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51. The EU-US Trade and technology Council: Mapping the Challenges and Opportunities for Transatlantic Cooperation on Trade, Climate, and Digital

Author:
Guillaume Van der Loo, Thijs Vandenbussche, and Andreas Aktoudianakis
Publication Date:
09-2021
Content Type:
Working Paper
Institution:
EGMONT - The Royal Institute for International Relations
Abstract:
The EU-US Summit on 15 June 2021 marked the beginning of a renewed transatlantic partner- ship and set an ambitious joint agenda for EU-US cooperation post-COVID-19. The new Biden administration offers the EU the opportunity to re-establish transatlantic relations, which reached their lowest point since World War II under the turbulent Trump administration, and to address the bilateral disputes and tensions that have emerged, partly as a result of Trump’s ‘America First’ policies. One of the key deliverables of the Summit was the establishment of the EU-US Trade and Technology Council (TTC). The TTC aims to deepen EU-US relations on trade and investment and to avoid new technical barriers to trade by cooperating on key poli- cies such as technology, digital policy issues and supply chains. Despite the optimism in Brussels and Washington about renewing and strengthening transat- lantic cooperation, there are several challenges for EU-US cooperation. In the areas of trade, digital and climate in particular several differing views or outstanding disputes (most of them inherited by the Trump administration) will need to be addressed by the new TTC (the first meeting is scheduled on 29-30 September 2021) or other joint bodies. Only then will the EU and the US be able to deliver on the new ambitious transatlantic agenda. This paper will there- fore discuss the key challenges and opportunities for EU-US cooperation in the three inter- related areas of trade, digital and climate. For each of these areas, the outcome of the June 2021 EU-US Summit will be discussed and the challenges and opportunities for delivering on the renewed transatlantic agenda will be analysed. Moreover, this paper will present several policy recommendations, for the TTC or on EU-US cooperation in general, on how to advance the transatlantic partnership.
Topic:
Climate Change, Diplomacy, International Cooperation, International Trade and Finance, Science and Technology, European Union, Digitalization, and Summit
Political Geography:
Europe, North America, and United States of America

52. How to get European businesses to digitalise

Author:
Frederico Mollet
Publication Date:
07-2021
Content Type:
Policy Brief
Institution:
European Policy Centre (EPC)
Abstract:
Europe’s underperforming tech sector and reliance on foreign technologies has long alarmed its policymakers. But a significant – and often overlooked – factor in the EU’s economic underperformance over the last two decades is its slow business digitalisation. EU industry, especially SMEs, struggles with the prosaic challenge of integrating digital technologies into its business models and operations. The preoccupation tends to be on how to foster new digital start-ups. But what about the digitalisation of existing firms? The EU budget and recovery fund are armed with a range of new EU funding streams and programmes to tackle this challenge. With its 2030 targets and new policy framework, the EU aims to catch up with the previous generation of digital technologies and ensure that it does not miss out on the next wave of transformational change. Otherwise, Europe will fall behind its economic competitors even further. But there are still some gaps in the EU’s game plan for business digitalisation. Frederico Mollet outlines several areas where the new policy framework can be optimised, and new initiatives would be worthwhile: Additional funding should be mobilised from Cohesion Policy funds. Business digitalisation is a critical factor in regional convergence, and so an increased funding share would be in line with the policy’s main objectives. The Commission should use its coordinating and convening powers to get banks to commit to a best practice code, to assess digitalisation loans and improve their staff’s digital knowledge. Public authorities should leverage private partners. Many firms lack the awareness and information necessary to digitalise, but a number of ‘access points’ and private sector networks (e.g. finance providers, B2B businesses, supply chain networks) can reach them. The EU should consider complementing the design and implementation of European Digital Innovation Hubs and transition pathways – its main programmes for supporting business digitalisation directly – with 5 additional components. Taken together, these recommendations will bolster the funding available for business digitalisation, tackle some of the critical barriers to finance, and optimise the delivery of the Commission’s programmes.
Topic:
Political Economy, Science and Technology, European Union, Business, and Digitalization
Political Geography:
Europe

