China’s digital silk road: data infrastructure for international trade?

Fri Aug 31, 2018

How can data encourage or discourage trade? A new ODI project explores how emerging global initiatives will help data-enabled businesses decide where to export or seek investment, and what that means for international trade

As part of the ODI’s innovation programme, we have started a project to build stronger trade links for data-enabled businesses between the UK and Australia, Canada, Germany, and Hong Kong. This international trade project has a particular focus on finance, transport and AI.

We see data as an emerging form of vital infrastructure. This data infrastructure includes building blocks – such as data assets, standards, organisations that steward data – along with policies and guides about how data should be collected, used and shared.

We want to understand the data policy and infrastructure in each country and find out what promotes or impedes trade. We will learn from governments, trade organisations and business about what works and what does not, and engage with existing networks more broadly to share our findings. Based on this initial research, we will build prototypes – for example, guides and workshops – to help increase trade of data-enabled services, and inform business decisions or policy interventions.

One key area of our research is major shifts affecting global data infrastructure, such as China’s digital silk road and the European Union’s recently introduced General Data Protection Regulation (GDPR).

China’s digital silk road

China’s digital silk road is an initiative for which it is difficult to find a concrete definition. Announced in 2015, its name harks back to China’s Silk Road – an ancient network of trade routes that connected East and West. It is part of China’s technology and trade strategies.

China’s multi-faceted technology strategy has helped new tech giants like Baidu, Alibaba and Tencent to grow. The country has created policy frameworks – such as its cybersecurity framework and new data protection framework – to help drive its technology strategy.

One strand of this strategy focuses on artificial intelligence (AI), which naturally relies heavily on data. The Future Of Humanity Institute’s report ‘Deciphering China’s AI Dream’ is a good description of China’s strategy for ‘leading the world in AI’.

In 2013, China created its Belt and Road Initiative, an ambitious trade strategy designed to improve its links with the rest of the world. The main focus is on improving connections, cultural exchange and trade with Eurasian and African countries.  Through the initiative, China is investing over $900bn into planned or current infrastructure projects – such as roads, railway lines and ports – but it isn’t the only infrastructure being developed.

China’s digital silk road is one such project, forming part of the country’s strategy to help its tech companies grow overseas. The initiative includes telecoms infrastructure to connect countries that have joined the initiative while promoting China’s standards and frameworks internationally. These standards do not yet extend to the kind of standards for data that we encourage at the ODI, but it only seems a matter of time.

China’s approach to developing and promoting standards within its own borders has been criticised internationally, notably by the USA, who have complained that the Chinese government is breaching World Trade Organisation rules by unfairly interfering in standards development to the benefit of its own businesses.

Countries as varied as Thailand, Turkey and Serbia have already subscribed to the digital silk road. China’s growing population (now over 1.4bn) combined with these countries means its potential market is huge. Encouraging countries that subscribe to (if you will excuse the metaphor) drive by China’s rules, will make it easier for the road to be travelled in both directions.

The digital silk road, and other trade agreements, allow China to encourage other countries to adopt its standards. The Chinese tech giants can be expected to leverage the road to help them export services outside of their home country. Meanwhile, businesses looking to travel in the other direction and export to China will also need to abide by its rules. For some services, there might be no impact, but for other services, this might include providing access to data for China’s social credit scoring – using those scores in the design of their own services, or enforcing China’s extensive censorship rules which are considered by many organisations to be in breach of human rights. As well as considering the costs and benefits of adapting services to meet China’s market, businesses need to consider potential harms to citizens and communities and weigh up how staff, investors, and existing customers might react.

Global data infrastructure is also being built by other countries

China is far from the only nation deliberately trying to strengthen global data infrastructure and align it with its own goals.

In May 2018 GDPR came into force. GDPR makes all organisations that process data in the European Union (EU) comply with a common set of regulations that give more rights and control to citizens over data about them. It also gives regulators more power to fine organisations that fail to comply. It does have holes, such as group privacy, but with support its new rights have the potential to create more trust in data and support innovation. Both the EU and advocacy groups aligned with the principles of GDPR are encouraging other nations to adopt similar legislation. This will grow the reach of GDPR beyond the EU’s population of 500 million people.

