Competition and relationships within the digital economy present various phenomena in international relations, such as the mutual technology blockades between the United States (US) and China, the implementation of the Digital Services Act (DSA) and Digital Markets Act (DMA) across the European Union (EU) with global impacts, global trade regulations through the WTO E-commerce Joint Statement Initiative (JSI), and the Regional Comprehensive Economic Partnership (RCEP). Given the dynamics resulting from the development of the digital economy, it is interesting to ask how digital economic competition influences international relations.
Digital Economy Competition from the Perspective of Social Construction of Technology
The digital economy has revolutionized conventional patterns of economic activity in various countries. The globalization of the digital economy means that technology is no longer confined by national borders, companies can operate globally, and innovations can spread rapidly. This expands international cooperation and participation in digital commercial activities in foreign markets (Ahmedov, 2020).
A World Economic Forum (WEF) report shows that countries that keep up with technological developments tend to excel in economic and social development. The report identifies seven countries, namely Finland, Switzerland, Sweden, Israel, Singapore, the Netherlands, and the United States, which are at the forefront of enjoying the positive impacts of economic investments in information and communication technology (ICT). Other factors contributing to this success include supportive environmental ecosystems, adequate infrastructure, good business regulatory policies, and sufficient human resource skills.
WEF spokesperson Oliver Cann stated that consumers, not companies or governments, drive the digital revolution. This view aligns with Manjikian’s writings in McCarthy (2017) regarding the Social Construction of Technology (SCOT), which argues that technology does not determine human actions; rather, human actions determine technology. This perspective also asserts that the use of technology cannot be understood without considering its social context. Manjikian also emphasizes that the development of information technology requires dynamic involvement between the government, industry, and society. Therefore, the design of a technology often reflects the patterns of stakeholders, the profile of society, and the availability of technology that supports such development. Countries dominating the digital economy often have government policies that support technological innovation, including investment in research and development (R&D), subsidies, incentives, regulations adaptive to business innovation, as well as the adaptation of their societies.
This is why major technology companies like Google, Apple, Facebook, Amazon, and Microsoft (GAFAM) in the US, as well as Alibaba, Huawei, Tencent, WeChat, ZTE, and Baidu in China, become key players in the global digital economy and achieve dominant market positions. This condition underscores the SCOT concept, where technology is essentially neutral and then evolves from its initial design into other forms as a result of social construction, in this case becoming an economic power tool. The dominance of these companies not only reflects their technological prowess but also the economic strength of their home countries, as well as their influence in setting technological standards and regulations worldwide. For example, China has made significant progress in e-commerce and AI technology, challenging the US’s dominance in the same fields, and the tensions between the US and China in the technology trade war reflect how competition in the digital economy can trigger geopolitical tensions.
Comparison of Digital Regulation Policies
Based on the concept of the Social Construction of Technology (SCOT), the development of technology in a country is inseparable from the patterns of its digital regulation policies. Generally, digital regulation policies are defined as a set of rules, regulations, and policies formulated by the government to manage, implement control, and shape certain ecosystems and behaviors in the digital sector (Saragih 2024). In this context, it is interesting to examine the forms of regulatory policies from several countries that are often discussed in the development of digital technology, including:
European Union
The EU includes several member states in the top 10 of the World Digital Competitiveness Ranking (IMD 2024). Its regulatory characteristics are the development of comprehensive and inclusive policies, involvement and transparency among stakeholders and flexible and adaptive regulatory processes. This is reflected in the EU’s data protection and privacy regulations, particularly the implementation of the General Data Protection Regulation (GDPR).
United States
Ranked first in the Digital Competitiveness Ranking (IMD 2024), the US has the following characteristics for digital regulation: combining good digital regulatory policy concepts, encouraging innovation rules through stakeholder collaboration, and being responsive to innovation. One realization of this is the Jumpstart Our Business Startups Act (JOBS Act), which is used to encourage funding for small businesses in the US by loosening many national securities regulations, including creating ways for companies to use crowdfunding to issue securities.
