International regulatory cooperation and services trade: Argentina and Uruguay adequacy decisions on data protection

This paper examines the experience in Argentina and Uruguay with EU data adequacy decisions. Building on existing evidence showing that data adequacy can boost bilateral trade in digitally deliverable services, the analysis shows that both countries recognized its trade-facilitating potential, in addition to benefits from data protection from a rights perspective. In addition, their experience with regulatory reform, based on the objective of obtaining an adequacy decision, has supported ongoing efforts more broadly in the region to develop data protection standards. There have been significant spillovers in a regulatory sense, as well as institutional adaptations on a regional level through the development of EU-based and non-EU-based adequacy clubs. A quantitative analysis using a structural gravity model that incorporates the latest developments in the causal analysis literature supports these claims. It shows that the effect of data adequacy on bilateral trade builds over time, potentially taking five years or more to fully develop. In Argentina, adequacy led to an increase of around 28 percent in bilateral exports of digitally deliverable services with other adequate countries. In Uruguay, the effect was smaller but still substantial, at 11 percent.