53. The Future of the Digital Order

Author:
Jeff Cirillo, Sarah Curtis, Joshua Fitt, Kara Frederick, Coby Goldberg, Ilan Goldenberg, Andrea Kendall-Taylor, Megan Lamberth, Martijn Rasser, and Dania Torres
Publication Date:
11-2021
Content Type:
Special Report
Institution:
Center for a New American Security (CNAS)
Abstract:
Nations that successfully harness the vast economic, political, and societal power of emerging information and communications technologies will shape the future of the global digital order. This future is not set in stone. A digital order defined by liberal democratic values requires U.S. leadership and the cooperation of trusted like-minded partners. In the absence of democratic leadership, autocratic rivals of the United States can fill that void—exploiting the control of information, surveillance technologies, and standards for technology governance to promote a digital ecosystem that entrenches and expands their authoritarian practices. In exploring how a closed, illiberal order is taking root in strategic regions around the world, this report offers recommendations for how to craft, promote, and preserve a more open and democratic alternative. An assessment of crosscutting trends between China, Russia, and the Middle East across three pillars—information control, surveillance, and technology governance—leads us to the following conclusions: China is the prime mover in shaping the evolving digital order in its favor. Beijing’s use of technologies such as facial recognition software and telecommunications networks allows the Chinese Communist Party (CCP) to expand control over its citizens. The CCP’s ability to promote and export this model of digital repression, in turn, gives like-minded, nondemocratic governments a roadmap for how to deploy digital technologies for control and abuse in their own countries. Russia’s model of digital authoritarianism, while technologically less sophisticated than China’s, could prove to be more readily adaptable and enduring for current and aspiring autocrats. Regional powers such as Belarus, Azerbaijan, and some Central Asian states have already incorporated elements of this model. In the Middle East, authoritarian leaders use digital tools to control internal populations by sabotaging and spying on citizens, and this contributes to the construction of an illiberal digital order that is beneficial to America’s peer competitors—China and Russia. These conclusions reveal four key trends with implications for the future of the digital order: Growing China-Russia alignment will generate dangerous digital synergies, such as (1) making digital autocracy accessible for a broader swath of states; (2) accelerating China’s and Russia’s digital innovation; (3) eroding liberal norms in international institutions; and (4) raising the prospects of a “splinternet,” a fragmenting of the internet along nationalistic, political, technological, religious, or ethnic lines. Countries around the world, particularly autocratic regimes and those flirting with illiberalism, will seek to regulate online communications platforms through (1) social media; (2) data localization laws; and (3) instigating company self-censorship, which restricts free speech and increases online control. Illiberal regimes will seek out Chinese technology to help them control social movements and civil protests. U.S. nondemocratic partners, adversaries, and even some democratic partners justify their pursuit of Chinese technology by underscoring ways the adopted technologies will contribute to economic growth, social stability, and efforts to fight crime and terrorism. The practices of illiberal regimes will reduce the efficacy of U.S. mitigation practices. Russia and China’s efforts to promote an illiberal digital order complement one another and could accelerate innovation between the two nations. The United States must craft a policy response that considers these emerging patterns and incorporates more than its usual partners in Europe and the Indo-Pacific. Shoring up the existing coalition of democratic actors to counter these illiberal trends will likely not be sufficient. This report offers recommendations that the United States can implement on three fronts: at home, while engaging with traditional U.S. democratic as well as nondemocratic partners, and when countering U.S. adversaries such as China, Russia, and Iran. The United States must take a leadership role, recognizing that the future digital order is at stake.
Topic:
Science and Technology, Governance, Authoritarianism, Leadership, Surveillance, and Digitalization
Political Geography:
Russia, China, Middle East, North America, and United States of America

54. Edge Networks, Core Policy: Securing America's 6G Future

Author:
Martijn Rasser, Ainikki Riikonen, and Henry Wu
Publication Date:
12-2021
Content Type:
Special Report
Institution:
Center for a New American Security (CNAS)
Abstract:
Technological leadership by the United States requires forethought and organization. The plan necessary to maintain that leadership—a national technology strategy—should be broad in scope. Its range includes investments in research, nurturing human talent, revamping government offices and agencies, and ensuring that laws, regulations, and incentives provide private industry with the ability and opportunity to compete fairly and effectively on the merits of their products, capabilities, and know-how. Given that key inputs are diffused globally, this plan must also carefully consider how the United States can effectively partner with other tech-leading democracies for mutual economic and security benefit. This includes taking measures to promote norms for technology use that align with shared values. In the context of strategic competition with China, the need to craft new approaches to technology development and deployment is increasingly apparent to government leaders. Many lawmakers grasped the stark reality that U.S. technological preeminence was eroding when they realized that China had become a global juggernaut in telecommunications, a situation exacerbated by Beijing’s push to dominate global fifth generation (5G) wireless networks. The state of play poses national and economic security risks to the United States, which, along with its allies and partners in the Indo-Pacific and Europe, has made notable headway in addressing and mitigating these risks. However, much work remains. Chinese firms continue to push for greater digital entanglement around the world, from Southeast Asia to Africa to Latin America. Given the fundamental importance to the digital economy of communications networks and the standards that govern them, the more successful Beijing’s policies are, the greater the challenge for tech-leading democracies to maintain their economic competitiveness. There is also the specter of norms. If these are dominated by illiberal actors, their power to shape how networks are used and to manipulate data flows poses threats to liberal democratic values the world over.
Topic:
Science and Technology, Norms, Strategic Competition, and Digitalization
Political Geography:
China, North America, and United States of America

