Digital Connectivity: How to Strengthen Europe’s Digital Agenda

Written by | Friday, September 6th, 2019
@Eubulletin

Connectivity is high on the EU’s agenda, but its digital dimension remains underdeveloped. The short paragraph on digital in the EU connectivity strategy is telling. The EU’s distinct approach to digital connectivity – with a focus on the internal market, rule-making and development – differs from similar strategies, particularly China and its Digital Silk Road. Needed, now, is a comprehensive strategic vision?that spurs action on all three practical elements of digital connectivity – namely, telecommunications infrastructure, business and regulation – and gives strategic guidance in the political and even securitized sense, and not only from a market perspective. 

As the US-China trade war evolves into a more permanent conflict at the nexus of trade, technology and data, Europe needs to act on the challenges of digital connectivity. An edge in innovation and Artificial Intelligence (AI) is crucial, as digitization transforms the global economy. Moreover, dominance in the fields of data and technology is vital for military dominance, and the United States has shown no restraint in demanding support from its allies to maintain its leading position. 

The call from Washington to ban Huawei from providing 5G infrastructure is the most well-known such example. But the United States’ push for a new export control regime for emerging technologies illustrates that the US-China conflict is impacting the EU and its member states and their relations with the United States and China in other fields as well. The EU needs to act if it is to remain a relevant player in the global reconfiguration of power and sources of power. 

The EU’s ‘Europe-Asia Connectivity Strategy’, adopted in October 2018, should help the EU and its member states on their way, but falls short of providing the necessary strategic guidance in the digital field. Essentially a value proposition for sustainable, comprehensive and rules-based connectivity, the strategy largely focuses on the field?of transport. This focus may have seemed natural considering the boom in Chinese investments and loans for infrastructure development in Europe in recent years, but today, as the fourth industrial revolution sparks a more conflictual international environment, European stakeholders are left ill-equipped to deal with growing challenges in the field of digital connectivity. 

Compared to the EU’s regulatory approach, key elements of the digital-connectivity strategy of others – especially China, with its Digital Silk Road (DSR) – are both at a higher level of strategic action and are business-oriented at the same time. The DSR is about hard infrastructure – that is, constructing and expanding existing telecommunications networks. Offering network security for China’s Belt and Road Initiative (BRI) investment recipients is an important element of the BRI now, and this role is expected to grow in the future as advanced infrastructure networks advance.

The DSR is also about business operations: promoting exchanges via the establishment of digital marketplaces. Both elements – e-commerce and e-payment markets – come together in smart city projects, which some distinguish as a third element of the DSR. China’s edge in AI and innovation?is important, as dominance in the fields of data and technology is also a key to military dominance. China’s push into the global digital economy has been largely driven by its national technology champions Huawei, Alibaba and Tencent. These companies have been able to deliver high-quality products at low cost, partially because of Chinese government support, even if Beijing’s role in supporting the DSR has been more low-key than other BRI components. 

Notably, while e-governance and e-business regulations appear to be largely missing in China’s DSR, this soft element does feature in the digital strategies of Japan and the United States, which otherwise resemble China’s approach. The United States and Japan, for example, are both moving on digital – individually and in synergy – including in their Free and Open Indo-Pacific policies. Alongside this regulatory push, both seek a share of the digital economy in third countries, by nurturing and maintaining, as well as investing in digital companies. Moreover, as China catches up in several high-technology fields, the US is demanding support, such as in the ‘Huawei ban’ case, from its allies to maintain its leading position.

Importantly, China’s more strategic and practical – rather than regulatory – approach to the digital field is of significance to Europe and beyond. First, European and other foreign firms are challenged to operate cost-effectively. In South-East Asia, for example, the digital economy has grown rapidly?and is emerging as a new growth engine, catalyzed by investments from external?tech giants (largely from China, but also from Japan) and regional unicorns. Chinese companies increasingly rival – and outdo – other major players in their ability to expand their presence abroad rapidly, thanks to their innovative edge and government support.

Yet, the consequences for the EU and?its member states go beyond business operations to include also the normative and security spheres. There are, after all, risks about the hardware and software needed for the shift to a digital economy. Investments?in network-security infrastructure abroad become a tool to further China’s – restrictive – vision for internet governance. China’s system runs counter to principles of free and accountable governance, and is successful already in Vietnam, for example.

Moreover, the integration of Chinese security software into critical infrastructure could serve as a boon to China’s espionage and security services. As regular software updates – rather than a one-off hardware installation – are needed, installing security checks is a bigger challenge than in earlier-generation technology. Although more infrastructure is needed to support digital activities, robust regulations are needed on key issues such as data privacy and cyber security. 

The EU has not been sitting still with?regard to digital connectivity. A common?EU approach to the security of 5G is in the making. On data privacy and security, the EU has acted to protect European consumers and individuals, particularly within the Union. In addition, at the World Trade Organization, the G20 and other forums, the EU is moving in cooperation with Japan and others to further a global framework that addresses cross-border internet policy, governed by the concept of data free flow with trust. 

Missing, however, is a comprehensive strategic vision that spurs action on all three practical elements of digital connectivity?and gives strategic guidance in the political and even securitized sense, not only from a market perspective. For European players to remain at the forefront of the fourth industrial revolution, problem-solving business operations of digital companies should be nourished and retained during the scale-up. This requires investments in innovation and technology – including in public–private partnerships – that nurture and maintain start-ups and ‘unicorns’. 

Awareness of?the need for greater investments in and?a strategic vision on AI is growing in the?EU and must now be followed by action. European governments and companies can learn from digital advances elsewhere – especially in South-East Asian countries, which are leapfrogging ahead in the field?and are inspired by China rather than by European, US or Japanese technologies.

Platforms are needed for the EU and its member states to discuss digital connectivity with stakeholders elsewhere. There is ample room for the EU to engage with others on its best practices with the Digital Single Market, including through?its Digital4Development framework, but resources are needed for action outside the EU. Opportunities for best practice exchange and greater synergies are also evident in the field of cyber security – including 5G. After all, countries in South-East Asia and Africa are facing similar challenges to those that EU member states are currently facing – of having to balance cost and risk. 

Now is the time to act on digital connectivity’s practical as well as strategic elements of hard infrastructure and business operations. This requires that European stakeholders do their groundwork – by way of investments in innovation, technology?and public–private partnerships, as well?as an allocation of funds – and thus reap?the potential of strategic cooperation and coordination with partners elsewhere.

‚How to Strengthen Europe’s Agenda on Digital Connectivity‘ – Policy Brief by Maaike Okano-Heijmans – Clingendael / The Netherlands Institute of International Relations.

(The Policy Brief can be downloaded here)

 

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