India must reclaim its lost digital space

India will not join the e-commerce negotiations at the WTO until issues like data flow and welfare to the poor are resolved. This firm articulation by Commerce and Industry Minister Piyush Goyal at the G20 Ministerial at Tsukuba, Japan, on June 8 and 9 underlined that India would not bow to pressure on an issue on which India’s digital future hinges on.

Most of us are unaware that away from the public glare a quiet battle is raging for control of the global digital business. At the core is the US quest to continue its dominance of digital business. Today, US technology firms dominate the digital business. But continued dominance would require the free flow of data across countries. The US and its allies are doing everything to ensure this. The outcome of this battle would decide the fate of the digital business in most countries. Let us understand the changing landscape. And what should India do?

The US firms Google, Facebook, Amazon, Airbnb, Visa/Mastercard, Uber, Netflix and Instagram may appear to be doing different activities. But, their main business is data. They track our digital transactions, chats, roads we travelled, countries we visited, hotels we stayed, restaurants we ate, food we ordered, medicines we bought, and bars we visited. The game is in collecting extensive data free of charge and selling value-added services created from this data.

Data has another significant use. Remember Siri or Alexa. Developing such Artificial Intelligence (AI) tools requires scanning terabytes of unstructured data to identify patterns of our thoughts, actions, behaviour and create applications for all conceivable areas. The problem is most data is generated in China and India. India produces more data than the US and the EU put together. China does not share data with US firms. So if India also restricts data flow, it will hit the US-AI strategy.

Today the US is collecting data freely from all countries, except China. But the US knows this will change soon. Technology and business models are easy to replicate at low cost. Soon as India and other countries develop similar tools, they may regulate data flows preferring local firms over the US firms. Or these countries may decide to charge for data. Any of this will kill the US business model. The US is putting in all its might to stop this from happening.

Main disadvantages

The US strategy is to persuade or force countries to join WTO negotiations and agree to the free flow of data. The US hopes this would ensure its digital dominance in perpetuity. Excellent for the US but for many countries like India, allowing the unrestricted flow of data has two significant disadvantages.

First, governments would have no control over violations caused by digital business. Online sites recruit terrorists, peddle child porn, traffic drugs. We have seen the allegations that Russia manipulated US presidential elections in 2016 through social media. Facebook peddles fake news, and Google search results can distort public opinion. National laws will not apply as people behind such sites sit in other countries.

Second, free flow of data creates digital monopolies that hurt competitors, so crucial for the growth of the sector. Monopolies make competition difficult for new firms, buy the promising ones, and if nothing works, copy the best features. The deep pockets allow e-commerce firms to use billion dollar sales, discounts and cash-backs to lure buyers. Domestic stores can never survive such onslaught. Countries suffer all adverse consequences but get no payments even though the data belongs to home users. As digital business becomes big, payment for import of digital products would soon be a significant forex issue.

To have a prosperous digital economy and reclaim our digital space, we need to adopt a four-point plan.

Quickly introduce central laws regulating e-commerce, data protection, data localisation, cyber security, etc. New draft e-commerce policy is a welcome step. Clear laws with proper regulations on data flow will signal global and local firms to invest in India.

Develop national champions. This has been our weak area. Set up free email service, and create an India focussed search engine. Invest in high capacity cloud servers, and make them available at low prices. Hosting on Indian servers must be attractive for local businesses. NIC has the expertise and already developed many platforms for government uses. The government may revive NIC, hiring the best talent for AI research and other vital areas.

Create a coalition of like-minded countries. Countries still do not grasp the significance of data flow, server localisation, etc. India must educate them. Once our laws and platforms are ready, we may take the call to join any international negotiations.

Be aware of the consequences of not joining the negotiations. Few experts argue India should join the talks and say what suits it. They forget the history of WTO negotiations. The US writ always prevails. The US uses grants, diplomacy, threats and sanctions to pursue its agenda.

Today, only 73 of the 164 WTO members support negotiations on e-commerce. If India, viewed as a software giant, joins, all remaining countries will participate. This will soon ensure the de facto dominance of the US in digital business becomes de jure.

On the business side, few experts fear that India’s ITES exports will suffer if we do not join the WTO negotiations. The truth is, US commitments under the WTO rules on services govern India’s access to the US market. New e-commerce rules cannot take liberty back.

Digital business accounts for a third of global GDP now, and its share will only increase. Reclaiming our lost digital space should be our top priority as best jobs and high growth would flow from this. An important enough issue to invest our national pride.

The writer is is from the Indian Trade Service. Views are personal.

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