Divided Internet and the World Digital Agency

The US government has ordered the suspension of activities of the video posting application “TikTok” and the dialogue application “WeChat” by Chinese IT companies in the United States. The US-led decoupling policy against China has spread to the world of the Internet; it initiated with security-related technologies and components, the next-generation communication standard “5G”, semiconductors, and artificial intelligence.

The digital market has entered the era of “Divided Internet” (splinter net), as former Google CEO Eric Schmidt described it. The US Federal District Court has ordered a temporary suspension of activity bans from the perspective of maintaining “freedom of expression.” However, the US government is solidly determined, fearing the leakage of personal data to China.

Free cross-border flow of data enhances economic efficiency and improves productivity. However, there is trade-off between the free flow of personal data and privacy protection, in addition to the conflict between privacy protection and national security.

The European Union is equipped with the most advanced and comprehensive legal framework for privacy protection, including the enactment of the General Data Protection Regulation (GDPR). Based on the presumption that the ownership of personal data belongs to the individual, it not only acknowledges the right of portability for his/her own data, but also it proceeds with the rule-making on the right of interoperability among different networks. The data portability functions as a competition promotion measure to prevent the move toward monopoly and oligopoly in the digital market.

In the United States, because of national security reasons, the government can obtain personal data. However, the European Court of Justice ruled in July this year that “Privacy Shield Agreement”, which guarantees the free flow of personal data between the US and the EU, violates the GDPR. The same problem arises in relation to Japan’s accession to the “Five Eyes” (framework for sharing confidential information centered on the United States and the United Kingdom). The problem also arises when big tech companies use cryptographic technology to make the access by the US government impossible to acquire personal data.

If a deep gap between the EU and the U S over personal data is too deep to reach an agreement, the world will be divided into three “digital economic zones”; namely the US based on the contract between firms and individuals (“notice-consensus system”), the EU focusing on the privacy protection and China, as a central management state of digital data.

World War II proceeded against the backdrop of the competition of exchange rate devaluation, the trade war, and the division into two currency zones centered on Britain and Germany. It’s now “the era of data-driven economy.” The dispute over data sovereignty has a greater impact on the world’s economic order than the currency war.

Two years ago, Canadian IT entrepreneur Jim Balsillie attempted to persuade Mrs. Lagarde, the then managing director of the International Monetary Fund, to establish the “data global governance” engaging in the use and management of data through standardization, instead of the global governance centered on money.

In Japan, the Digital Agency proposal is triggered to move, but at the world level, the establishment of “World Digital Agency” is required; it aims to solve global issues such as pandemics and environmental problems through the free flow and management of data.

(The english translation of the article was published in the Nikkei morning edition 2020/10/23.)