UK Data Diplomacy: Navigating the Nexus of Economics and Geopolitics in the Indo-Pacific
by Thomas Carey-Wilson
Critical infrastructures, including telecommunications and the internet, are shaped by economic interests that often disguise political ideology. In this way, sometimes calls for economic openness are no exception. As poignantly said by Maxigas and ten Oever (2023), “What the democratic conception of the open network/market hides is that some actors are better positioned and possess more resources for harnessing the advantages of openness.”
In this article, I briefly examine how both tendencies (i.e., open data sharing across borders versus a preference for more restrictive policy in this space) can disguise geopolitical interests and ideological differences, even conflicts. Indeed these differences are already entangled in states’ complex exercise of national security interests and economic comparative advantage through global fora and international agreements.
I develop this examination in two main points. Firstly, I explore the dynamics of open and closed data policies in the context of international trade and its inherent relationship with geopolitical interests and ideological disparities. This sheds light on the strategic implications of data governance choices across the global landscape. Secondly, I explore the geo-economic dimensions of open data flows and emerging digital technologies, highlighting the United Kingdom (UK) Government’s (officially, and hereafter, called ‘His Majesty’s Government’ — HMG) efforts to potentially develop and exercise comparative advantage in the Indo-Pacific region.
Through recent foreign and tech policy updates, HMG (in particular, the Foreign, Commonwealth and Development Office — FCDO — Department for Science, Innovation & Technology — DSIT — and Cabinet Office) has reiterated its interest in how more open cross-border data flows could be the key to unlocking economic prosperity for multiple actors globally. This is increasingly the case in domains of certain emerging digital technologies, such as those of artificial intelligence (AI), quantum computing or bio-engineering. The flip side of this dynamic involves instances where authoritarian states purportedly intertwine political motives with economics, resulting in states adopting or being swayed by their values through economic incentives, like investments in vital national infrastructure.
The Indo-Pacific region’s diverse assortment of economies, political systems and geopolitical alignments provides a good area of focus for this examination, in addition to being of particular interest to HMG’s foreign and technology policy. As data flows continue to rise in significance for the operation of digital markets worldwide, this will likely continue to evolve as a domain where economic and geopolitical conflicts, rooted in contradictory ideological value systems, interplay.
Open and Closed Data in Policy and Trade
Cross-border data flows (or the ‘flow of information’) have been a point of disquiet for European states since the aftermath of the Cold War, but attention to this subject area has grown in response to the volume and granularity of (often sensitive personal) data used in digital services like personal banking and e-commerce.
Personal banking and e-commerce are both domains which present great economic opportunities to national markets across the world. Given the transborder nature of these sectors, they are also responsible for a large bulk of cross-border data flows. The importance of cross-border data flows for markets like this (and increasingly others) is evidenced by the embedding of e-commerce and financial service clauses in trade agreements between countries like Japan, Singapore and Australia enabling the free flow of information, in principle, for mutual economic benefit from these sectors.
I have noticed these trends primarily in two recent HMG policy documents: the Cabinet Office’s Integrated Refresh Review 2023 (IR23), a renewed outline of government security, defence, development and foreign policy stances since 2021, which itself heralded the previous Integrated Review 2021 (IR21). Also, the UK DSIT and FCDO’s International Technology Strategy 2023 (ITS), a policy report outlining the HMG’s strategic priorities for investment in, and development of, global digital technologies.
Trade deliberations (and by extension, data flows enabled by them) are often underscored by the assumption, or concern, that states can leverage economic advantage to non-economic ends, such as geopolitical ones. The ITS certainly reflects this, explaining that HMG supports its foreign policy objectives by embedding digital chapters in each of its trade agreements across the Indo-Pacific region. One salient example of this underscoring in trade agreements is the 2021 Japan-UK Comprehensive Economic Partnership Agreement (JUKCEPA), which contained a groundbreaking chapter on how International Data Spaces (IDS) can enable Japan’s ‘Data Free Flow with Trust (DFFT)’ concept. IDS is defined as “the sovereign and self-determined exchange of data via a standardised connection across company boundaries”. Alongside these economic aims, both the ITS and IR23 repeatedly emphasise that offsetting ‘unjustified’ domestic data localisation policies is key to “countering authoritarianism in the region” by enabling free market innovation and the “exchange of ideas.”
The approach taken by states in mitigating the risks associated with these data flows sheds light on their national security profiles, which itself relates to their geopolitical alignments.
