The United States’ blacklisting of the Chinese company Huawei — since reversed — represents an important milestone as the world splits digitally around its two digital superpowers, the US and China. Last year, the US disallowed Alibaba’s takeover of Moneygram and later embargoed US supplies to the mobile company ZTE. Amazon and Google recently affirmed their loyalty to the US military. China’s corporations in any case closely follow the State’s directions.
The digital world’s centre is mostly taken to be the US. But according to a leaked US government document, if China dominates telecommunication globally — and Hauwei indeed tops in 5G technology, it “will win politically, economically, and militarily”. China is also closing in on the Artificial Intelligence (AI) gap, as reports emerge that not only China produces more AI research, its quality is also set to soon surpass that of the US’s.
Not just geopolitical rivals, even big digital corporations try to avoid depending on another company for crucial digital supplies. Global digital value chains are therefore getting vertically consolidated, as AI companies begin to even make their own chips.
Global digital offerings would increasingly organise, and split, around the two global digital poles of US and China. They are also becoming more integrated right from computing chips, network equipment and user devices to software, applications and AI. Every other country will have to choose between the two digital superpowers as its primary digital supplier, and get increasingly locked into it.
It is scary to imagine such a digitally split world. Countries will face acute digital dependencies on their respective digital overlord (US or China), as the latter controls data-driven digital intelligence running their various sectors.
With the outlook being so dismal, countries like India should explore the combination of a geopolitical approach of digital non-alignment, with a practical one of diligently promoting open digital value chains.
Digital non-alignment implies deliberate economic and political investments to avoid getting too closely hooked to either of the digital superpower’s digital products and services. Its technical, policy-legal and business model complement is to establish open digital value chains.
Vertical integrations must be checked through open technical standards, strong competition regulation, and other policies like mandating data sharing. This will require close cooperation among the digitally non-aligned countries, including, hopefully, European ones.
But most importantly, India needs a strong domestic digital industry in most, if not all, key links of the digital value chain. We are increasingly being left with digital economy’s physical elements — cars, drivers, logistics, manufacturing, hospitals, schools, and so on. The data driven digital brain at the top of the digital value chain in every sector is either in the US (largely) or China. Just think of the Uber application extracting our data, using it to control interactions between our car drivers and commuters, and making a neat 25% cut on all payments, without actually even having to to be in India. Similar will be repeated in every single sector. Our much vaunted IT or digital strength is contributory — and up for sale — and not controlling, whether as software coders or digital start-ups eager for US or Chinese buyouts.
What is required is a strong and clear-headed digital industrial policy, which aims foremost at the layer of highest value: data. After all, the most important data needed to manage various sectors in India is local — arising from us and about us. This provides the basis for claiming legal ownership over such data, and channelling it for development of Indian digital industry. India’s draft e-commerce policy attempts precisely that through the concepts of community data and national data. It also proposes adequate legal and technical frameworks to make such data available for India’s digital development.
This does not entail isolation from global digital value chains. It only creates the space and basis for negotiating on better terms with foreign technical service-providers, and in a manner that develops our capabilities, and enables India to keep graduating higher in digital value chains. This, as against the current forecast of permanent digital dependencies. Unlike most other countries, India has the required technical as well as managerial/entrepreneurial capabilities and a large enough domestic market.
After establishing more open digital businesses domestically, India can also develop a global niche. Its alluring global offer can be of less extractive business models than those of the US or China, even if it affects profit margins. These models would respect local data ownership, and build respective domestic digital-industrial capacities, rather than suppressing them. Almost all countries today fear digital subjugation enough to welcome such a more open global digital business approach, perhaps even if it initially has less shiny offerings than those of the digital superpowers. For instance, what does it really take to digitally organise a city’s food business, and would it matter if it gets accomplished in two years rather than one?
But it will require a clear and strong-willed nationwide vision and effort. Not just a data protection law here and an e-commerce policy there, and multiple varied perspectives arising from finance, commerce, industry, IT, and security establishments. A single anchor in the government, and a document, with a strategic digital vision, has to be created first. We must also remain prepared to face much resistance, and even setbacks. Global leadership is not for the faint-hearted.