NON‐TARIFF BARRIERS TO INTERNATIONAL DATA FLOW
| DOI | https://doi.org/10.1108/eb057508 |
| Published date | 01 May 1988 |
| Pages | 8-11 |
| Date | 01 May 1988 |
| Author | Kevin F. McCrohan,Larry S. Lowe |
| Subject Matter | Economics,Information & knowledge management,Management science & operations |
NON-TARIFF BARRIERS TO INTERNATIONAL
DATA FLOW
by
Kevin
F.
McCrohan
George Mason
University,
Fairfax,
Virginia,
and
Larry S. Lowe
Loyola
College,
Baltimore,
USA
Introduction
The major focus of economic activity within the developed world has shifted from the manufacturing of products
to the provision of services, in particular the handling of information. The annual reports of many major
corporations, such as Aetna Insurance, Xerox and General Electric, depict an expansion into information
industries. A particularly important issue resulting from this is the use of internationally transmitted computer
data,
which has been termed "transborder data flow."
Transborder data flow occurs when computer and telecommunications technology is merged to make machine-
readable data which are then sent by way of some communications channel from one country to another.
Multinational corporations rely on it, as do governments and the international financial community. It is very
possible that the control of transborder data flows will be the trade war of the 1990s.
This potential trade war involves a fairly significant and
rapidly growing sector of the world's economy. For
example, at present, telecommunications equipment
and services accounts for approximately five per cent
of US gross domestic product (GDP) and about three
per cent of GDP in Western Europe and Japan. This
is expected to double by the early 1990s[1]. Additionally,
any obstacles to the free flow of information, even if
initially market specific, will cause serious difficulties
for trade in both products and services. One thing
appears certain however, the increasing inclination of
the countries of the world to control transborder data
flows will cause difficulties in the years ahead for
multinational corporations, companies trying to develop
markets abroad, and, of course, for the computer
hard-
ware and software producers in international markets.
This article discusses the evolution and types of barriers
to transborder data flow, as well as their immediate
impact on the telecommunications industry and
possible ramifications for world trade in general.
The International Telecommunications
Market
Technical constraints of distance and transmission costs
in setting up international information networks have
been significantly reduced due to the merging of
computer technology and telecommunications.
Organisations, today, depend on the flow of information,
both domestically and across borders, in order to
accomplish daily activities and operations. This is
especially true for transnational corporations — banks,
airlines, manufacturing firms, advertising agencies,
insurance companies and shipping firms — which need
to co-ordinate operations, manage remote facilities and
make time-sensitive decisions. The development of
packet-switched networks, in which computers arrange
and store small groups of digitalised data for distribution
over high-speed networks, has greatly reduced the cost
of international data dissemination, or transborder data
flow (TBDF). TBDF is now an integral part of nearly
every transnational operation.
A transborder data flow can be a number of things: a
radio broadcast beamed across the Iron Curtain, a
telegram sent to a friend in Paris, or a message sent
by computer. This article concentrates on computer-
encoded information sent between computers or
terminals in different countries for processing or storage.
Technological developments over the past 25 years have
made it possible for computers to talk to each other
or to terminals in the next room or different parts of the
world.
This is done through telephone lines, by satellite,
cable or other communications modes.
These breakthroughs have made many more business
arrangements possible. Companies can connect their
various worldwide operations to central computer
processing facilities in their headquarters, or even to
their customers or suppliers. For example, computer
service firms located in the US can now routinely
contract with foreign customers, private companies or
governments, to handle their data processing needs.
In some cases, large data banks of a foreign concern
can be located entirely within the US.
The barriers to transnational flow of data that have
emerged cause a certain sense of déjà vu among those
that have followed trends in protectionism during the
past 20 years. Much, as was seen during the 1970s
with other industries, is made of Japanese moves to
open their telecommunications market to increased
levels of competition[2]. Barriers to TBDF are cited as
a means of saving jobs, with the Canadian Government
estimating 20,000 data processing jobs lost in the
mid-1980s due to the offshore processing of Canadian
data[3].
Additionally, 60 countries are either considering
IMDS
May/June
1988
8
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