According to the world’s great powers, sovereignty – the right to impose law and make war and peace – remains the exclusive privilege of the territorial nation-state. Even amid the troubles of post-colonial and post-imperial rule, states assert that they alone may order the space within their borders — whether on land or in the sea and sky. The world has been mapped, bounded, and dissected.
Except in cyberspace. Only in recent years have governments begun to debate whether to curtail cross-border data flows and limit other digital ties — the result of accelerating geopolitical rivalry between the United States and China. To reassure U.S. allies and protect the competitiveness of digital service companies that are key to resisting Chinese techno-economic coercion, the United States must recognize these developments and advocate for a digital “open door” — international norms that protect private companies from anti-competitive practices while allowing nation-states to exercise sovereign rights on matters of privacy and security. Only with such a framework in force can free nations trust in the self-organizing capacity of private business to build out and secure the Internet of tomorrow.
The Digital Sovereignty Problem: Security and Prosperity
While the People’s Republic of China dredged up islands in the South China Sea, Silicon Valley performed an equally herculean task of building and connecting data centers throughout the industrial world. Google, Microsoft, and Amazon today control 66 percent of the global cloud computing market. [1] These “digital islands” supercharge information processing for commercial and military use, powering the complex computations that underpin manufacturing, e-commerce, and gaming.
Just as China can militarize its man-made islands to spy on and disrupt nearby shipping, so too can American policymakers manipulate U.S.-based companies to intercept and sabotage digital communications. This reality of sovereign power was known as early as the 9/11 attacks. When the Swiss banks refused to cooperate with U.S. terrorist finance investigations, U.S. officials threatened to seize the information themselves. [2] Since the banks used communications networks within U.S. legal jurisdiction, they could not escape without interrupting their operations.
The largely unnoticed expansion of U.S.-based digital services was an artifact of the unipolar moment. World leaders have long understood that having an economy dependent on foreign firms carries political risks. But the low risk of hostile U.S. action, the lack of non-U.S.-based alternatives, and the promise of Internet-enabled prosperity made embracing Silicon Valley irresistible. Silicon Valley in turn strengthened America. Digital services now comprise over 10 percent of the U.S. gross domestic product, over $2.4 trillion per annum. [3]
The rise of China, however, has ended this unipolar moment. The Chinese Communist Party (CCP), in its bid to challenge U.S. global leadership, has weaned itself from digital dependence. As early as 1996, the CCP laid the groundwork for a self-sufficient future when it claimed the legal right to control information flowing across Chinese borders. [4] Now, after two decades of investment, the CCP has successfully created an indigenous digital service sector that has given it operational control over its own sophisticated networks. [5]
These Chinese state-backed firms both supply domestic demand and act as instruments of global power. From cloud computing firms like Alibaba, Huawei, Tencent, and Baidu to 5G giants like Huawei and ZTE, Chinese companies now provide competitive digital services to firms from Europe to Africa. Yet they are also required to collect intelligence for the CCP under China’s 2017 National Intelligence Law. [6] And given the CCP’s history of using export controls in its coercive diplomacy, they offer a means to punish misbehaving dependent nations. [7]
U.S. policymakers now face a twofold challenge. Firstly, many nations are understandably eager to mitigate the risks of digital dependence. The European Union (EU), for instance, has imposed new regulations on foreign companies under claims to “digital sovereignty.” [8] Many are eminently sensible protections for users’ privacy and security. But some measures threaten a more protectionist world that will disadvantage U.S. firms. As the world’s foremost digital power, the United States must clearly articulate global digital governance norms that uphold American interests.
Secondly, there is the question of whether friendly private firms can successfully compete against Chinese state-backed giants. The question is intimately linked with the first, for if the global digital market devolves into a series of regional markets among the advanced industrial democracies, then Chinese firms will be better poised to compete against less-efficient, redundant businesses. To prevail in this competition, U.S. policymakers must resist the temptation to weaponize or otherwise direct U.S. private firms, which will only create further suspicion and make them less dynamic.
Between Splinternet and Digital Open Door: Two Digital Economic Orders
A “splintering” of the Internet is on the horizon today. China is not the only power that can launch a self-sufficient digital services industry. Although it would be enormously costly, European states, India, and others can all do it. They would simply have to come to the same conclusion as the CCP — that dependence on the United States is anathema to their national security. U.S. policymakers must take concrete steps to reassure allies and partners that this is not the case.
Fortunately, there remain strong incentives against such measures even beyond the financial cost. For instance, amid the ongoing debates over digital sovereignty in the EU, Germany has agreed with France on most privacy concerns. But Germany has still preferred to rely on American systems as a guarantee to access U.S. markets, objecting to French arguments for greater protection and strategic autonomy in favor of economic prosperity and stronger diplomatic ties. [9]
Two possibilities for digital world order have now come into view, corresponding to the two dominant perspectives on economic competition. The first, the so-called “splinternet,” corresponds to the mercantilist tradition that seeks relative gains in security and prestige even if one “loses” in absolute terms. [10] [11] The second, which could be termed the “Digital Open Door,” corresponds to the liberal tradition that seeks absolute gains even if one country “wins” more than another — its priorities are prosperity and liberty.
