The free flow of data between the US and EU is responsible for generating substantial value for both countries’ services trade and investment – often more than goes reported.
In this 2014 report, Brookings studies the economic impact of cross-border data flows between the US and the EU. It purports that this is the most significant bilateral trade relationship across the globe. Furthermore, this relationship is underpinned by cross-border flows of data, including the online purchasing of a range of services (or “digitally deliverable services”). Indeed, cross-border data flows between the US and Europe are 50% higher than between the US and Asia, and almost double that between the US and Latin America. In 2012, US exports and imports of digitally deliverable services were $384 billion and $234 billion, respectively. Of this, the US exported $141 billion worth of these digital services to the EU and imported $87 billion. This comprised 72% of US bilateral services exports, as compared to 55% of exports to Asia and Latin America.
The free flow of data across borders increases the productivity and competitiveness of businesses, reduces trade costs, and facilitates economic growth and job creation. Businesses rely on such data flows to interact internally, with customers and with suppliers, to control global supply chains, to access low-cost software on demand and to conduct global research and development. SMEs and new start-ups are provided with opportunities to participate in the global economy. These data flows can also be considered a form of international trade. Digitally deliverable services include the purchase and delivery of financial, consulting, engineering and design services. Indeed, increasing Internet access has been found to lead to increased international trade.
These digitally deliverable services are also used as inputs into the production of other goods and services. Where these products are exported, so are these services used in their production. Taking into account the additional value of digitally delivered services in goods and services exports, Brookings estimates the total worth of US cross-border digitally delivered services to the world at $570 billion in 2012, or 32% of total US exports. Digitally deliverable services imports from the EU are used to produce US goods and services for export, and vice versa. In 2009, 62% (or $11.2 billion) of digitally deliverable services from the EU were used in the production of US exports. Digitally deliverable services are also delivered through affiliates of US companies operating in Europe, and vice versa. In 2011, these services were worth $312 billion as supplied through US affiliates in Europe.
“As the world’s two largest economies, the US and EU decisions on support for cross-border data flows will also have global implications.”
Brooking’s report highlights the many cross-border data flows that go unrecorded in international trade statistics. Full measurement of such important sources of economic growth and international trade illustrates the true significant economic value of the free flow of data for these two countries. Furthermore, whether the EU and US take full advantage of their international trade and investment prospects will have a wider impact on all transatlantic economic relations.