The Global Technology Fracture and Our Regulatory Inadequacies

Context: International trade regime expressed in the rules of the World Trade Organization and other agreements are not designed for the world of data, software and artificial intelligence.

Technological challenges to the international Trade Regime:

• Threats to geopolitics and national security:

• Digital technologies allow hacking of industrial networks, conduct cyber-espionage, and manipulate social media.
• For E.g. Russia has been accused of interfering in elections in the US through fake news sites and the manipulation of social media. 
• Fears of Huawei links to the Chinese government.

• Concerns about individual privacy:

• Internet platforms are able to collect huge amounts of data on what people do.
• The European Union (EU) has enacted fines for companies that fail to protect the EU residents’ data. 

• Market monopolization of large companies: 

• New technologies give a competitive edge to large companies that can accumulate enormous global market power.
• Economies of scale and scope and network effects produce winner-take-all outcomes.
• Unfair advantage to some firms: For, E.g. state surveillance has allowed Chinese firms to accumulate huge amounts of data, which in turn has enabled them to corner the global facial recognition market.

General Constraints and cautions for Global rules:

• Global rules—even if feasible—are inefficient in a broader term, since countries have different preferences.
• Balance between the gains from trade against the gains from regulatory diversity has to be obtained
• Hyper-globalization has already proved inadequate due to policymakers prioritizing the gains from trade over the benefits of regulatory diversity. 

Way Forward: Greater international coordination and global rules.

• Greater international coordination and global rules: Transnational regulatory cooperation and anti-trust policies could produce new standards and enforcement mechanisms.

• Benefits of common rules: 

• It checks the practices such as data localization, local cloud requirements, and discrimination in favour of national champions create economic inefficiencies.

• They reduce the gains from trade and prevent companies from reaping the benefits of scale.

• Presence of constant threat that their national regulations will be undermined by companies operating from jurisdictions with laxer rules.

• Maintenance of diversity in rulemaking:

• Countries may devise their own regulatory standards and define their own national security requirements.
• But they have no right to internationalize their standards and try to impose their regulations on others.

Conclusion: We need a regulatory patchwork, based on clear ground rules that help empower countries to pursue their core national interests without exporting their problems to others.