The U.S. foreign policy community coalesced around the liberal tradition after reflecting on the 1930s, when Depression-era trade wars reorganized the world economy into self-contained economic “blocs” that then sought to aggrandize themselves through war. Considering the horrors of the Second World War, U.S. President Harry Truman declared in a 1947 speech advocating for an international trading system that “we must be prepared to make concessions if we are to obtain concessions from others in return.” [12]
To forestall the worst excesses of mercantilist competition, U.S. policymakers must adapt the insights of the liberal tradition to the digital age. Ongoing talks between the United States, EU, and Quadrilateral Security Dialogue partners to harmonize technology standards are a step in the right direction. [13] [14] An ideal policy outcome would be a series of digital free trade agreements with partners much like the comprehensive Digital Economy Agreement signed between the United Kingdom and Singapore in 2021. [15] Such legal assurances would go a long way toward creating a common digital market with the economic heft to challenge China’s tech giants.
But as far as global norms are concerned, U.S. policymakers should take their bearings from an earlier episode of American economic diplomacy. In the years after the First Sino-Japanese War (1895), if European powers began extracting territorial concessions from the weakened Qing state, China could have become like Africa, partitioned into colonies. Fearing that U.S. merchants would lose access to Chinese markets, former U.S. Secretary of State John Hay issued two notes advocating for an Open Door, whereby the Qing state retained sovereign powers of taxation and the European powers would permit free trade through their spheres of influence. [16]
A “Digital Open Door” would see all countries accede to sovereign oversight measures like data localization (housing personal data within the country of origin) and transparency (disclosing what data is collected). The goal should be to make concerns over surveillance and dependence as much of a non-issue as possible. While policymakers should continue to vigorously defend U.S. firms against anti-competitive practices like forced IP transfers (e.g. via mandatory mergers), they ought to welcome the emergence of competitive foreign firms so long as they emerge from free competition. U.S. leaders should also refrain from weaponizing dependence against allies.
The idea of a “Digital Open Door” is particularly well-suited for strategic competition because it accentuates the fundamental difference between the American and Chinese regimes. As a democratic commercial republic, there are powerful political and economic interests in the United States (including the private firms themselves) that aggressively oppose government intervention. U.S. legal institutions also make a wall of separation a real possibility. The CCP, on the other hand, will not allow its firms to operate independently. It must have control.
Once the United States develops and enforces barriers between government and private business, digital services from the United States and other like-minded countries will be much more attractive to countries concerned about digital sovereignty. Much like how the United States built a free-trading system between industrial democracies independent of the Soviet Union during the Cold War, the United States today has a chance to build an international digital order independent of China, proving a viable alternative by force of example.
The New Wild West: Letting the Private Sector Lead
The notion of putting more distance between the government and private business may seem like a step in the wrong direction. After all, cyber-competition is ruthless, both in terms of finding new markets and securing systems from cyber-attacks. The Chinese have also embraced a strategy of state-led coordination — the CCP has cells in every publicly-listed company. [17] How will the United States compete if it simply allows its companies to govern and direct themselves?
Put differently, U.S. policymakers face a question familiar to American history: What is the best way to order an ungoverned “frontier” whose bounds are being expanded every day by private entrepreneurs? The settlement of the American West offers useful precedents for thinking through this contemporary challenge. That frontier was as ungoverned as the frontiers of cyberspace today. Land and gold were as valuable then as data is now. And the allure of prosperity, coupled with American freedoms, was all that was necessary for private settlers to achieve one of the greatest conquests in history.
The “closing” of the frontier is often remembered today as the end of a conflict between technologically advanced U.S. settlers and disorganized indigenous peoples. But this impression is misleading. For two centuries, powerful indigenous and European polities fiercely contested the Midwest and the Southwest. U.S. settlers fought both indigenous nations like the Comanche and the Lakota as well as European empires like Spain (and later Mexico) and Britain. [18] [19] [20] That the United States would prevail in these conflicts was not a foregone conclusion.
For John Jay, writing in Federalist No. 5, Spain and Britain were great threats contesting the American frontier: “Spain thinks it convenient to shut the Mississippi against us on the one side, and Britain excludes us from the Saint Lawrence on the other…” [21] The two empires vied to turn North America into a divided continent like Europe. For Alexander Hamilton, the best way to ensure the survival of the Union was to close the frontier with a vast continental army. [22] Only these measures would make the frontier safe for orderly settlement.
