The U.S.’s signal of a huge digital shift

America’s withdrawal from its centerpiece digital trade positions at the WTO now gives developing countries a good opportunity to shape effective digital regulation

Updated - November 11, 2023 08:51 am IST

Published - November 11, 2023 12:08 am IST

‘But a major (perhaps the main, unstated) reason for the U.S. declaration is the China factor’

‘But a major (perhaps the main, unstated) reason for the U.S. declaration is the China factor’ | Photo Credit: Getty Images/iStockphoto

When Thomas L. Friedman triumphantly declared in 2005 that the world was flat, with the opportunities having been equalised globally, it was considerably premised on new digital developments. This new geopolitical and geo-economic ideology was led by the United States, home to most of the world’s Big Tech. It first sought to redefine development through the field of ICT4D (Information and Communication Technologies for Development), and then herald a new dawn for democracy globally, most characterised by colour revolutions in East Europe and the so-called Arab Spring.

Prempting digital regulation

Behind it all of course was a new plan to employ the global reach of digital tentacles, and later data-enabled controls, for economic expansionism. Some called it digital colonisation, due to its extractive nature. The U.S. thereby sought to prempt alarmed national regimes from reconstructing boundaries to contain digital globalisation. It devised a set of digital trade proposals seeking binding commitments from countries to essentially prevent any effective future regulation of Big Tech. For some years now, such digital trade proposals have been the hottest agenda at various plurilateral trade negotiations and at the World Trade Organization (WTO). Countries such as India and South Africa, and some other developing ones, have stoutly resisted the U.S.-driven digital trade agreements juggernaut.

In the circumstances, the world was shocked to hear the U.S. withdraw, in late October, from its centerpiece digital trade positions at the WTO — those about data flows/localisation, access to source code, and location of computing facilities. The declaration represents a watershed moment about how the global digital economy and society will evolve going forward. The stated motive is the realisation that the U.S. needs domestic policy space to regulate Big Tech and AI, for which data and source code could be important leverage points. Having employed this as a major reason for opposing global digital trade agreements, developing countries can feel vindicated. However, they also had strong economic reasons; an uncontrolled remit of the Big Tech would not allow domestic digital industrialisation.

From flat to a split digital world

But a major (perhaps the main, unstated) reason for the U.S. declaration is the China factor. The flat world was a happy place for the U.S. when it meant its singular digital hegemony over it. But with China fast on the heels of the U.S. towards digital superpower-hood, the situation has become more complex. The digital trade negotiations at the WTO are open to all countries, and China grasped the opportunity to participate in them. China had leveraged its accession to the WTO in 2001 to become the ‘world’s factory’, thereby taking its economic development, and subsequently geopolitical status, to an entirely new level. A free digital trade agreement — with free data flows, without the need to share the source code of digital products, and allowing remote computing facilities — could similarly be employed globally by China to now outsmart the U.S. digitally. It could help bring China on an equal footing with the U.S. in accessing global digital markets, and in driving and controlling the world’s digitalisation, in all sectors. Apart from the economic challenge, the U.S. also considers any pervasive Chinese digital presence globally as a major security threat.

Such Cold War-like economic and security-related exclusions, and blocs building, may at least be as important a reason behind the U.S. declaration as the stated one of preserving policy space. Even though having withdrawn from these all-important positions in the WTO digital trade negotiations, where China cannot be excluded, the U.S. may still push for data flow, source code, and facilities location, related provisions in regional digital trade deals, in some form or the other. Such deals will be led by the U.S., and, significantly, be limited to its allies. The Indo-Pacific Economic Framework for Prosperity (IPEF) and the Americas Partnership for Economic Prosperity (APEP) are two such initiatives by the U.S. It is pursuing similar interests through bilateral trade and technology councils, for example with the European Union (EU) and India.

The historic declaration by the U.S. can, therefore, be seen in two different lights. At one level, it signals a full global acceptance that preserving national policy space around data flows, source code, and location of computing facilities is key to all-important digital regulation. This is a most welcome development. But at another level, what indeed is rather worrying is that it could firmly herald the splitting of the global digital space, structures and value-chains into two competing blocs — one led by the U.S. and other by China. This is already happening, but could now pick up a new momentum.

Resisting digital dependencies

What does this mean for developing countries such as India? They should make the most of the new global consensus on the need for strong digital regulations to rein in Big Tech and manage AI, including through policies related to data, source code, and location of computing facilities. The U.S.’s statement is like abnegation by the king, with the EU already employing data and source code related laws in its domestic regulation which are beginning to look quite contrary to its positions at global digital trade forums. Developing countries should grasp this opportunity with both hands to urgently shape new paradigms for national digital regulation.

But, at the same time, developing countries must stoutly resist a new trap of a digital Cold War, whereby they get bound into digital dependencies either with the U.S. or China. A new digital regulation paradigm should combine with strong digital industrial policies to bolster domestic digital industry. Countries should aim at creating globally open standards, open protocols, and open digital public infrastructures. All these together could mean complete and genuine global-scale interoperability. This would enable open global digital value chains, allowing easy switching across global digital trade partners — suppliers or consumers — whether from the U.S., China, or elsewhere.

Parminder Jeet Singh is a New Delhi-based digital activist and researcher

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