming General Data Protection Regulation (GDPR) and the repeal of Net Neutrality, are driving the protectionist mentality. Congress calling on Facebook CEO Mark Zuckerberg to testify about his platform controversially sharing data on 87 million of its users with Cambridge Analytica only exacerbates the situation.

I won’t name names, in order to protect the privacy of certain players, though I know of a company that not only needed its data in Canada, it had to be in Quebec. I also know of a global brand in France that is planning to store its data only in France. Late last month while attending Mobile World Congress in Barcelona, Spain, I spoke with potential customers who wanted data stored locally in Turkey and Israel. These kinds of moves could harm data-sharing partnerships or companies’ efforts to engage customers with more relevancy if systems that process data are fragmented across hundreds of jurisdictions.

Certain governments already have data localization laws in place. Russia, for example, enforces data localization laws so that citizens’ datasets have to remain in the country. Enforcing its laws, Russia has banned access to LinkedIn since 2016 and threatens to block Facebook in 2018 unless it agrees to comply with the data localization laws.

In Canada, British Columbia and Nova Scotia mandate that personal data held by certain public institutions must be stored and accessed within the borders of the country. There are 195 countries in the world. Imagine if software companies were required to have a service instance for every country—that scenario would likely drive their costs through the roof. Such developments aren’t necessarily going to sink currently thriving data players, but the potential impact is worth keeping an eye on.

What’s more, in an era where artificial intelligence promises smarter business tools and predictive data, digital protectionism could not only impede progress but also have a negative impact. For example, if all data must be stored locally, AI systems may draw only from data silos in each country, which would seemingly create nationally-biased “intelligence.”

This May, GDPR is set to go into effect across the European Union as the EU looks to have its regulations catch up to all the technological advances that have occurred in the past two decades. When the previous EU data directive was adopted, Google and Facebook didn’t even exist.

GDPR will impact any organization anywhere that hawks goods or services in the EU or tracks the behavior of folks in Europe, regardless of where such businesses’ offices or software firms are located. GDPR is fashioned to protect the privacy of EU citizens from companies in other markets with less stringent privacy protections, and it has the additional effect of forcing the rest of the world to conform to the EU’s more civic-minded standards.

GDPR is part of a bigger picture of nationalist-based separatism that’s been coming into focus for a while. Before Brexit rocked the political-economic landscape in 2016 and GDPR was adopted the same year, there were already signs of digital protectionism in Europe. In 2014, German Chancellor Angela Merkel momentarily proposed the idea of the EU building its own internet to prevent email and other data from flowing through U.S. networks. That move was a direct reaction to unflattering reports of data collection by the U.S. National Security Agency.

Governmental watchdogs are inherently necessary to protect consumers. At the same time, the internet depends on the free flow of data, and this reality will remain especially true as we see more and more consumers adopting new messaging channels and Internet of Things technology.

Does that mean governments, tech companies, brands and other organizations should be even a smidge more lax toward data security? Absolutely not. We already observed how Equifax and Target have suffered thanks to their respective security breaches. More recently, Strava, a mobile fitness platform, inadvertently revealed top-secret U.S. military bases because some soldiers were logging their exercise routines on its app.

As businesses, we need to always think of what’s best for customers. When they share data, we should be stewards of their information with a privacy-by-design modus operandi. At the same time, consumers are increasingly appreciative of data-based experiences that delight them.

A Salesforce study showed that 57 percent of consumers said they’d share their data to get more personalized offers. (This situation has been growing for a few years, by the way.) And businesspeople want to capitalize on that trend, which shows no signs of slowing down. Hence, we need to be proactive in educating the marketplace that the free flow of data, by and large, makes our lives more fluid on a daily basis and even sometimes helps first responders save lives. The everyday executions of modern culture are absolutely dependent on data.

For the sake of the digital economy, it’s now imperative that we don’t let digital protectionism devolve into an internet ecosystem that entails borders at every turn.

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This article was originally posted in AdWeek.