55. Russia’s quest for digital competitiveness: The role of private businesses in securing state interests

Author:
Andrey Indukaev
Publication Date:
12-2021
Content Type:
Policy Brief
Institution:
Finnish Institute of International Affairs (FIIA)
Abstract:
The Russian leadership prioritizes digital technology for the country’s security and international standing, but also for its economic and technological success and development. These diverse goals are closely intertwined within the logic of geoeconomic competition. The Russian authorities have increased their involvement in the ICT sector over the years and this has led to the hybridization of business and state logic of action at all levels. While the state has an upper hand in the relationship, this does not exclude the possibility of mutually beneficial partnerships. Moscow-based start-up NtechLab’s close collaboration with the city of Moscow is a case in point. For private businesses, the Russian state’s proximity is a mixed blessing that creates business development opportunities but also major risks. These risks limit Russia’s capacity to make digital technology the driver of modernization of its economy.
Topic:
Business, Private Sector, Strategic Interests, and Digitalization
Political Geography:
Russia and Europe

56. Monitoring Online Political Advertising: A Toolkit

Author:
Barbara Jouan Stonestreet and Michael Baldassaro
Publication Date:
11-2021
Content Type:
Special Report
Institution:
The Carter Center
Abstract:
During an electoral process, electoral actors, whether contestants or noncontestants, have the right to advertise political ideas in accordance with the right of expression. However, political advertising may be subject to reasonable limitations through regulations imposed by domestic law, including who can run political advertisements, when and where they may run advertisements, restrictions on advertising expenditure levels, and reporting and disclosure requirements to ensure transparency, accountability, and a level playing field. Increasingly, election contestants and noncontestants are using social media platforms to advertise political ideas.
Topic:
Politics, Elections, Internet, and Digitalization
Political Geography:
Global Focus

57. Binding Constraints on Digital Financial Inclusion in Indonesia: An Analysis Using the Decision Tree Approach

Author:
Firman Witoelar, Teguh Yudo Wicaksono, and Carlos Mangunsong
Publication Date:
07-2021
Content Type:
Working Paper
Institution:
Center for Global Development (CGD)
Abstract:
Despite the concerted efforts of the Indonesian government to increase financial inclusion and the e-commerce–led growth of digital payment services, a large proportion of the country’s population remains financially excluded. Much of the growth and innovation has mainly benefited those already financially included. To understand this outcome, we use the decision tree approach developed by Claessens and Rojas-Suárez (2020), focusing on one of the products with the largest potential to increase financial inclusion in the country: e-money. Our analysis finds that a crucial binding constraint on the expansion of e-money services is a regulatory framework that creates an unlevel playing field between banks and nonbank providers of digital financial services. Regulatory restrictions applied to nonbanks on cashout services, agent recruitment, and know-your-customer processes are at the core of the problem. In addition, a perception of low benefits from the usage of formal financial services results in a lack of the critical mass of customers necessary to ensure the profitability of agents, particularly in remote and rural areas, and thus the expansion of e-money services. We also find other constraints that are not binding at the national level but are binding for some specific groups. The low provision of digital infrastructure in rural areas outside Java is one of them. In addition, constraints such as low trust in providers, though not binding, should be addressed in order to maximize the gains that could be obtained from relaxing the binding constraints.
Topic:
Development, Finance, Digitalization, and Digital Finance
Political Geography:
Indonesia and Oceania

