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It is increasingly difficult for any organisation to escape the omnipresent “cyber hype”. So, it is not surprising that in recent years a new field of activity has also emerged in the area of diplomacy: Cyberdiplomacy. Under the influence of digital technologies and the possibilities they afford to create virtual spaces and opportunities for interaction, the relationships between states and societies have undergone revolutionary changes; new actors and channels of influence have emerged. This poses radically new challenges to states when designing foreign policy. However, the creation of (desired) images and realities in bi- and multilateral relations has always been an essential task of diplomacy; “virtual spheres” have been and will remain key issues in “classical” diplomacy, too. But with the revolutionary development of the internet, new possibilities are emerging almost every day, with the emergence of “computer-generated horizons of meaning”[1] and their own dimensions of space and time. The major question is how to shape these politically.

Currently, the foundations of a future global cyber society are being laid. Even if we, at the moment, are rather witnessing a “territorialisation”[2], or even “fragmentation” of the internet. In the future, we might expect shifting borders, changing and overlapping spaces, and the “occupation” of virtual spheres. State institutions and regulations have a significant, though by no means exclusive, influence on what this “virtual territory” will look like. Taking such virtual realities into account in the formulation of political goals and the development and use of new political communication instruments is an essential part of the field of cyber diplomacy.

Though there are comprehensive concepts in this field – such as the European Union’s Cybersecurity Strategy (EUCSS) in December 2020 – defence measures against threats from the cyberspace are only slowly complemented by more preactive approaches. Due to this historical development, the terms “cyber security and cyber diplomacy” were closely linked for a long time or were even understood as identical. But the much-discussed cybersecurity is just one dimension of a modern understanding of cyber diplomacy. Only in recent years have both dimensions become detached from each other to incorporate further aspects.

It is therefore worthwhile to look more closely at areas beyond the field of cybersecurity. The complex confrontation with the “cyber superpowers”, such as the People’s Republic of China or Russia, offers an interesting “learning and action space” and can contribute to the further development of European cyber diplomacy. The EU increasingly wants to include this policy field in its regulatory competence and take on a global pioneering role.

Two aspects examined more closely here should give an impression of the diversity of challenges and possible instruments: first, the creation and regulation of a global cyberspace; and second, the creation of virtual public spheres abroad.

Assuming the “three digital empires”[3] – the USA, the PR China and the EU – the battle for standards and rules in cyberspace has not yet been decided. The EU is (still) very much committed to the paradigm of establishing a multilateral, rule-based order in the cyberspace. Unfortunately, both in the real and virtual world order, this development points to further fragmentation and systemic rivalry, with competing and fundamentally incompatible ideas of order. The bitter disputes over future internet standards, the creation of national cyberspaces in Russia and China, but also the transatlantic conflicts over the protection of privacy signal major fault lines in the cyberspace. How one should actively counter acts of aggression in hybrid conflicts is among the unresolved questions in international law and diplomacy. In the field of global finance and with the introduction of digital currencies and crypto products, established financial systems are coming under massive pressure, while traditional regulatory mechanisms can hardly keep up effectively.

In dealing with the People’s Republic of China, the largest individual challenging actor in the field of cyber diplomacy, the 2000s were associated with great hopes for social change and political opening. The internet was supposed to play a central role in bringing new ideas to the country and developing alternative forms of organisation. However, the “counter-revolution” by the Communist Party was put in place within a few years. The People’s Republic has developed its own impressive cyber diplomacy strategy and combined it systematically with other forms of influence, such as investment or military cooperation. Here, competition with the West takes place intensively in “third markets”. Unfiltered direct communication with the Chinese public via social media has come to a near standstill; one can no longer speak of reciprocity in this field. From a European point of view, therefore, influence must be exerted on two levels: Western democracies must actively engage in shaping the discourse in virtual public spaces both in their home countries and abroad; the hitherto rather passive fight against disinformation is not sufficient. And in the area of human rights or market access opportunities, it remains a thankless but compelling task to press Chinese policymakers to enable unfiltered channels of communication into Chinese society.    

