Cross-Border Data Transfers & Small Businesses

Small Business
Cross-border data transfers can help small businesses by (1) increasing access to digital knowledge resources and overseas markets and leveling the playing field vis-à-vis larger enterprises; (2) offering a “digital dividend” that can be enjoyed by millions of small businesses globally; (3) allowing small businesses to use cross-border digital tools to seize economic opportunity with agility; and (4) reducing digital barriers that disproportionately impact small businesses.
  • Data Transfers & Leveling the Playing Field for Small Business. Small businesses face knowledge and access barriers that larger enterprises can more easily overcome. Data transfers and cross-border access to technology and markets help level the playing field. As the Organisation for Economic Co-operation and Development (OECD) has explained, cross-border data flows are especially important for small businesses.…Better and faster access to critical knowledge and information also helps small businesses overcome informational disadvantages, notably with respect to larger firms, reducing barriers to engaging in international trade and allowing them more readily to compete with larger firms. One recent study estimates that digital tools helped small businesses reduce export costs by 82 percent and transaction times by 29 percent. Data localization and transfer restrictions make it harder to achieve these benefits, in part because they produce a fragmented Internet that reduces market opportunities for domestic small businesses to reach worldwide markets, which may instead be confined to some local or regional markets.
  • Data Transfers & Small Business Digital Agility. Many small businesses demonstrate a greater degree of digital business agility than larger enterprises. Studies have found that, while 95 percent of small businesses were negatively impacted by the COVID-19 pandemic, the pandemic also caused 70 percent of small businesses to accelerate efforts to become more digitally competitive. The most digitally progressive small- and medium-sized enterprises (SMEs) are growing eight times faster than the least progressive. Studies have also found that small businesses with a strong digital presence grow twice as fast, and are 50 percent more likely to sell outside their region, relative to those with little or no digital presence. In a recent Center for Strategic and International Studies (CSIS) study, 65 percent of small business surveyed indicated they moved data across borders, with even higher percentages for those that export.
  • Data Transfers & the Disproportionate Impact of Digital Restrictions on Small Business. Unfortunately, the number and variety of digital trade barriers affecting small businesses has increased in recent years, and today include data localization mandates; unnecessary data transfer restrictions; customs duties on electronic transmissions; or other discriminatory digital measures. These types of digital barriers fall particularly heavily on small businesses, which lack the resources that larger companies can draw upon to comply with onerous mandates. In a recent CSIS study, small businesses highlighted divergent data privacy rules (40–60 percent of SME survey respondents) and data localization rules (30–40 percent of SME respondents) as key challenges. Conversely, with greater cross-border connectivity, small businesses estimate that they could increase sales by 15–40 percent and hire between 10–50 new employees each.

AlphaBeta, MicroRevolution: The New Stakeholders of Trade in APAC (2019),
Asia-Pacific Economic Cooperation, Small and Medium Enterprises (2022),
Federal Reserve Banks, Small Business Credit Survey: 2021 Report on Employer Firms (2021),
Goodman, Matthew P. and William Reinsch, Filling in the Indo-Pacific Economic Framework, Center for Strategic and International Studies (2022),
IDC, 2020 Small Business Digital Transformation: A Snapshot of Eight of the World’s Leading Markets (2020),
Organsation for Economic Co-operation and Development, Mapping Approaches to Data and Data Flows (2020),
Organsation for Economic Co-operation and Development, Enhancing SMEs’ Resilience through Digitalisation: The Case of Korea (2021),
Organsation for Economic Co-operation and Development, SME Digitalisation to Build Back Better, Digital for SMEs (D4SME) Policy Paper (2021),
Suominen, Kati, What Do CPTPP Member Country Businesses Think about the CPTPP, Center for Strategic and International Studies (2021), (For SMEs engaged in online sales, the most important digital economy provisions were those that (1) ensured that companies can move customer data across borders; (2) permitted companies to choose where to store their data; (3) prohibited digital customs duties; and (4) protected consumers from harmful practices, such as spam.)
Urata, Shujiro, How Can Asia Reignite Its SME Growth Engine through Trade? (2021),
US International Trade Commission, Digital Trade in the US and Global Economies (Part 2) (2014),