Data localisation policies are defined by the Centre for Global Development (CGD) as policies which “restrict the flow of data out of a country or requires copies of data be stored in-country”. The reasons for this range from justifications relating to national security to cohering with a country’s legitimate domestic public policy. Curiously, what constitutes ‘legitimate’ or ‘unjustified’ in these contexts remains a point of ambiguity. Elaborating on the possible reasons behind this semantic ambiguity, the approach taken by states in mitigating the risks associated with these data flows sheds light on their national security profiles, which itself relates to their geopolitical alignments. Scholars like Aaronson and Leblond (2018) and Gao (2021) have written about the concepts of “data realms” or “data kingdoms”, respectively. Whether framed as realms or kingdoms, both concepts point to how certain states have aligned their data governance practices to harmonise with those of great power states like the People’s Republic of China (PRC), the United States Government (USG) or the European Union (EU).
For instance, the data governance policies and practices of states like Vietnam are more closed; bearing a localised and security-conscious approach to data transfers comparable to strategic allies of the PRC. In contrast, the Republic of Korea’s (ROK) data protection policies frame data privacy as a consumer protection right which applies insofar as the data subject is participating in markets, generally in line with close diplomatic ally the USG. What is driving these alignments and divergences is a complex question, but given the political and economic similarities between states residing in the same data realm, the answer at least partially lies in looking at international trade policy and the value systems driving preferences therein.
Widely-used World Trade Organisation (WTO) frameworks like the General Agreement on Trade and Services (GATS) articulate the ‘free flow of information’ as a baseline principle for trade agreements. However, within sections like Article XX, there are several often-cited exceptions to this principle including for “legitimate public policy interests” and “public order”. Ambiguous language like this penetrates international trade agreements, leaving flexibility for states, like the PRC or India, to impose restrictions on the movement of data. This is against a backdrop of some other states like the USG and HMG (broadly ‘Euro-Atlantic’) governments insisting that such data flows remain ‘open’, often aligning with their market-based economic and geopolitical positioning. Currently, the latter is favoured by existing consensus through the rules-based international system represented by organisations like the World Trade Organisation (WTO). In this way, the demarcation between economics and geopolitics can become hazy.
These vague (and, as noted by Burri (2021); pre-internet!) exceptions are raised in trade agreements across the Indo-Pacific, like the PRC-inclusive Regional Comprehensive Economic Partnership (RCEP), supporting trade inclusivity by skirting around the domestic data localisation policies of prospective participants. Both IR23 and the ITS recognise that there is a wide variety of these preferences for data localisation at the national level, but it is hard not to notice that the majority of the countries referenced as close strategic partners in the region are of a certain political and economic stripe. Countries like the Republic of Korea, Japan, Australia and Singapore — all free-market democracies — are referenced throughout both documents in the context of strategic partnerships like the Digital Trade Network (DTN) and various free trade agreements across the Asia Pacific.
It is certainly not novel to point out that free-market democracies are more likely to trade with other free-market democracies. This much has been identified by scholars like Manfield et al. (2002), who found that international trade coordination roughly correlates with “regime type”. But regardless of its novelty, there are reflections of state-ideological differences in the manner that digital trade and data flows are agreed upon and that accommodating these differences is vital for healthy trade relations, and possibly for what might be considered mutually beneficial flows of data between countries.
Both IR21 and IR23 underscore the strategic significance of the Indo-Pacific region and the challenges posed by countries like the PRC, which embody what is termed as ‘systemic competition.’ This concept of systemic competition signifies a heightened rivalry among states and non-state actors, characterised by an escalating contest over international rules and norms. It involves the formation of competing geopolitical and economic blocs, each driven by distinct values, which traverse our security, economic, and institutional frameworks.
This shift from a singular arena to multiple strategic arenas is central to understanding how systemic competition is currently shaping international dynamics, particularly in the context of emerging digital technologies.
The case of IR21, generally outlines how science and technology will become a battleground in this systemic competition. However, IR23 takes this idea further by delineating specific domains where this competition unfolds, notably in areas such as artificial intelligence (AI) and microprocessors. It explicitly argues that the science and technology arena has evolved into multiple strategic arenas. For instance, within the realm of AI, technology has not only advanced significantly but has also become more widely accessible, intensifying the competition for dominance in this prominent domain. This shift from a singular arena to multiple strategic arenas is central to understanding how systemic competition is currently shaping international dynamics, particularly in the context of emerging digital technologies. In addition to showing a narrowing of focus on specific technical domains, there is renewed interest in the part that open data flows play in feeding the research, development and operation of these emerging digital technologies. It is to this topic that we now turn.