Cyber diplomacy has become a central component of interstate action because spaces and forms of interaction have changed dramatically. The constantly intensifying systemic competition between authoritarian and liberal models of society is, unsurprisingly, taking place with increasing intensity in these virtual spaces. And the fate of an open, liberal order will essentially be decided there. European cyber diplomacy has to make a decisive contribution to the outcome of this conflict.

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[1] See Clemens Apprich, Technotopia: A Media Genealogy of Net Cultures (Media Philosophy), 2017

[2] See Daniel Lambach, The Territorialization of Cyberspace, International Studies Review, Volume 22, Issue 3, September 2020, Pages 482–506, https://doi.org/10.1093/isr/viz022

[3] See Susan Ariel Aaronson & Patrick Leblond, 2018. “Another Digital Divide: The Rise of Data Realms and its Implications for the WTO,” Journal of International Economic Law, Oxford University Press, vol. 21(2), pages 245-272, https://ideas.repec.org/a/oup/jieclw

/v21y2018i2p245-272..html

Peter Hefele Digital European Union Security

In mid-2020, a lethal clash occurred between Indian and Chinese troops in the border region of Ladakh. Soon after, India opened fire on the digital front by banning dozens of Chinese mobile applications and declaring them harmful to Indian sovereignty and security. In a similar fashion, the US digital hawk brought its gaze on a technological prey. On national security grounds, the Trump administration initiated a crusade against the likes of TikTok, WeChat and Alipay.

The US’ handling of the TikTok saga has been a messy affair, with the new presidential administration appearing to backtrack on the ban. There are legitimate concerns that foreign businesses shouldn’t be in the crosshairs of politicians, nor should users be collateral damage in the technological rivalry between the US and China.

The national security rationale applied by India and the US in this digital skirmish might appear overblown, but there is an important case to be made. How should our governments respond to online businesses acting in a nefarious way? How should our institutions treat digital platforms which can be conduits for authoritarian influence?

Let’s quickly look under the hood of two of the most popular Chinese platforms. The ‘super-app’ WeChat offers a bundle of services, with more than a billion active users and around 100 million downloads outside of China. WeChat is not only heavily surveilled within China, but also monitored abroad, with strong political censorship of user conversations. The Chinese Communist Party has been using this platform to target the Chinese diaspora in other countries, apply information control, and spread disinformation.

International superstar TikTok also favours content moderation and applies censorship to politically sensitive topics. Both WeChat and TikTok have been embroiled in controversies about the storage and transfer of personal data. Don’t forget that these businesses have to comply with draconian Chinese legislation that requires companies to support national intelligence work.

Some readers might consider such alarm about cute videos or chat platforms a bit premature. But this is just the tip of the iceberg and the problem is not limited to apps. Cheap Chinese Internet of Things (IoT) devices are quickly expanding their share of European markets where standards for such technology are still wobbly. Interconnected home speakers or smart devices remain extremely vulnerable to cybersecurity breaches and are likely to leak user data. It is a matter of time before Chinese AI-driven hardware and software starts raising serious ethical, cybersecurity, and espionage concerns.

The EU must develop stringent standards for the access of advanced digital hardware and software from third countries.

While all of this unfolds, the European dove sits and waits. Much of the EU’s recent efforts have been aimed at Silicon Valley companies and their dirty business when it comes to monopolistic behaviour, monetisation of personal data, and stifling competition. This is a laudable effort but the EU should not underestimate the threats coming from the digital juggernauts to the East. European commitment to online privacy should not be our only line of defence against the ongoing onslaught from China. This is no longer solely a question about bureaucratic personal data management, it’s a question of national security.

The EU must develop stringent standards for the access of advanced digital hardware and software from third countries. The same way we have common rules for consumer goods safety or health requirements for imported foods. The same way we blocked the entry of cheaper Chinese cars which didn`t cover European safety requirements a decade ago.

