Cybersecurity and Trade: The Increasing Use of Cybersecurity Measures and their Impact on International Trade

Abstract

Rapid advancements in technology have resulted in the expansion of digital cross-border transactions, known as digital trade, which relies on cross-border data flows to facilitate the trade of goods and services around the world. Digital trade provides benefits for enterprises, allowing them to scale up faster, increase efficiency, and expand their customer base. However, the increased use of digital services that requires the large-scale collection of sensitive data has resulted in an increase in the frequency and scale of cyber-attacks as malicious actors attempt to exploit vulnerabilities in networks that lack the proper cybersecurity measures. This can be detrimental to national security, impacting national defense, critical infrastructure, and individual citizens whose information can be stolen and used for malicious purposes. To mitigate this risk, numerous governments have been imposing unilateral cybersecurity measures, such as restricting exports to and imports and investments from enterprises operating in certain countries that are deemed to pose higher risks to cybersecurity. Measures also include restricting cross-border flows of data to countries with insufficient cybersecurity standards or requiring that data be routed through certain countries. The requirement for more stringent cybersecurity increases opportunities for enterprises to fill existing market gaps. However, the multiple regulatory frameworks that enterprises are required to comply with depending on the market they are operating in increases costs, imposes barriers to trade, and has the potential to weaken cybersecurity, ultimately calling into question whether these measures achieve their objective. To prevent this and reduce tensions that may arise through allegations of digital protectionism, global cooperation is required to define the issue of cybersecurity and develop a framework for imposing measures that strengthen cybersecurity, with trade agreements being a useful tool to do so.