A recent article published by the U.S. International Trade Commission (USITC) provides an overview of the global market for cloud services, and an excellent resource for policymakers’ questions about cloud computing and how to enable greater adoption.

At a time when policymakers around the world are struggling to keep pace with the rapid pace of technological change and the growth of cloud computing, the article explores the role of cloud computing in U.S. exports and examines the international dimensions, providing a concise overview of the key policy areas that are implicated as the cloud industry grows globally, and the ongoing attempts to address these challenges. As U.S. industry experts and cloud providers know, the key policy challenges associated with cross-border cloud computing and ensuring the seamless flow of information worldwide revolve largely around concerns associated with data privacy, security and localization requirements.

A major contribution of the study is the new set of estimates regarding the contribution of cloud computing to U.S. services exports. When a U.S. firm or foreign affiliate sells cloud computer or software services to an overseas customer, this counts as an export and favorably impacts the US balance of trade in services. But localization requirements can hurt these exports. As the office of the United State Trade Representative said in its 2012 Telecom Trade report, “…restrictions on data access and transfers are becoming more consequential trade barriers.”

The study helps us understand just how damaging these trade barriers could be for the growth of our software and computer services firms. It finds that in 2010, U.S. firms exported cloud services worth almost $1.5 billion from their U.S. facilities to customers in other countries. In 2009, they exported an additional $1.4 billion of cloud service to foreign purchasers from their affiliates located abroad. The study concludes that “cloud computing is already a source of significant revenue for U.S. exporters and multinational firms.”

In the absence of trade barriers, cloud exports could become much more significant in the years ahead. Cloud provision of software and computer services is the future of the industry and is growing much faster than the overall growth of these markets. Gartner estimates that global revenue from all software sales will increase 8.4% per year through 2015 – from $244 billion in 2010 to $347 billion 2015, while the cloud provision of software will increase much faster – 22.6% per year from $10.0 billion in 2010 to $21.3 billion in 2015 (see ITC study p. 6). Gartner estimates that global revenue from computing services will increase 22.6% per year through 2015 – from $791 billion in 2010 to $983 billion in 2015, while forecasting that cloud computing services will grow from $4.1 billion in 2010 to $22.0 billion in 2015, a dramatic growth rate of 87.3% per year (see ITC study p. 6). The potential growth of cloud exports in a world without trade barriers is enormous.

Importantly, the article highlights that governments around the world have sought to address these key policy challenges through domestic policies, bilateral agreements, and multilateral institutions. On the international level, approaches have included establishing non-mandatory, best-practice guidelines as well as binding commitments. The article cites many sources in describing both approaches as important: the former may be developed rapidly and are more able to keep pace with technological change, while the latter emerge more slowly, but provide investors a greater sense of certainty about countries’ policies.

Additionally, the article compares the role of developed and developing countries, concluding that developing countries have played a smaller role than developed ones in the market for cloud services and international policymaking related to the cloud, citing the developing countries lack of infrastructure and domestic policies to more fully develop their cloud industries. Finally, case studies of India and China provide evidence of the great potential for growth of cloud computing in developing countries, while highlighting the divergent approaches, challenges and opportunities that these countries are seeking to overcome.

David LeDuc is Senior Director, Public Policy at SIIA. He focuses on e-commerce, privacy, cyber security, cloud computing, open standards, e-government and information policy.