This should come in parallel with other comprehensive measures to boost our defensive digital capabilities in cyber security and the protection of critical infrastructure, not to mention the need to decisively boost our export controls on selling advanced technology to countries with appalling human rights records. The EU has imposed an arms embargo on China since 1989, but why are we still supplying them with surveillance and dual-use technologies?

Our commitment to free trade and global supply chains don’t mean that we provide unconditional access to our markets and networks. It is unnerving that we are debating whether it’s fair to scrutinise the market access of Chinese digital platforms, while Beijing unscrupulously maintains a wide-ranging ban on hundreds of US and European apps and digital services. In a similar act of techno-nationalism, Russia is trying to limit the exposure of its population to Western digital platforms by obligating phone providers to pre-load all new smartphones with specific Russian-made social networks, payment apps, and voice assistants.

There is the optimistic tale that the Internet will always remain open and that international actors will inevitably embrace the digital domain as a tool for empowerment and joint cooperation. This belief is as noble as it is erroneous. The global system of Internet governance resembles the characteristics of the ‘analogue’ international system – ruthlessly competitive, and prone to regionalisation and conflict. We must finally acknowledge that the likes of China and Russia are not benign actors – Europe is dealing with aggressive authoritarian regimes both online and offline.

The US President Theodore Roosevelt liked to recite the West African proverb: ‘Speak softly and carry a big stick’. On the digital front, Europe speaks softly but often comes empty-handed.

This needs to change.

Dimitar Lilkov China Digital

Even though the decision by the main social media platforms to silence Donald Trump was a relief for many, it was also a source of concern and scepticism. The fact that a CEO had the unquestionable power to block the sitting President of the second largest democracy in the world, a nuclear superpower, shortly after he received a record 74 million votes and without any judicial oversight, was rather alarming.

Social media companies rightly argue that Trump violated their platforms’ rules. It wasn’t the first time, either. But this is not the issue now. For better or worse, these digital platforms are not simply corporate applications. Social media are what Habermas would define as today’s “digital public sphere”. The public sphere, open to all, emerged in Europe in the 18th century as a place for critical dialogue, where citizens formed communities whose shared rationality acted as a regulator for the power of the state, and it has now adapted to the new technological reality. Analogous to the 18th-century newspapers, magazines, reading groups and cafés in Europe, we now have Facebook and Twitter. They are the digital version of the Ancient Greek “Agora”, which often turns into a Roman arena*.

This digital public sphere is opaquely controlled, through arbitrary procedures. Every CEO is accountable to his shareholders and consequently to his clients, one would say in an expansive way. But this balance is not enough. The user-client cannot directly control any CEO. He can only withdraw from the platform. This does not constitute any direct control power.  

Due to the size and nature of their operation, big social media companies actually manage a “public good” and cannot be treated with standard corporate rules. Additionally, loose self-regulation is insufficient, regardless of the reactions from the supporters of the internet’s anarchic nature.

Obviously, I would never recommend the strangling of internet freedom, but I strongly believe that it is the right time to discuss the creation of an institutional framework in accordance with the model of supranational institutions.  

We need a sort of “international law” for digital platforms and AI, guaranteeing the fundamental rights of citizens – users – and providing specific procedures and even sanctions.

We are sailing in uncharted waters. This means that we must create new maps and possibly new compasses to find our way in this potentially dystopic reality.

Understandably, such an institutional mechanism cannot match the speed of developments on social media, but this should not be discourage attempts to address this complex and challenging situation. After all, supranational bodies and international rules were not created overnight, nor do they ensure that we actually live in an ideal world. But they generally prevent us from being led into the utter chaos of a global jungle.

What happened to the absolutely reprehensible Trump, will happen tomorrow to someone else who is less unfavourable to us, but a CEO will still have the absolute power to press the delete button. As citizens, we cannot be complacent and delegate the right to control freedom of speech to an uncontrolled mechanism.

