Securing a Connection: Governments’ Future in the World of Tech

July 20, 2019

Denmark appointed its first tech ambassador to Silicon Valley in 2017, signaling a new era of diplomacy between governments and tech companies.[i] In stark contrast to this revolutionary move, relations between governments and tech companies have frequently been antagonistic. But the industry’s growing power and influence make cooperation essential.[ii]

Tech companies are beginning to resemble governance structures and they are increasingly competing for power with governments on national and global scales.[iii]  Their worth is greater than the GDP of many countries – if Amazon was a country, it would have the 58th highest GDP in the world.[iv]  Tech companies possess great amounts of data and their technologies and algorithms influence our perception of the world.[v] Tech companies are increasingly affecting our everyday lifestyles – online communication or education platforms serve as the prime examples.[vi]  Newest technologies, such as self-driving cars, will shape the future and governments need to be prepared.[vii]

It is key for our modern societies that governments and tech companies work together in order to create an environment where technological innovation is made to act to our advantage rather than disrupt the existing socio-economic processes. Bearing this in mind governments should not first and foremost attempt to forcefully curb tech companies’ power. This will only limit their own capacities and create a culture of contestation, hampering much-needed innovation.

Increasing Taxes for Tech – a misguided policy

Governments around the world have implemented stronger tax regulations to limit the power of tech companies. In the EU, a broader initiative for a ‘digital tax’ on EU turnover is combined with country-level efforts.[viii] France, for example, introduced a digital sales tax on large internet and technology companies like Google, Apple, Facebook and Amazon in January 2019, arguing that it will raise government revenue.[ix]

There is no doubt that tech companies must pay taxes. Regulatory initiatives such as taxation should, however, be reduced to the bare necessary, as they may alienate, and also only temporarily weaken tech companies. Old-style tax regulation approaches are no longer applicable in the technological realm.[x] According to Larry Downes, a recognized author on technological disruption, each new generation of technological developments successfully challenges previously-established monopolies without governments intervening. This entails a mechanism of self-control – the free development of more technological innovations prevents the establishment of monopolies, not taxation or breaking up tech companies.[xi] In fact the technology itself, which tech companies develop, will last and will be further built upon in the long-term.  Increasing taxation is simply too slow-paced to correct market failures when it comes to technological innovations. Advocating for increased taxation as the ultimate solution for filling regulatory gaps is misguided and this policy must be revisited building upon other, softer regulatory approaches.

Towards Universalized Regulation

Gaps in both national and international technology regulation are ample and can include aspects such as accountability, transparency, the scope of company competences, and cooperation with state bodies. As a result, tech companies often develop their capabilities by pushing the established legal boundaries and working at the “cutting edge of the law.”[xii] Uber and Airbnb have developed innovative alternatives to traditional transportation and hospitality services, forcing governments to develop new legal terms for such market transformations. Promoting universalized principles regarding the role of tech companies in modern societies and technology regulation-related law could help gradually close those gaps, which inherently create mistrust and hostility between governments and the tech companies.

New regulation must clearly define a role for tech companies to play in society. They should be encouraged to be drivers of positive social change. Due to their innovative and far-reaching role, tech companies should not be treated as simply profit-oriented organizations and regulations should address this. In fact, private sector companies have in general been putting increasing emphasis on creating social value through corporate social responsibility measures, in recognition of the negative externalities of their products and services.[xiii] Tech companies should be at the forefront of these initiatives.

International agreements to enhance regulation of tech companies should be pursued with the involvement of supranational bodies such as the EU or the UN. These institutions could facilitate the process of filling regulatory gaps through setting basic guidelines for cooperation and fostering dialogue. In fact, the approach should be to focus on creating soft law,[1] which can in turn change hard regulatory framework, as has for example been the case with the UN Guiding Principles on Business and Human Rights.[xiv] International governance tools like codes of conduct, guidelines, and forums for dialogue can gradually harmonize regulatory frameworks. They are a more sustainable approach for dealing with emerging technologies and fostering collaboration beyond treaty-based solutions.[xv]

When Can Collaboration Succeed?

There are four main factors essential for successful collaboration between governments and tech companies: (a) The creation of a long-term relationship, (b) the ability of governments to properly benefit from technological advances, (c) along with government officials gathering a more profound understanding of the available technologies and (d) the discovery of mutual interests between the parties.

(a) There are various examples of long-term collaborations between governments and the tech industry having been successful.[xvi] To name only one, the Digital India program is an ambitious collaborative initiative established permanently in 2006 to empower the country’s citizens by providing public internet and universal mobile connectivity access.[xvii] The program has vast ambitions, thus requiring many years of collaboration to effectively innovate India’s infrastructure, provision of public services, along with financial empowerment of citizens through creation of an online payment service.

(b) Governments themselves can in fact also benefit from technological advances.[xviii] Data collected by companies can be used to improve government services. New technologies can also be used to digitalize public service to increase accessibility. For example, Estonia has already implemented an e-Governance platform using technological advancements with success.[xix]

(c) More frequent interactions between the public and private sector, which could be done through joint projects on infrastructure and or sustainable development, could help governments to better understand the technologies available and how they can be used. Gaining more knowledge will improve their bargaining power when making agreements with tech companies.

(d) Developing synergies between governments and tech companies, whether it in the format of roundtables or international forums engaging government representatives and actors in the tech sector, or even through creation of a dedicated secretariat, is essential to prepare for the future of digitalization. Both governments and tech companies share the responsibility for shaping future societies and the government will need to embrace integrating, and not simply adapting to new technologies. Keeping this in mind, governments should not be wary of negotiating and actively cooperating with tech companies.