But Hamilton was wrong. Self-organizing private settlers took the lead in driving Spain out of Florida and Louisiana. They did so at little expense to the states, who permitted settlers to claim frontier lands as private property. The promise of high rewards thus shifted the burden of security to willing settlers, who could acquire firearms. It is little different in cyberspace today. Private cyber defense firms are almost exclusively responsible for stopping malware. Even in conflict zones like Ukraine, firms like Microsoft have defended their own systems from Russian state hackers [23].
Spain, in contrast, consolidated its agricultural wealth in the hands of large landowners under central administration. Obsessed with control, the Spanish prohibited ordinary subjects from owning firearms, making energetic territorial defense (let alone expansion) difficult across vast distances. We see parallels in the CCP’s cautious policy towards artificial intelligence — digital content generation must be under the direct supervision of loyal regulators. [24] For private enterprises venturing into the unknown, the costs of state control may outweigh the benefits of state subsidies.
Of course, the state has an important role to play. During Westward expansion, the wealth accumulated from newly settled lands financed highways, canals, and railroads, encouraging further settlement. It also provided diplomatic cover and deployed the regular army where needed, in addition to bringing law and order. But sustaining this successful cycle of conquest, profit, and taxation required the U.S. federal government to take its cue from private interests.
Today, the U.S. government should similarly take cues from its digital service providers. It should make investments in basic science research and higher education to advance the frontiers of knowledge. It should loosen immigration requirements to recruit the best and brightest talent in the world. And it should use diplomacy to build consensus around norms that protect U.S. companies from anti-competitive practices. It must not get in the way of private risk-taking itself.
The Roadmap Forward
The rise of U.S. and Chinese digital service providers and the weaponization of dependence by each respective government have raised two related questions. First, how do these vulnerabilities relate to global concerns over digital sovereignty — especially since certain countries (usually, where the firms originate) can compel information disclosures by law and by force? And second, how can the United States encourage the adoption of its own systems over Chinese systems (for all the concerns above) and secure them from attack?
On the question of sovereignty, the United States should advocate for a “Digital Open Door” to ensure that states need not worry about foreign meddling and firms need not worry about state interference. Examples of practical steps in this direction include the 2021 UK-Singapore Digital Economy Agreement, which guarantees trusted cross-border data flows and protects personal data and intellectual property. [25] The United States might build on this framework in the ongoing U.S.-EU Trade and Technology Council talks and in the Quadrilateral Security Dialogue.
As for winning the digital competition, the U.S. government should leverage ongoing talks with the EU and the Quad countries to encourage common standards that will make it easier for firms to participate in the global market. [26] It can also build on the 2020 Clean Network Initiative, which assembled a coalition of over 50 countries and 180 telecommunications companies to commit to democratic values and transparency standards. [27] These efforts provide like-minded nations with safer options to choose from in developing their digital economies.
As great power competition comes to cyberspace, the United States should have faith that its form of government and foreign policy traditions position it for success. America decided to remake the world after the Second World War to make it more prosperous and thereby safe for liberal democracy. The same cannot be said for the Chinese Communist Party’s ambitions now, for whom the pursuit of relative advantage (even over domestic segments of the Chinese population) has trumped all other considerations.
Alex Hu ’23 served as the President of the AHS chapter at Yale University, where he earned a Bachelor’s degree in Humanities.
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Notes:
[1] Charles Griffiths, “The Latest Cloud Computing Statistics (updated July 2023),” AAG, 2 July 2023, https://aag-it.com/the-latest-cloud-computing-statistics/.
[2] Henry Farrell and Abraham, L. Newman, “Weaponized Interdependence: How Global Economic Networks Shape State Coercion,” International Security 44, no. 1 (Summer 2019): 42–79.
[3] Tina Highfill and Christopher Surfield, “New and Revised Statistics of the U.S. Digital Economy, 2005-2021,” U.S. Bureau of Economic Analysis, 22 November 2022, https://www.bea.gov/system/files/2022-11/new-and-revised-statistics-of-the-us-digital-economy-2005-2021.pdf.
[4] “Freedom of Expression and the Internet in China: A Human Rights Watch Backgrounder,” Human Rights Watch Backgrounder, July 2001, www.hrw.org/legacy/backgrounder/asia/china-bck-0701.htm.
[5] Kathy Gao, “Where next for China’s Technology Policy? Creating the Industrial Internet,” BloombergNEF, 9 December 2019, about.bnef.com/blog/where-next-for-chinas-technology-policy-creating-the-industrial-internet/.
[6] Arjun Kharpal, “Huawei Says It Would Never Hand Data to China’s Government. Experts Say It Wouldn’t Have a Choice,” CNBC, 5 March 2019, www.cnbc.com/2019/03/05/huawei-would-have-to-give-data-to-china-government-if-asked-experts.html.