We are sailing in uncharted waters. This means that we must create new maps and possibly new compasses to find our way in this potentially dystopic reality. Perhaps it would have been more appropriate for the corporate actors themselves, to make the first move and create such a system of checks and balances. But this has not been the case.

The European Commission has taken a double initiative in this direction on behalf of EU member states. The Digital Services Act and the Digital Markets Act are two crucial steps ahead for Europe, which is acting, albeit slowly, to set some limitations – legal obligations for online platforms, creating a more solid legal framework. It is an attempt to bring order to the digital chaos and contribute to the digital space with our European values. This could prove a profound movement of global leadership. In this framework, the EU needs to lead the way in a constructive international dialogue and join forces with other global democratic allies, since the issue is not solely European, but global.

Following on Donald Trump’s ban from online platforms, a wide public discussion about the uncontrolled power of social media has begun at an international level. Many leaders raised the question of further regulation. It is not about Trump himself, but about the principle of democracy and freedom of speech. German Chancellor Angela Merkel has suggested that lawmakers should set the rules governing free speech and not private technology companies. Thierry Breton, EU Commissioner for Internal Market, raised concerns about the “deep weaknesses in the way our society is organised in the digital space”. Manfred Weber, chairman of the EPP group at the European Parliament, pointed out that “we cannot leave it to American Big Tech companies to decide what we do and do not discuss, what can and cannot be said in a democratic discourse. We need a stricter regulatory approach”. French Finance Minister Bruno Le Maire commented that “the regulation of the digital world cannot be done by the digital oligarchy”. U.K. Prime Minister Boris Johnson said it was time for a real debate about the status of big internet companies.

There is no easy conclusion to this discussion, but even its existence is proof that we manage to keep the spirit of modern democracy strong. We cannot expect obvious and “ready to use” solutions. We need a thorough and open-minded discussion to come up with them, with multiple aims: to address the digital world’s existing and emerging challenges in an innovative manner; to use cutting edge technologies to the benefit of societies; to set the necessary ethical rules on AI; and to safeguard the “algorithm of our democracy”.

As a union of some of the most advanced, well established, and oldest democracies in the world, the EU has the duty to break ground on this.

*This idea is expanded upon in the book “Reflections and distortions – The Electoral Impact of Social Media in Europe”, soon to be published by ENOP – CIEPEG.

Panagiotis Kakolyris Democracy Digital Leadership

You’ve got to hand it to the Chinese authorities – there`s never a dull moment. In late 2020, a lottery was organised in the city of Suzhou for the allocation of thousands of online wallets, each containing 200 digital yuan (25 euro). The lottery was one of the many pilot experiments organised by the People’s Bank of China (PBOC) to test how China’s central bank digital currency would perform both online and offline.

On the face of it, this is a noble pursuit by a government providing essential services to its citizens. The World Bank estimates that China has one of the highest number of people who lack access to a bank account. The PBOC wants to provide a state-backed digital equivalent of the yuan which will be fully operational in late 2021 or early 2022. However, the government isn’t actually opening new opportunities – it’s desperately trying to catch up with the private sector.

In the last decade, the Asian country made a silent transition to a near cashless society. Payment systems designed by digital giants Alibaba and Tencent essentially leapfrogged the card-based services and started a revolution in financial transfers and retail. China currently tops the global ranking of financial technology (FinTech) adoption globally, with 87 % of its mobile users having access to innovative services. FinTech refers to all kinds of technology-enabled innovation in the financial sector. Plastic cards are not in vogue anymore – QR codes and FinTech apps make the money go round in China.

     Fig. 1 Source: E&Y | Martens Centre

Widespread mobile applications Alipay and WeChat Pay dominate the mobile payments market in the country, with trillions of euro worth in annual transactions. When it comes to personal data, the reputation of these private apps is murky. In early 2021, the US President signed an executive order banning transactions with eight Chinese software applications (Alipay and We Chat Pay included) due to potential snooping of sensitive data.

