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Measuring the Value of Cross-Border Data Flows

The internet has transformed how Americans live, work and play. It has connected people around the world in new ways through data that flows seamlessly across borders. Businesses rely on cross-border data flows to access markets and interact with customers across the globe, find new suppliers and communicate with their overseas affiliates. Citizens rely on these flows to access a wealth of information from around the world; communicate with family, friends, and colleagues overseas; and gain access to foreign consumer and financial markets. Data users around the globe are exploring new ways to use big data to learn more about the world in which they live.

The economic data that is available from the Department relies on sound methodology and standard nomenclature. This data helps businesses choose strategies and informs policymakers as they set priorities. These priorities, in turn, drive policy choices, international negotiations, regulations, and legislation. A growing body of research has examined the relationship between cross-border data flows and economic growth – these studies point to the growing economic significance of these flows. But while the government has robust datasets on traditional industries, currently the U.S. Government does not regularly collect data that is specifically intended to measure how cross-border data flows impact the U.S. economy. As the use of cross-border data flows grows, we need to expand the information available to measure the economic impact of these flows and to help businesses and policymakers make informed decisions. Data on cross-border data flows and the digital economy should employ the same solid statistical foundations that our other economic data rely on. Some academics and private sector studies have examined the economic importance of cross-border data flows, but data gaps remain.

To better understand the potential data gaps and where the U.S. Department of Commerce (the Department) could best add value, the Department's Digital Economy Leadership Team (DELT) initiated a six-month effort to gather information on unmet data needs related to the measuring the economic value of the free flow of information. As the culmination of that effort, this report catalogs the challenges of measuring cross-border data flows and makes recommendations for improving the related data. Our analysis is based on numerous meetings with researchers and other stakeholders, a literature review, and a roundtable convened on May 9, 2016, to discuss measurement gaps.

This report and the recent Department effort are primarily focused on cross-border data flows. Cross-border data flows are one component of the broader digital economy. The digital economy encompasses all the goods and services that rely on or facilitate digital technologies. Many of the recommendations presented in this report relate to both cross-border data flows and the larger digital economy that encompasses them.

During the course of our research, culminating with the May 9, 2016, roundtable, stakeholders provided recommendations to help reach the goals noted above. While there are opportunities for both the private sector and U.S. Government agencies to improve the available measures of the value of cross-border data flows, this report primarily focuses on the opportunities specific to the Department. From the recommendations, we identified six actions the Department can take to improve the availability and quality of statistics and economic analysis related to cross-border data flows and the digital economy:

  1. Improve the overall coverage and quality of the government statistics on the service sector.
  2. Develop a standard nomenclature or standard definitions for concepts related to cross-border data flows, distinguishing between concepts such as the digital economy, digitally-intensive, digitally-enabled economy, and information and communications technologies (ICT).
  3. Develop a greater understanding of how firms use cross-border data flows and what economic value the data flows provide. These metrics should cover the entire U.S. economy as well as specific sectors.
  4. Develop improved and consistent macroeconomic statistics to measure the value of cross-border data flows and the digital economy, such as the contribution of data flows and the digital economy to the gross domestic product (GDP). These metrics should cover the entire U.S. economy as well as specific sectors.
  5. Continue the dialogue between the Department and private industry to facilitate data sharing and the linking of public and private datasets, where legally and logistically feasible and consistent with strong privacy protections for firms.
  6. Continue the collaborative efforts of the Department and international organizations to ensure that metrics on cross-border data flows and the digital economy are widely available for countries around the world.

In this report, we discuss these six recommendations in more detail and explore some of the challenges in measuring the value of cross-border data flows. We also describe related efforts that are currently underway at the Department. For example, the Bureau of Economic Analysis (BEA) is already taking several steps to improve its trade-in service statistics. BEA and the National Telecommunications and Information Administration (NTIA) are also embarking on a three-year study to define the digital economy, improve measurement related to ICT pricing, and provide initial estimates of the digital economy's contribution to GDP. The Department is committed to continuing collaboration with the private sector and other non-governmental groups, as well as with other government entities, both domestic and international.

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