China-Europe Digital Track II - 2023

Author - Yaw Asamoa Adoo

Globally, the increasingly integrated nature of business and our personal lives requires a reimagining of the nature of collaboration whether in bilateral alliances, scientific research or sharing data for law enforcement and security. Today’s digital economy is adorned with disruptive technologies that thrives on constant innovation to which access to and sharing of data is an integral part of the innovative process.

In March 2023, with the introduction of the Chinese government's new Cross-border Data Transfers (CBDT) initiative under the Personal Information Protection Law (PIPL), new protections that guarantees the personal information of its citizenry have been outlined. This has ramifications for multinational companies as they are confronted with the need to re-evaluate their business strategies in conformity to localizing data handling and transactions obligations if they serve over 100 000 Chinese clients annually either onshore or online.

This move is reflective of the posturing that fraught the European Union and the United States of America with the General Data Protection Regulation (GDPR) and European Union-U.S. Data Privacy Framework (EU-U.S. DPF) that was signed in March 2022 and which ensured the transatlantic data flow crucial to entrenching the $7.1 trillion economic relationship between the two stakeholders. Clearly, cross-border data flows not only have socioeconomic relevance but can also shape bilateral relations and foreign policy.

How do we strengthen cross-border data flows?

A key factor among others is trust. The implementation of GDPR and PIPL is a committed effort towards the protection of the rights and data privacies of the citizenry of both China and the EU thus obliging companies to show their commercial or other intents in the collection, usage and storage of their personal data. Trust is important to ensure safeguards for data security. Storage and processing of personal and transactional data should be a fiduciary obligation to be sacredly guarded. If gatekeepers engender trust in end-users, it ultimately creates an environment of openness and sustainable data sharing for continuous innovation.

Secondly, data localization measures need to be limited since they have a counterproductive effect on trade, productivity, and innovation. According to econometric data analysis by the Information Technology & Innovation Foundation (ITIF), a 1-point increase in a country’s data restrictiveness shrinks its gross trade yields by 7 percent leading to a drop in productivity by 2.9 percent and consequently increases downstream prices by 1.5 percent over a 5-year period. As of 2021, 62 countries had enacted such barriers, and the figure keeps increasing. It is symptomatic of digital protectionism therefore regular key stakeholder deliberations between the EU and China will be useful to develop constructive alternatives.

Thirdly, there needs to be better interdependences whether through quality compliance, reporting standards, biometrics for law enforcement etc. Standard contractual clauses SCC or similar international policies will enable the EU and China to agree on common grounds for engagement. Interdependences also have merits through the strengthening of priority industrial clusters as well as academic and business expertise ecosystems to foster innovation for emerging technologies.

In the evaluation of competing interests, the guiding principle should be to contain the urge to entrench competitive advantage in favour of advancing competitive collaboration.

What is the role of new technologies?

Industry 4.0 has heralded a digital economy where the dynamic use of data is driving cutting edge technologies and business models. Major technology firms usually have international footprints and thus develop strategies to share data to realize economies of scale, virtualization of operations among other benefits.

Disruptive technologies tend to create new business models that either cleverly circumvent existing legacy restrictions on cross-border data flows or develop new operating models that inspire a ground-up restructuring of customs, usages, and binding legislations. Uber and Airbnb are references in how countries loosely or tacitly evolved to accept their radical business models.

Examples of other new technologies such as 5G offer the enabling capabilities for smart cars and cities, Blockchain facilitates supply chain traceability for instance to curb the circulation of counterfeit medicines in developing economies; intelligent automation and Internet of Things (IOT) optimizes operational efficiencies in costs and resource wastage. Similarly, machine learning tools such as IBM Watson, Google BERT or recently ChatGPT by Open AI are unleashing the possibilities of quantum data analysis in real time which enables businesses and institutions to extract useful insights for their decision-making.

Additionally, with business entities that are sensitive to foreign surveillance, cloud computing providers offer data encryption where the keys are held nationally and therefore unavailable for decryption beyond borders.

Emergent technologies present interesting prospects for green field investments, R&D funded and or supported by government initiatives or business collaboration. The One Belt One Road (OBOR) initiative is a key example of such possible investment opportunities between China and some countries in central and eastern Europe. Investments of this kind are inherently capital intensive and strategic hence becoming a competitive enabler from a national interest perspective. If data flow is curtailed, the resultant benefit for the digital economy is geographically localized eventually leading to inadequacies in formalizing industry standards among others. A pragmatic approach that is devoid of zero-sum interests can be progressively harnessed to develop mutually beneficial technologies that will lead to impactful socioeconomic outcomes.

What digital service standards are required?

Service is the fundamental basis of exchange. For this reason, a public policy that envisions baseline rules for building government services that are fast, clear, and simple is vital. Ensuring consistent service levels entails reducing the gap between expected and perceived service quality. Understanding this differential will ensure better design of digital services through discovery, iterations, testing and a feedback loop.

Key factors that contribute to this gap may include;

1.     Knowledge

Resulting from insufficient discovery activities e.g. Market research, service recovery, feedback loop

2.     Service design and standards

Lacking user centricity in designing solutions, criteria for requirements

3.     Service performance

Service intermediary inefficiencies, KPI’s, poor operational process management

4.     Communications

Overpromising and underachieving

User centricity should remain the fulcrum of acceptability of service delivery. The scope of services whether informational eg. virtual assistants, e-learning, publications, government institutions websites or transactional services involving registering a business, tax filing formatives, contract details, e-commerce among others should satisfy a minimum viable product criterion. Among other elements, the outcome variables should prioritize ease of access, connectivity, usability, and relevance.

Ease of access

Ease of access not only entails the availability and enabling infrastructure to access digital services but should be embedded with inclusiveness. In both Europe and China there is the growing phenomenon of an aging populace who may largely not have an automatic reflex to consult digital services when dealing with daily routines.

Connectivity

Omnichannel features could form part of baseline requirements to enhance seamless integration of services provision. These made possible by personalizing user preferences without compromising their usage characteristics. Similarly, Omnichannel opportunities coupled with the enabling technologies of internet of things (IOT) and 5G combined can potentially enrich our daily routine by eliminating duplicative tasks, offering imperceptive interface and personal exchanges among others.

Usability

It is important to explore end-user needs and behaviour to determine what constitutes value from their perspective. User-friendly-by-design should be the preferred approach in developing a service delivery policy. Metrics to consider includes an ergonomic interface, time savings, information transparency, reduced effort, variety, and configurability of services among others. Usability can be developed through regular agile, iterative, and continuous improvement processes in conformity with industry best practices.

Relevance

Service relevance needs to align with demand conditions. These may include size, sophistication, and segment structure of local demand. Digital services promised should be deliverable by the business entity. For this reason, policy regulations are key to ensuring that standards are upheld to optimize user experience and to ensure that standards are replicable and responsive to fluctuations in demand without compromising quality levels.

Thus, regulations in the form of industrial policies are key to developing the capacity of domestic firms and institutions that are heavily reliant on the digital economy. Several layers of policy however may add to costs and complexities for businesses thus limiting the competitive potential that trade and or the digital economy may offer.

Conclusion

In conclusion, collaboration on cross-border data flows is increasingly relevant towards trade advancement, privacy safeguards as well as enhancing national interests. An integral aspect to this is non-restrictive regulations which enables emergent and disruptive technologies to thrive organically through knowledge clusters, adequate funding and service delivery indicators that policy regulation could facilitate.