Linkedin recently threw in the white towel on operating in Russia.
Unwilling to go along with Russian authorities’ order to store all Russian users’ data in the servers in the country, the social networking company chose to abandon the market rather than comply with the law.
The site, which served about six million Russian users, was blocked in the country in November shortly after a Russian court ruling sided with the government’s communications regulator.
The Linkedin case is perhaps the most prominent example of an emerging legal and trade trend worldwide in which multinational companies are required to store and process country-relevant data locally.
U.S. companies have lobbied and pleaded with foreign governments to relax data restrictions with little success. Most recently, the issue became a priority in the Trump administration’s trade negotiations. President Trump recently listed the issue as one of his demands in the upcoming renegotiations for the North American Trade Agreement.
Seeing data as a desirable currency and a tool in wielding economic and political power, dozens of countries, including China, Russia, Germany, Turkey, Belgium, Brazil and South Korea, have enacted data-must-stay laws in recent years with varying degrees of severity.
Not surprisingly, U.S. companies, especially the ones that handle large amounts of data, are concerned. Cutting-edge tech firms worry about having their intellectual property, such as source codes, stolen. Having to store data locally is expensive for small to midsize companies that have to find local server vendors, says Josh Kallmer senior vice president for global policy at the Information Technology Industry Council (ITI).
More broadly, measures that inhibit companies to invest abroad stifle jobs and innovations, the rule’s opponents say. Restricting data movement can also erode the Internet’s vitality in the long run. For example, Americans can no longer look up prospective Russian suppliers or customers on Linkedin.
“Part of what made the Internet always great and the reason why it’s blossomed is because it was always decentralized and not subject to heavy-handed regulations,” says Omer Tene, vice president of research and education at International Association of Privacy…