[7] Fergus Hanson et al., “The Chinese Communist Party’s Coercive Diplomacy,” Australian Strategic Policy Institute, 1 September 2020, www.aspi.org.au/report/chinese-communist-partys-coercive-diplomacy.
[8] Frances Burwell and Kenneth Propp, “Digital Sovereignty in Practice: The EU’s Push to Shape the New Global Economy,” Atlantic Council, 7 December 2022, www.atlanticcouncil.org/in-depth-research-reports/report/digital-sovereignty-in-practice-the-eus-push-to-shape-the-new-global-economy/.
[9] Arno Pons, “Digital Sovereignty: For a Schuman Data Plan,” Fondation Robert Schuman, 16 January 2023, www.robert-schuman.eu/en/european-issues/0652-digital-sovereignty-for-a-schuman-data-plan.
[10] Aaron L. Friedberg, “The Growing Rivalry between America and China and the Future of Globalization,” Texas National Security Review, 8 February 2022, tnsr.org/2022/01/the-growing-rivalry-between-america-and-china-and-the-future-of-globalization/.
[11] Anne Collier and Ranjana Kumari, “The SPLINTERNET Is Here: How to Make the Most of It,” CEPA, 28 September 2022, cepa.org/article/the-splinternet-is-here-how-to-make-the-most-of-it/.
[12] Harry S. Truman, “Address on Foreign Economic Policy, Delivered at Baylor University,” The American Presidency Project, 6 March 1947, www.presidency.ucsb.edu/documents/address-foreign-economic-policy-delivered-baylor-university.
[13] Matthew Eitel, “Talking Trade, Tech – and Security?,” CEPA, 22 June 2023, cepa.org/article/talking-trade-tech-and-security/.
[14] “Quad Leaders’ Summit Fact Sheet,” The White House, 20 May 2023, www.whitehouse.gov/briefing-room/statements-releases/2023/05/20/quad-leaders-summit-fact-sheet/.
[15] Channing Lee, “No Time to Wait in Getting Digital Trade Right,” The Hamiltonian, 15 July 2022, hamiltonian.alexanderhamiltonsociety.org/issue-two/no-time-to-wait-in-getting-digital-trade-right/.
[16] Robert B. Zoellick, America in the World: A History of U.S. Diplomacy and Foreign Policy (New York, NY: Twelve, 2020), 97-11.
[17] Sayari Analyst Team, “Chinese Communist Party Cells in Private Companies: Though Not yet Universal, Increasingly Situated to Play Greater Roles in Corporate Governance,” Sayari, 24 August 2022, sayari.com/resources/chinese-communist-party-cells-in-private-companies-though-not-yet-universal-increasingly-situated-to-play-greater-roles-in-corporate-governance/.
[18] Pekka Hämäläinen, The Comanche Empire (New Haven, CT: Yale University Press, 2009).
[19] Pekka Hämäläinen, Lakota America (New Haven, CT: Yale University Press, 2020).
[20] Robert Kagan, Dangerous Nation: America’s Foreign Policy from Its Earliest Days to the Dawn of the Twentieth Century (New York, NY: Vintage Books, 2007).
[21] John Jay, “The Federalist Papers No. 5,” The Avalon Project, 2008, avalon.law.yale.edu/18th_century/fed05.asp.
[22] Kagan.
[23] Cissy Zhou, “China Tells Big Tech Companies Not to Offer CHATGPT Services,” Nikkei Asia, 22 February 2023, asia.nikkei.com/Business/China-tech/China-tells-big-tech-companies-not-to-offer-ChatGPT-services.
[24] Brad Smith,“Defending Ukraine: Early Lessons from the Cyber War,” Microsoft On the Issues, 22 June 2022, blogs.microsoft.com/on-the-issues/2022/06/22/defending-ukraine-early-lessons-from-the-cyber-war/.
[25] “UK-Singapore Digital Economy Agreement,” Gov.uk, 14 June 2022, https://www.gov.uk/government/collections/uk-singapore-digital-economy-agreement.
[26] Matthew J. Slaughter and David H. McCormick, “Data Is Power,” Foreign Affairs, 16 April 2021, www.foreignaffairs.com/articles/united-states/2021-04-16/data-power-new-rules-digital-age.
[27] Peter Coy, “U.S. Policy: Against China, ‘America First’ Is Becoming America and Others,” Bloomberg.Com, 9 December 2020, www.bloomberg.com/news/articles/2020-12-09/u-s-policy-against-china-america-first-is-becoming-america-and-others.
Image: “Westward the Course of Empire Takes Its Way,” by Emanuel Leutze, retrieved from https://commons.wikimedia.org/wiki/File:Westward.jpg. This work is in the public domain in its country of origin and other countries and areas where the copyright term is the author’s life plus 100 years or fewer.