Open Data Flows, Tech and Comparative Advantage
Given the rapid growth of the UK tech sector over the last several years, it could be the case that aside from these overtly geopolitical objectives about systemic competition, HMG is also making an economic calculation in that it wields a comparative advantage in this area over many Indo-Pacific countries, especially given the strength of its supporting quaternary sector (research and universities). In this way, the lines between what is beneficial for the UK geopolitically and economically become blurred.
The economic benefits brought by being a first mover in any of these domains of emerging digital technology might be an attractive prospect for governments, and data is clearly seen as a key enabler for cutting-edge research and development in all of these (a ‘horizontal’ undergirding their ‘vertical’ — a conceptual framework particularly outlined in the ITS). The ITS spells out in its first core principle, ‘Open’, how data, emerging digital tech and political values are interrelated:
“Open — we will promote the design, development and use of technologies which support personal freedom and democratic values and champion standards which enable innovation, data free flow with trust, exchange of ideas, and trade.”
In contrast, emerging digital technologies have become an appealing vista for states looking to improve the competitiveness and comparative advantage of their domestic economic profile. Hoarding the data which may buttress the development of these technologies can be a reaction to concerns over providing competitive advantages to other states, as evidenced by MI6's suggestion of curtailing the access of Chinese researchers to UK Biobank.
Hence, the content and directionality of cross-border data flows become a security concern for states wanting (or perhaps from their perspective, needing) to maximise these advantages domestically, amongst other public policy interests like data protection. Examples of this include India’s recently withdrawn Personal Data Protection Bill (PDPB), which would have mandated domestic data localisation policies partially for the purposes of economic growth, including to “help give Indian firms a competitive advantage in fields like artificial intelligence (AI)”. The logic of this is that large datasets from abroad used for training AI models are registered and stored locally in Indian data centres, possibly building an opportunity for greater access to these datasets for Indian firms.
It is difficult to see how a preference for open against the tendency for more closed data localisation measures is not imbued with a complex web of economic, technological geopolitical and ideological interests at the international level.
Hard data localisation can even be just as much a matter of preventing the inflow of data that is perceived as harmful to the economy or wider society in different ways. The main example here includes the PRC’s strict system of internet censorship, often referred to as the ‘Great Firewall of China.’ Data localisation is one aspect of this system, with nebulously defined ‘critical information infrastructure operators’ required to store all data on Chinese soil according to the 2017 Cybersecurity Law. This enables the government to better monitor, control and potentially restrict online content, including social media, search engines, and news websites.
Given this, it is difficult to see how a preference for open against the tendency for more closed data localisation measures is not imbued with a complex web of economic, technological, geopolitical and ideological interests at the international level. Edward Luttwak’s pioneering work in geo-economics revealed how economic power can serve as a tool for states to wield geopolitical influence, in particular focusing on states’ interactions with oil markets of the 1970s. Luttwak (1974) argued that amidst the 1973 oil crisis, this critical resource for industrialised nations exposed their vulnerability to external suppliers. This resource dependency created a situation where oil-producing countries, particularly those in the Middle East, could exert significant geopolitical leverage by controlling the supply of oil.
In present times, increasingly pivotal data-driven digital value chains are also being recognised as crucial subjects for the study of geo-economics (this is strictly leaving aside any misplaced comparison between data and oil!) It is therefore unsurprising that both the IR23 and ITS repeatedly convey the need to open up data flows and broader opportunities for digital trade by tackling unjustified data localisation policies. This word ‘unjustified’ is reminiscent of the manner in which ‘legitimate’ is used by WTO GATS procedures discussed earlier; ambiguous and perhaps strategically so.
Technical standardisation […] is recognised as an important regulatory lever for HMG to exercise influence, especially since it shapes how a large number of the above digital technologies are developed, the level of interoperability and potentially with whom.
