November 5, 2018
Last week I was fortunate to travel to Hangzhou, China, to participate in a CSIS annual dialogue with the Shanghai Institute of International Studies. The dialogues have been going on for four years with two meetings a year–an opportunity for think tanks and similar organizations from both countries to get together in a less formal atmosphere and “exchange views,” a Chinese term that these days means listening to each other’s talking points. This is the third year I’ve been fortunate to participate, and I think the dialogue has actually provided opportunities to occasionally–but not always–break away from talking points and have real conversations. That is getting harder, largely because the Chinese government is making it more difficult for its scholars and thinkers to have unfettered relationships with foreigners, but this year’s dialogue did provide some opportunities for honesty, partly because we were not in Beijing, and partly because we focused on topics related specifically to innovation.
My panel focused on digital trade and internet governance, and to the extent consensus was reached, it was clear that these will be significant areas of U.S.-China-EU competition going forward. To get the discussion started, I offered several hypotheses:
- We are heading for fragmentation of the Internet as countries and regions each pursue their own agendas and develop their own rules.
- China is pursuing a policy of much more control; the EU is pursuing a policy that emphasizes privacy protection, and the United States at this point is not leading, which has given rise to some efforts on the part of our individual states to step in and pursue their own rules.
- While this kind of fragmentation may suit national policies, it is not good for business, not good for growing our economies (particularly as trade becomes increasingly based on digital technologies), and not good for greater understanding among peoples.
- The ideal approach would be a common, global set of norms, but that is unrealistic. Instead, we are more likely to see competition, particularly among the EU, China and the United States to convince third countries to adopt our rules.
There are a few signs of hope:
- 71 WTO members, including the United States, China and EU agreed in Buenos Aires to launch exploratory talks on a plurilateral ecommerce agreement.
- The Asia Pacific Economic Cooperation (APEC) Forum’s Cross Border Privacy Rules (CBPR) might provide a good basis for advancing a digital best practices agenda that could make reaching agreement on governance easier.
- We should not rule out the possibility that the EU and the United States could come to a consensus on the EU’s General Data Protection Regulation (GDPR), which would be a considerable step toward a unified global standard but would leave China isolated.
There are also, however, areas where convergence may be impossible:
- Data localization. China, in particular but not uniquely, is not ready to forego that requirement, despite the costs it will impose on the economy.
- China continues its outright bans on some Western internet companies and continues to maintain foreign equity caps and joint venture requirements in this sector, and the joint venture partners continue to insist on technology transfer as a condition of doing business.
- The EU’s GDPR threatens to impose serious restrictions on cross-border data flows that will become increasingly problematic as digital commerce continues to grow.
It seems clear these days that in talking about the Internet, what you hear most frequently from Europeans is “privacy,” what you hear most frequently from Chinese is “security,” and what you hear most frequently from Americans is “cat videos.” We are obviously on divergent paths, with Americans focused on a free and open Internet, and the Chinese and Europeans obsessed with security and privacy respectively. The United States has an opportunity for leadership here, but thus far has not exercised it effectively. It would be a mistake to assume that this is a problem that will take care of itself, and that the Internet has always been open and will remain so. Freedom, whether it is electronic or personal, requires constant attention if it is to be maintained. The cat videos are not at risk, but many other things are.
If we cannot reconcile these different approaches, then we will find ourselves in the business of building walls around our respective gardens rather than further developing a tool for greater economic growth, cultural diversity, and common understanding.
William Reinsch holds the Scholl Chair in International Business at the Center for Strategic and International Studies in Washington, D.C.
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