The Chinese Communist Party isn’t too happy with the fact that private companies operate the bulk of transactions within the country and that so much money is transferred from traditional banking accounts to electronic wallets. The PBOC is also eager to cut the costs of maintaining traditional banknotes, and also being able to efficiently track money flows within China.

An additional aim for Beijing is increasing the international appeal of its currency. The yuan’s annual share of global payments cleared on SWIFT hovers around 2%, which is meagre compared to the sway of the dollar, euro, and pound sterling. If China is the first country to launch a digital currency, it will make the headlines, but that doesn’t mean the yuan’s inherent problems will go away. Foreign investors are subject to specific financial restrictions, while Chinese authorities have often intervened in capital markets and been criticised for currency manipulation. Global investors are not going to judge a currency only by its shiny new cover. Still, Chinese leadership hopes that in the long run, a digital yuan might pressure the dominance of the US dollar and become the currency of choice for partner countries in Asia.

Fig. 2 Source: SWIFT

USD = US dollar, EUR = Euro, GBP = British pound, JPY = Japanese yen, CNY = Chinese yuan

Interestingly, the biggest prize here may not be the currency’s strength. Recent investigations report that Chinese regulators have persistently bullied Ant Group (parent to the Alipay app) to share their valuable troves of consumer-credit data they have been accumulating from their customers. The recent public disappearance of Jack Ma, founder of Alibaba, certainly raises additional eyebrows. A few months ago, Ma publicly stated that traditional Chinese banks operate with a ‘pawn shop’ mentality.

Obviously, Chinese pawnbrokers and their political overlords are in a hurry. The state wants to reduce the dominance of private actors in the digital payment space. Policymakers in Beijing are also concerned that cryptocurrencies like Bitcoin or Ethereum will grow in appeal for Chinese users, who may migrate funds towards decentralised and anonymous digital tokens. In essence, with its digital yuan, the Chinese state aims to develop the perfect anti-thesis to cryptocurrencies – highly centralised and completely prone to state surveillance.

It seems that China’s digital currency would tick all the right boxes – reining in private companies, tracing financial flows, and boosting the international appeal of its national currency.

The mass adoption of the digital yuan will make every transaction in the country potentially transparent and traceable. This would be an additional step in Xi Jinping’s blueprint for societal management through state-backed digital tools. Monitoring of digital financial flows can also be bundled with China’s nascent social credit system as a mechanism for rewarding and penalising individual behaviour. It seems that China’s digital currency would tick all the right boxes – reining in private companies, tracing financial flows, and boosting the international appeal of its national currency. Indeed, Chairman Mao would have been proud.

European policymakers shouldn’t underestimate these developments. Within the EU, Sweden is one of the few experimenting with the creation of a digital currency, while this topic isn’t even on the agenda in many European capitals. The European Central Bank (ECB) has launched a public consultation on the idea of creating a digital euro, but Frankfurt is years behind on an actual project. Europe doesn’t need to race ahead to beat China in creating a digital currency, but we should be wary of yet another domain in which the Chinese are taking the lead.

An in-depth Martens Centre research study shows that the EU is currently lagging behind when it comes to FinTech services and innovative financial products – all the hot developments are happening in Asia or the US. Add in AI research, telecommunications patents, or development of various technological standards internationally, and you’ll see the EU being dwarfed by China in many of these domains.

The EU is best positioned to pioneer a global standard for a secure digital currency, which will be complementary to euro banknotes. The ECB has the resources and technical capacity to develop a privacy-proof digital euro equivalent, which will be a natural next step in the digitalisation of the European economy. An ECB-designed digital euro should not be launched overnight, and should go through rigorous tests for its durability and state of the art privacy design. It could serve as a tool for financial inclusion of citizens who are operating outside conventional banking services and also increase personal convenience when dealing with financial transactions. Moreover, unregulated payment solutions or third-country financial applications are already mushrooming, which creates specific long-term risks and vulnerabilities. Like it or not, fundamental change is coming within retail, e-commerce and finance across Europe, and EU policymakers must be prepared to provide trustworthy alternatives.