But the purpose of this ambiguity may be clearer than first meets the eye. In addition to passages about tackling authoritarianism, the bare economic benefits to the UK opened up by increased digital trade are gestured throughout. For instance, the ITS references the Asia Pacific Digital Trade Network (DTN) which includes: “Australia, Japan, Indonesia, Singapore, South Korea and Thailand, the DTN’s mission is to accelerate the growth of UK digital technology and digital trade through helping UK businesses find opportunities for new partnerships, increased trade and investment, and greater market access.” Outside of international partnerships and trade agreements as legal and economic avenues, both the ITS and IR23 also highlight international fora as places to propagate more open principles embedded in technical design. Technical standardisation (and standards-development organisations [SDOs]) is recognised as an important regulatory lever for HMG to exercise influence, especially since it shapes how a large number of the above digital technologies are developed, the level of interoperability and potentially with whom.
In IR23, HMG states explicitly: “we will engage directly with China bilaterally and in international fora [like SDOs] so that we leave room for open, constructive and predictable relations.” This is in addition to exercising influence on how the “emerging digital and technology order” is shaped by seeking “to shape open, democratic norms, rules and standards and effective accountability and oversight while opposing the overreach of state control.” The persistent mention of the PRC, especially in the IR23, is underscored by anxieties about the kind of geo-economic advantages which activities like participation in supranational organisations like the WTO, or SDOs like the International Telecommunications Unions (ITU) or the International Organisation for Standardisation (ISO) might yield. Such anxieties are in light of the increasing participation of Chinese firms in these fora, with the number participating in ISO technical committees jumping from 465 in 2005 to 668 in 2021, ascending to third in the number of participants behind the UK and Germany.
However, there are also more direct interactions between strategic economic investment, data flows and digital trade. Although not mentioned by name in either policy document, the Belt and Road Initiative (BRI) is a programme led by the PRC to provide regional investment in physical infrastructure, including numerous countries in the Indo-Pacific. A substantial dimension of this is the ‘Digital Silk Road’, an initiative to supply digital infrastructure to emerging markets. Some have concerns that Chinese firm’s infrastructural investment stimulated by this initiative such as the Pakistan & East Africa Connecting Europe (PEACE) and South Atlantic Inter Link (SAIL) submarine cable networks could lead to the exportation of China-centric, localisation-biased data governance frameworks.
As noted by Erie and Streinz (2021), these (potentially legitimate) concerns often ring hollow given the wholesale dominance of some EU and US-domiciled voices (despite the noted absence of the latter in some key fora like the ITU) in influential supranational fora like the WTO and the aforementioned SDOs, instantiating and encoding distinctly open, market-driven norms reflecting their own ideological preferences. Granted, this balance of representation throughout the rules-based international order could change, but for now, there remains a clear hegemonic geopolitical bloc driving global and internet governance. Furthermore, there have been documented debt-related structural issues with the BRI, although a new iteration of the programme is said to be planned, facilitating an increased investment in digital technologies of up to 300 per cent.
This complex and uncertain picture provides a useful illustration as to why HMG might see a particular need to ensure data flows are as open as possible. Namely, to prevent the fragmentation of digital trade along geopolitical lines. But, given this also potentially benefits digital free markets in countries like the UK, the distinction between geopolitical self-interest and mutual economic benefit is further blurred or potentially co-existent.
Conclusion
Having explored the intricate landscape of Indo-Pacific cross-border data flows and HMG’s policies in this domain, it highlights how economic interests often conceal underlying geopolitical and ideological motivations. As digital markets continue to evolve and data becomes increasingly critical, it is clear that economic and geopolitical conflicts, rooted in contrasting ideological values, will persist.
As we strive to navigate this multifaceted landscape, it is apparent that there exist areas for further research. Firstly, there is a need for a more in-depth analysis of the motivations behind domestic data governance policies within countries across the Indo-Pacific and beyond. Understanding the intricate interplay of economic, geopolitical, and ideological factors that drive these policies is paramount for crafting effective international strategies and agreements.
Secondly, the dynamics of digital trade in emerging digital technologies demand closer examination. How do states leverage their comparative advantage in these domains, and to what extent do these economic calculations intersect with their geopolitical interests? Further research is necessary to elucidate the blurred lines between economic self-interest and mutual benefit in the increasingly crucial global digital trade landscape.
As we navigate this complex terrain, it becomes evident that understanding the motivations behind domestic data governance policies and the dynamics of digital trade is essential. Multiple stakeholder groups need more work to decipher the intricate web of economic, geopolitical, and ideological interests that underpin this critical global arena. Just as Maxigas and ten Oever (2023) noted, beneath the facade of an open network can lie a landscape shaped by power and resources, warranting continued scrutiny and exploration.
