World has come alive to the power of re­claim­ing dig­i­tal sovereignt­y

The Daily Telegraph - Business - - Focus On China - garry white Garry White is chief in­vest­ment com­men­ta­tor at wealth man­age­ment com­pany Charles Stan­ley

The world’s most valu­able re­source is no longer oil, it’s data. How­ever, un­like oil, data is highly mo­bile – and an in­di­vid­ual’s per­sonal in­for­ma­tion can be stored on servers in a myr­iad of lo­ca­tions around the world.

Now Bei­jing has started to im­pose its “Great Fire­wall of China” on Hong Kong, con­cerns are mount­ing about the se­cu­rity of in­for­ma­tion held in the for­mer Bri­tish ter­ri­tory – par­tic­u­larly over pres­sure on tech­nol­ogy com­pa­nies to hand over in­for­ma­tion to Chi­nese se­cu­rity ser­vices.

The phys­i­cal lo­ca­tion where data is stored is about to be­come a ma­jor bat­tle­ground as dig­i­tal sovereignt­y be­comes more im­por­tant by the day. Dig­i­tal sovereignt­y is the idea that par­ties must have own­er­ship, or sovereignt­y, over their own dig­i­tal in­for­ma­tion and refers to both in­di­vid­u­als and coun­tries. It’s not just wor­ries about an as­sertive Bei­jing that are driv­ing calls for data to be repa­tri­ated around the world – the ubiq­ui­tous power of US big tech­nol­ogy com­pa­nies is also a ma­jor cause for con­cern.

This week, the Aus­tralian govern­ment said it was con­sid­er­ing new sovereignt­y rules for govern­ment data that would force cer­tain data sets to be hosted in ap­proved Aus­tralian data cen­tres. This fol­lowed sig­nif­i­cant con­tro­versy in the coun­try over data from its CovidSafe virus con­tact trac­ing app, which is held on Ama­zon’s servers. Con­cerns were raised that the data of or­di­nary Aus­tralians was not se­cure be­cause of the US Cloud Act, which ex­tended US author­i­ties’ global reach over data stored on servers.

The US Clar­i­fy­ing Law­ful Over­seas Use of Data (Cloud) Act was in­tro­duced two years ago and ex­tends crim­i­nal war­rants served on a US-based provider to all emails re­gard­less of where in the world the servers are lo­cated. It was in­tro­duced fol­low­ing a le­gal case in which it was ar­gued that US laws did not ap­ply to emails stored on a server in Ire­land.

Dig­i­tal sovereignt­y is not only about in­creas­ing the se­cu­rity of in­di­vid­ual and govern­ment data. China and US are the two ma­jor tech­nol­ogy lead­ers and other re­gions – es­pe­cially Europe – have been left be­hind in the area that is shap­ing the econ­omy of to­mor­row.

The Euro­pean Union is in a con­sul­ta­tion pe­riod over its own dig­i­tal sovereignt­y rules as part of its Dig­i­tal Ser­vices Act (DSA) – and there are hopes that ring-fenc­ing data from the eu­ro­zone will al­low the bloc to tur­bocharge its own tech­nol­ogy com­pa­nies to com­pete on the world stage. But some ar­gue that the EU pro­pos­als are not re­ally about se­cu­rity at all, they are aimed at giv­ing Euro­pean com­pa­nies a plat­form to com­pete with the strong po­si­tion of US and Chi­nese dig­i­tal com­pa­nies in EU mar­kets.

The EU is propos­ing the cre­ation of a sin­gle mar­ket in EU data that will al­low Euro­pean com­pa­nies ac­cess to large data sets through “com­mon Euro­pean data spa­ces”. It is hoped this will al­low con­ti­nen­tal com­pa­nies to de­velop ar­ti­fi­cial in­tel­li­gence-based ap­pli­ca­tions to boost its lack­lus­tre tech­nol­ogy sec­tor. Europe has lagged the US and China in tech­no­log­i­cal lead­er­ship – and this is a drag on its econ­omy and equity mar­kets.

The EU’s cloud in­fra­struc­ture ini­tia­tive is called Gaia-X. Last week, Peter Alt­maier, Ger­many’s econ­omy min­is­ter, said that Gaia-X will play a “cen­tral role” in the EU’s dig­i­tal tran­si­tion. “This project is the cra­dle of an open, trans­par­ent dig­i­tal ecosys­tem, where data and ser­vices can be made avail­able, col­lated and shared in an en­vi­ron­ment of trust,” the EU says.

Gaia-X is set to of­fer Euro­pean cloud data stor­age al­ter­na­tives to US com­pa­nies such as Mi­crosoft or Ama­zon, where most Euro­pean users and busi­nesses cur­rently have their data stored. Mr Alt­maier said he wants to “fur­ther the dig­i­tal sovereignt­y of Europe” through strength­en­ing “com­pe­ten­cies in key tech­nolo­gies” and push the devel­op­ment of a “po­tent gi­ga­bit-in­fra­struc­ture”.

The Euro­pean data ecosys­tem will ini­tially fea­ture 11 French and 11 Ger­man firms, in­clud­ing Or­ange, EDF, BMW and Siemens – but will also be open to US com­pa­nies that ad­here to the project’s trans­parency terms.

In­dia is start­ing to flex its mus­cles over its own data se­cu­rity too. On Tues­day, Ravi Shankar Prasad, the coun­try’s IT and tele­coms min­is­ter, said In­dia will not com­pro­mise on its data sovereignt­y.

The com­ments came days af­ter the coun­try blocked 59 Chi­nese apps on con­cerns around “sovereignt­y and se­cu­rity” fol­low­ing bor­der skir­mishes be­tween the two coun­tries last month. This is a key pol­icy area for the govern­ment be­cause In­dia has more than 560 mil­lion in­ter­net users, mak­ing it the sec­ond largest on­line mar­ket in the world be­hind China.

So, what does this mean for in­vestors? It high­lights the ar­eas where sig­nif­i­cant spend­ing will be di­rected, with large in­vest­ment in the soft­ware and in­fra­struc­ture that drives the cloud, as well as cy­ber­se­cu­rity sys­tems to pro­tect valu­able in­for­ma­tion from ex­ter­nal ac­tors.

The prob­lem for the Euro­peans, In­di­ans and Aus­tralians is that the US and China are so far ahead that it will be ex­tremely dif­fi­cult to catch up – no mat­ter what rules or reg­u­la­tions they in­tro­duce. The EU’s cloud in­fra­struc­ture project is part of “a Euro­pean Strat­egy for Data”, which was launched by the Euro­pean Com­mis­sion in Fe­bru­ary this year. The strat­egy wants the data sin­gle mar­ket to en­sure that the EU’s share of the data econ­omy by 2030 matches that of the US and China.

But with the US ad­min­is­tra­tion de­ter­mined to pre­serve the power of its own tech­nol­ogy ma­jors and China us­ing fair means or foul to get an ad­van­tage, catch­ing up looks near im­pos­si­ble. The EU has a dif­fi­cult task on its hands.

‘The prob­lem for the Euro­peans, In­di­ans and Aus­tralians is the US and China are so far ahead’

‘Now Bei­jing has started to im­pose its “Great Fire­wall of China” on Hong Kong, con­cerns are mount­ing’

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