In the coming years, we will witness increasing cyber warfare globally and a relentless race for technological leadership. The European Union simply cannot let digital authoritarians from the East dominate technological standards, or become unrivalled to pioneer new tools for monetary policy which carry the stamp of the Chinese Communist Party.

Dimitar Lilkov China Digital Economy

The EU takes the challenge of digital transformation very seriously. We have decided to make it, along with the Green Deal, the main driver for economic recovery and long-term growth.

The EU has a profound and well-established reputation as a standard-setter. It is moving rather quickly toward a modern legal framework for its Digital Single Market, establishing a regulatory space that would be conducive both to the growth of digital business and protective of the fundamental rights of users.

This is particularly important now when there seems to be no doubt that the world’s future is digital, that digital technology is of general-purpose, and that it cuts across business activities, people’s lives, and societal transformation. It does not recognise borders between national jurisdictions but also has a strong geopolitical dimension.

Although the EU has been already for a while moving forward with the implementation of its plan to create a regulatory framework for the digital transformation of its Single Market, and that a series of legislative proposals have been already issued, there is still time for the EU and the US to move toward a common regulatory space for the digital transformation.

Our relations’ history clearly demonstrates that aiming for the alignment of already existing and well-established standards to make them conducive to business activity, citizens’ preferences, and security has always been difficult and costly.

However, in the case of the digital transformation, we have a situation comparable to a greenfield investment. We are basically starting from scratch. Many choices are still to be made. Providing a shared regulatory framework for an emerging global common good can be a win-win move.

In a time when China, currently the only large economy experiencing growth, has been aiming for technological self-sufficiency and pouring enormous subsidies into high-tech, AI, electric vehicles, and the semiconductor industry, the EU is lagging behind in the global technological race, and the US is hardly benefitting from the trade and tech war. Choosing a cooperative approach for the digital transformation seems to be a good path for the EU and the US. When 5G will shape the near future of the digital economy, the EU and the US could be partners in creating a new vision for going beyond 5G.

COVID-related challenges open new areas for digital cooperation. Data sharing is crucial, also in the context of combatting the pandemic now and other potential global health hazards that will affect us in the future. European and American global resilience will be reinforced if we work together through digital sovereignty, which already seems to be a buzzword on both sides of the Atlantic.

Europe will spare no effort on the path toward making itself a centre of digital innovation. There is, indeed, no reason that we should lag behind. There is a market of 450 million people, there are great standard-setting capabilities, and there is knowledge and experience on how to ensure the integrity of digitalisation in terms of privacy protection and ethical dimensions. There are millions of small companies that, with some incentives, can spread their wings to capture the advantages of the digital transformation. The EU is all set to become an attractive strategic partner for the US in the digital world. Working together would allow us to reduce existing threats to the Open Internet. Europe knows how to tear down dividing walls, and it understands well the risk of raising digital walls and the benefits of a global mindset. It also knows the cost for the business community of operating in different regulatory regimes.

My concern is that, given the disparities in standards and protocols, the global race for digital leadership based on digital sovereignty might not produce a win-win situation for all. We have to resist the temptation to go alone in this area.

Choosing to work together as leaders on standards and behaviour in the digital world and putting the digital economy at the heart of transatlantic relations can bring benefits to citizens and businesses on both sides of the Atlantic and help find globally accepted solutions to existing inadequacies.

We have a chance that must not be missed. It is a perfect area for a transatlantic reset. Frustration with largely dysfunctional economic relations with the US for some years now leads us to sometimes thinking in terms of the need to balance against the US. But it matters today that our bonds have grown from shared values. In that regard, China is on the other bank of the river. If we feel left behind globally, we should aim at taking back control, like the Brexit dreamers, or use our huge regulatory power in the service of Western values.

Danuta Maria Hübner Digital Regulation Transatlantic