Frictions In Digital Trade – Regulation of Cross Border Data Flow

What is Digital Trade?

The term digital trade is very wide in its scope of application. It covers everything from the sale of consumer products on the internet, to the supply of online services and global value chains amongst a plethora of applications and platforms 2. Digital trade has often been met with a broad range of challenges; therefore, this article seeks to succinctly outline the following challenges in taxation and data centres, firewalls, and data localization due to the core infrastructure they provide to facilitate digital cross-border trade.

Challenges in Digital Trade

The frictions in digital trade often stem from protectionist policies and regulations of the respective governments in question that have a myriad of sectors and industries they legislate over. State sovereignty is a jus cogens norm under international law, therefore, a state is well within its right to legislate as it wishes. Notwithstanding, certain policies are injurious to both economic development and the many forms through which digital trade is facilitated. Some of the avenues through which a state may promulgate such policies include the following:

1. Taxation

Taxation can easily be defined as the mandatory contributions levied on individuals or corporations by a government entity, whether local, regional, or international. The type of tax often associated with friction to digital trade is tariffs. These are taxes on imported goods, charged against the importer to protect the domestic
market.