58. Identifying Binding Constraints on Digital Payment Services in Ethiopia: An Application of a Decision Tree Framework

Author:
Getnet Alemu, Tadele Ferde, and Alejandro Fiorito
Publication Date:
07-2021
Content Type:
Working Paper
Institution:
Center for Global Development (CGD)
Abstract:
While several comparable countries in sub-Saharan Africa have seen a significant increase in financial inclusion, mainly driven by digital financial services, Ethiopia still performs poorly. Even digital payment and transfer services, which lower-income and less literate segments of the population could benefit from, are rarely used. Given the low development level of Ethiopia, numerous supply and demand factors could explain this disappointing outcome. We use a decision tree framework to isolate and analyze potential constraints to find which are binding—that is, which constraints limit the expansion of digital payment services in Ethiopia. Our analysis indicates that supply-side problems are pervasive, and we find that competition problems in the essential digital infrastructure market and in the financial sector are responsible for the inadequate provision of digital payment services in Ethiopia. However, the root cause of inadequate competition, and therefore of low financial inclusion through digital payment services, is institutional deficiencies. The two key institutional deficiencies are the lack of capacity of regulatory and supervisory institutions, and the unwillingness of the central government to enable and promote competition. The dominance of public enterprises, Ethio Telecom and the Commercial Bank of Ethiopia, has kept the prices of digital payment services high, particularly for low-income populations, as fees charged for undertaking low-value transactions are very high and the cost of digital infrastructure (mobile phones and plans) is also substantial. Unless these institutional binding constraints are removed, digital payment services in Ethiopia, and digital financial services more generally, will hit a very short ceiling that limits their enormous potential to improve livelihoods in the country.
Topic:
Development, Finance, Digital Economy, and Digitalization
Political Geography:
Africa and Ethiopia

59. A Decision Tree for Digital Payment Services: The Case of Mexico

Author:
Ivonne Acevedo and Miguel Szekely
Publication Date:
07-2021
Content Type:
Working Paper
Institution:
Center for Global Development (CGD)
Abstract:
This paper explores the reasons why digital payment services in Mexico are used to a much lower extent than would be expected considering the country’s level of development and the authorities’ efforts to expand these types of services during the past two decades. The paper applies the analytical framework proposed by Claessens and Rojas-Suarez (2020), which consists of identifying the binding constraints preventing an increase in the usage of digital payment services, among a set of alternative explanations. The methodology starts by evaluating the price and usage of digital payment services to discover whether constraints may be on the supply side, the demand side, or both. The main findings suggest that the crucial binding constraints on the expansion of digital payment services in Mexico are mainly on the supply side of the decision tree. Indeed, we identify the regulatory framework seems to be a binding constraint, since it creates an unlevel playing field among the providers of digital payment services. Current regulation could also be a constraint on increasing the provision of digital financial infrastructure, particularly for expanding cash-in and cash-out access points in rural areas. Thus, relaxing the regulatory constraint could enable the expansion of digital payment services. In addition, there is evidence suggesting that a coordination failure, reflected in a strong preference for transacting in cash, might be a binding constraint in the country. Perceived low or nonexistent benefits from using digital payment services could be the source of the coordination failure, since it prevents the formation of a critical mass of users, which in turn discourages suppliers from offering these services.
Topic:
Economics, Finance, Services, and Digitalization
Political Geography:
North America and Mexico

60. Searching for the Binding Constraint to Digital Financial Inclusion in Pakistan: A Decision Tree Approach

Author:
Imran Khan and Karrar Hussain Jaffar
Publication Date:
07-2021
Content Type:
Working Paper
Institution:
Center for Global Development (CGD)
Abstract:
Over the last decade, Pakistan has seen improvements in the coverage of its networks of bank branches, ATMs, and mobile money agents. However, the country is lagging behind comparator countries when it comes to the financial inclusion of its population; according to the latest estimates, barely 20 percent are currently included. By using the Claessens and Rojas-Suarez (2020) decision tree methodology, this paper assesses the potential demandand supply-side constraints limiting the usage of digital payment services to identify which constraints are binding. Our main finding is that Pakistan’s institutional weaknesses constitute the most important binding constraint. These weaknesses have incentivized the creation of a sizable informal economy that has resulted in a preference for cash over the use of formal financial channels for the majority of the population. Reflecting institutional deficiencies, the imposition of a withholding tax on financial transactions undertaken by individuals who did not file tax returns has further encouraged a move toward cash and away from digital finance. On the demand side, Pakistan lags behind comparable countries on various indicators such as technical literacy, awareness about the functionality of products, and social inclusion of women. Nevertheless, we find that these constraints are severe only for specific subpopulations. Consistent with our conclusion that institutional weaknesses, the binding constraint, have created deep incentives to remain informal, a considerable proportion of mobile phone–owning financially excluded individuals continue to choose to be financially excluded in spite of having high levels of technical literacy, functional awareness, and trust.
Topic:
Finance, Innovation, Banking, and Digitalization
Political Geography:
Pakistan and Asia