The EU plans to finalise its updated reuse of public sector information (PSI) directive in 2019. PSI was designed to create transparency and fair competition around access to government data. The update is still in discussion but we hope that it will recognise that increased data access for the purpose of transparency and fair competition should also apply to private sector organisations delivering services in heavily regulated sectors, such as govtech, transport, utilities and health. The EU is also rolling out new data directives in sectors such as finance, although these initiatives are currently more fragmented with different countries following different models.

These are the EU’s ‘rules of the road’. As with China, governments and businesses that want to operate in the EU have to abide by their regulations. For governments, this will take the form of a data adequacy decision, while businesses will need to comply with relevant legislation. Recently, some businesses outside of the EU have chosen not to comply with GDPR and withdraw their service offerings from EU citizens.

The EU’s rules reflect many of the values of the open movement, which includes organisations like the Open Data Institute, Open Knowledge International, Open Data Charter, OpenStreetMap, the Web Foundation and the Open Government Partnership. This movement brings together governments, private and third sector organisations to create a data infrastructure with a foundation of open data. The Open Data Charter’s principles and the ODI’s strategy articulate both the shared values of the movement and the missions of the organisations in it.

Australia and Canada both include strong proponents of the open movement, like Open North and ODI Nodes in Australia, Ottawa and Toronto. Each country has ongoing debates about data. The Government of Canada has recently launched a consultation looking at data’s impact on the future of work, innovation, and trust. Australia has launched an open banking initiative intended to give consumers more control over banking data as a way of creating more competition and new services. Both countries are part of the CPTPP free trade agreement which includes measures to increase the flow of data and trade in services built from it. These data measures are another manifestation of global data infrastructure.

Other global data infrastructure is being built by organisations in the USA. The USA has little national legislation and strategies for data; instead, measures are implemented at the state level or imposed by the market. In practice, this means that technology hubs, such as Silicon Valley, set the rules. Cloud services platforms like Amazon Web Services, Microsoft Azure, Google and Cloudflare and social media platforms like Facebook and Twitter are a huge part of our global data infrastructure. Some of these organisations are working on their own initiative, the Data Transfer Project, to increase data sharing between them. They are also working to establish rules about what type of businesses and services they allow to use their infrastructure, or not. The degree to which these private companies set their own rules, and the extent of influence of their origin country or other national or global institutions, will be something that will develop over coming years.

The values in data infrastructure affect businesses

Consciously or not, all of these initiatives are building different flavours of data infrastructure. Sometimes these differences arise for local reasons – for example building better consumer services or enforcing desired privacy guidelines – but they also arise to support international trade and other forms of foreign policy. In other cases, like some of the data infrastructure being built using cryptographic technologies like bitcoin and blockchain, they may also be designed to avoid national boundaries and governance with the goal of building a very different kind of geopolitical landscape.

Data is a political topic. As political theorist and author of ‘Do artefacts have politics?’, Langdon Winner has attested, no data infrastructure is neutral. Each data infrastructure includes the values of the societies and communities from which they arise, and shapes the services that can be built on it. This, in turn, has an effect on businesses.

The nature of data infrastructure affects business decisions about where to trade, where not to, and how to adapt services to local conditions. These decisions are sometimes based on factors as relatively straightforward as consumer demand and availability of data to the right standard, but other times it is far more complex and involves an assessment of other dynamics in the data infrastructure. Good businesses are aware of how these dynamics will shape them and their services.

In our international trade project at the ODI, we will be increasing our understanding of these issues; how they affect business decisions now, and in the future; and whether we can help businesses make those decisions.

We will be guided by the ODI’s mission and vision for the future: we want people, organisations and communities to use data to make better decisions and be protected from any harmful impacts.

If you would like to talk these issues through with us at the ODI, you can reach us at [email protected].

Image: Silk trading route between China and India, copyrighted Adobe Stock.