In light of the tech industry’s growing power and influence, governments need to address these four factors to make collaboration between governments and tech companies successful in the future.

References

Picture by Steve Johnson (@steve_j)

[1] Although soft law provisions, which can take the form of agreements, principles or declarations, are not legally binding, they are able to create internationally recognized codes of conduct and ethical principles which would allow to guide the process in a more effective manner.

[i] Office of Denmark’s Tech Ambassador, “TechPlomacy,” Office of Denmark’s Tech Ambassador, accessed December 9, 2018, http://techamb.um.dk/en/techplomacy/ .

[ii] Chris Stokel-Walker, “The First Silicon Valley Ambassador Is out to Make Nice with Tech Giants,” WIRED, 2017, accessed December 8, 2018, https://www.wired.co.uk/article/casper-klynge-first-ever-silicon-valley-tech-ambassador .

[iii] “How 5 Tech Giants Have Become More Like Governments Than Companies,” NPR, 2017, accessed December 18, 2018, https://www.npr.org/2017/10/26/560136311/how-5-tech-giants-have-become-more-like-governments-than-companies .

[iv] Fernando Belinchón and Ruqayyah Moynihan, “25 giant companies that are bigger than entire countries”, Business Insider, 2018, accessed April 30, 2019, https://www.businessinsider.com/25-giant-companies-that-earn-more-than-entire-countries-2018-7?international=true&r=US&IR=T.

[v]  Suskin, Jamie, “Jamie Susskind in Conversation with Helen Lewis On How Tech Is Transforming Our Politics.” Interview. Acast (audio blog), 2018, accessed December 6, 2018, https://play.acast.com/s/intelligencesquared/jamiesusskindinconversationwithhelenlewisonhowtechistransformingourpolitics .

[vi] Jennifer Groff, “Technology-Rich Innovative Learning Environments”, OECD, 2013, accessed May 10, 2019.

[vii] Daniel Araya, “The Big Challenges in Regulating Self-Driving Cars”, 2019, accessed May 12, 2019, https://www.forbes.com/sites/danielaraya/2019/01/29/the-challenges-with-regulating-self-driving-cars/.

[viii] Rochelle Toplensky, “Google, Facebook and Apple Face ‘digital Tax’ on EU Turnover,” Financial Times, 2018, accessed December 15, 2018, https://www.ft.com/content/e38b60ce-27d7-11e8-b27e-cc62a39d57a0 .

[ix] Davies, Rob, “France Pushes Forward Alone with New Tax on Big Tech Companies,” The Guardian, 2018, accessed December 8, 2018, https://www.theguardian.com/technology/2018/dec/17/france-alone-new-tax-big-tech-companies-gafa .

[x] William D. Eggers, Mike Turley and Pankaj Kishnani, “The Future of Regulation,” Deloitte Insights,  accessed February 2, 2019, https://www2.deloitte.com/insights/us/en/industry/public-sector/future-of-regulation/regulating-emerging-technology.html .

[xi] Larry Downes, “How More Regulation for U.S. Tech Could Backfire,” Harvard Business Review, 2018, accessed December 16, 2018, https://hbr.org/2018/02/how-more-regulation-for-u-s-tech-could-backfire .

[xii] Alex Hern, “If Tech Firms Push the Law to the Limit, Is That Such a Bad Thing?,” The Guardian, 2017, accessed December 12, 2018, https://www.theguardian.com/commentisfree/2017/oct/09/tech-firms-push-law-limit-regulatory-impunity.

[xiii] Howard W. Eimicke and William B. Buffet, “How Companies, Governments, and Nonprofits Can Create Social Change Together,” Harvard Business Review, 2018, accessed December 16, 2018, https://hbr.org/2018/05/how-companies-governments-and-nonprofits-can-create-social-change-together.

[xiv] Noura Bara, “The U.N. Guiding Principles: Beyond Soft Law”, Hastings Business Law Journal, 2016, accessed May 27, 2019.

[xv] Gary E. March and and Brad Alleby, “Soft law: New tools for governing emerging technologies,” Bulletin of the Atomic Scientists, 2017, Stanford Online, accessed February 3, 2019, https://www.tandfonline.com/doi/full/10.1080/00963402.2017.1288447?scroll=top&needAccess=true .

[xvi], Howard W. Eimicke and William B. Buffet, “How Companies, Governments, and Nonprofits Can Create Social Change Together,” Harvard Business Review, 2018, accessed December 16, 2018, https://hbr.org/2018/05/how-companies-governments-and-nonprofits-can-create-social-change-together.

[xvii] “Digital India,”, Ministry of Electronics & Information Technology Government of India, accessed January 31, 2019, https://digitalindia.gov.in/content/introduction .

[xviii] “Digital Disruption: What do governments need to do?”, Commission Research Paper, Canberra, Productivity Commission 2016, accessed February 1, 2019.

[xix] “E-Governance,” E-Estonia, accessed December 8, 2018,  https://e-estonia.com/solutions/e-governance/ .

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Valeria Filippova

Valeria is a member of the Policy Corner 2019 team project at Sciences Po Paris and she is currently completing her Master's in International Security. She obtained her Bachelor's at the SciencesPo Reims Campus with a focus in transatlantic relations. Her main interests are peacekeeping and conflict resolution strategies, the defense and security industry, as well as relations between Russia and the West.