We’re currently witnessing a paradox when it comes to data privacy and open commerce. China and Russia are walling themselves off. For protectionist and national security reasons, they are putting up barriers to global engagement and commerce online. Less-than-free developing countries, such as Vietnam, seem to be increasingly drawn to this template.
The last three decades of digital data have been a Wild West of practically unlimited freedom and possibility. Recently, as is well known through regulatory frameworks such as GDPR, some regions are clamping down, affecting the ease of cross-border data flows and resulting in the isolation and siloing of data usage within borders, with no global standards for data governance to help move things forward.
Into this void has walked an unlikely protagonist: Japan’s Prime Minister, Shinzo Abe. At the recent Davos meeting, he called for a new initiative to build open rules for the global digital economy. He has also issued a call for a new political track in the Osaka G20 Summit — an “Osaka Track” — to start a worldwide discussion on data governance. He could be onto something.
But are the players around the table ready to forge a durable and high standard framework that’s up to the challenge?
A rising tide
Global data governance is at a crossroads. As the days of a free-wheeling cyberspace in the 1990s and early 2000s seem more and more remote, countries are increasingly taking steps that clamp down on the movement of data across borders.
I mentioned China and Russia above. But even democratic India, envious of China’s development and in the grips of a pervasive data nationalism, is looking seriously at putting up major protectionist barriers, for example with strict localization of payments data, their controversial draft e-commerce policy, and their draft data protection bill. Given the enormous potential for data gathering that’s a natural byproduct of their massive business process outsourcing (BPO) industry, they hope to reap the benefits from inward data flows without giving anything up through outward flows.
And others, like the EU, are responding to concerns about privacy and the social implications of online platforms, are devising divergent solutions to real challenges. While well intentioned, the EU’s restrictive privacy regime and those copying its model risk creating an even more fragmented global geometry for commerce.
Can the tide be turned?
As a critical mass of countries begin to put up barriers to cross-border data flows, the global community needs to respond with a data governance framework that addresses legitimate concerns of privacy, security, and development, without restricting open commerce. This need is only becoming more urgent as artificial intelligence (AI), which runs on data, becomes more advanced, more widely deployed in the economy, and more squarely within the sights of policy makers.
The global policy community has been directionless for several years on this front, while the U.S. has consciously retreated from leadership. In addition to protectionist rhetoric and unexpected tariffs that have ruffled feathers of key allies, the U.S. withdrawal from TPP left several states in Asia rudderless, and the president’s rhetoric on immigration has alienated many in Latin America. Even if this were not the case, American leadership is more focused on goods than on data in its trade agenda.
For its part, Europe remains dedicated to a privacy regime that implicitly regards cross-border flows of personal data as a threat to be managed. Other developed states with their hearts in the right place, like Canada and Australia, are too small on their own to provide effective leadership.
An unlikely hero?
Abe seems to be the only world leader willing and able to take up the mantle. Carving out an uncharacteristically outsized role for this traditionally cautious nation, he seized headlines at Davos with his call for a new effort to build open rules for the global digital economy.
Highlighting the primacy of data in emerging technology and Society 5.0, he argued for a new system of “data free flows with trust” (DFFT).
Abe aims to use the summit, which brings together large developing and developed countries of different persuasions, to push discussions at the World Trade Organization (WTO) for new rules, where some countries are already exploring a path toward multilateral e-commerce rules.
Drawing up rules to govern data involves a dizzying array of diverse and sensitive issues, from protections of personal data, to law enforcement and national security access, to AI ethics, to competition and copyright norms. Competing visions among states of how to hammer out an interoperable framework will hamper this process. Disagreements on these points will be sharp even among developed states.
However, disagreements among developed states will be nothing compared to the challenges the group will face if others like China, Russia, and India engage robustly in the discussion. If the process is housed in the WTO, as Abe suggests, it will likely be open to these other, more restrictive views on data.
This begs the question, can the WTO — or multilateral negotiations in general — move quickly enough to develop meaningful responses to the challenges the global digital economy faces? The WTO has often proved to be a cumbersome institution, with many negotiating efforts withering on the vine.
No choice but to try
Forging anything that looks like a global framework — even a loose one — will require buy-in from many countries, as well as a leader like Japan that can continue to muster the political will and wield the capital necessary to keep the process moving forward. It will also require a business community that is organized and pushes governments to do the hard work to develop a framework that is useful for global industry.
Despite the myriad challenges, there is little alternative but to try. The global digital economy is not on a good trajectory. Unless some sort of global consensus, even a partial one, can be reached on several issues, we will all end up poorer and more disconnected.