China
Ranked 19th in the Digital Competitiveness Ranking (IMD 2024), China’s digital regulations have the characteristic that national security is paramount, with regulations focusing on security while remaining flexible to attract investment. The implication of this policy is the Great Firewall of China (GFW), which refers to the internet censorship policies implemented by the Chinese government. On the other hand, the Great Firewall has had significant positive impacts, especially in the development of e-business that also drives the Chinese economy. The rapid growth of local internet companies like “BAT” (Baidu, Alibaba, and Tencent) demonstrates the positive side of the GFW implementation. In this context, the GFW functions as a form of protection and support from the government (Yahya and Mutia, 2022).
Comparing the digital regulation strategies in the European Union, the United States, and China reveals varying characteristics. The European Union adopts a comprehensive, inclusive, and protective approach, while the United States is more market-driven and fragmented. In China, the approach is more concise and restrictive. Each country faces challenges and has best practices that other countries can adopt to develop digital development strategies suited to their specific needs and contexts.
Technology Trade War
The technology trade war between the US and China is a clear example of how competition in the digital economy can trigger international conflicts. It began with the imposition of import tariffs on each other’s products, leading to import and export bans on 5G technology, semiconductors, social media platforms, and data security applications in several countries (Garcia and Goyal, 2021). This situation also reflects the rivalry for global hegemony in the digital era, where countries strive to maintain and expand their dominance through control over technology. From an international relations perspective, this conflict transcends economic aspects and highlights geopolitical dynamics and national security.
Both countries are also competing to build strategic alliances with other nations to strengthen their positions, influence the global diplomatic landscape, and encourage other countries to take sides or seek balance in their relations with these two powers. One such initiative by China, known as “De-dollarization,” involves reducing reliance on the US dollar in its international economic transactions and encouraging other countries to use the Yuan or their local currencies in international trade transactions.
From the digital economy perspective, this trade war causes significant disruptions in the global supply chain and prompts increased investment in domestic innovation by both sides. Trade restrictions, tariff implementations, and application bans lead to the fragmentation of the internet, or “splinternet,” where the digital community is divided along certain boundaries. Additionally, this situation could cut off other countries’ access to digital technology or cause inefficient discussions in separate economic fields, with losses further compounded if the allies of the conflicting nations follow suit. This creates uncertainty that can hinder innovation and global economic growth.
Impact of Digital Economic Competition from the Perspective of International Relations
Digital economic competition encompasses several interconnected aspects that can create inequality and disharmony, including:
- Digital Divide – Based on the World Digital Competitiveness Ranking (2023), the US, Singapore, and Indonesia respectively rank 1st, 3rd, and 45th. The US and Singapore, as developed countries with advanced technological infrastructure, have fast and widespread internet access, as well as strong innovation centers such as Silicon Valley and the Smart Nation initiative. On the other hand, Indonesia, as a developing country consisting of numerous islands, still faces significant digital divides with limited internet access and telecommunications infrastructure that need improvement and expansion, exacerbated by corruption cases. This will certainly impact the potential long-term economic gains presented through the digital economy.
- Political Tensions – As explained in the previous section, one example is the tensions arising from mutual accusations between the US and China, resulting in technology blockades that also affect other countries.
However, competition in the digital economy also drives cooperation and strategic alliances. Countries facing similar threats or challenges often collaborate to enhance their technological capabilities and protect common interests, with impacts such as:
- Innovation and Economic Growth – Competition in the digital economy drives economic growth, especially in developing countries with great potential in the technology and internet sectors. This can be seen from the efforts of US technology companies to expand their businesses in Africa. For example, Facebook (Meta) and Google have initiated innovation development initiatives, such as training programs for 50,000 people in Nigeria organized by Facebook, and a plan supported by the Nigerian government called the “next billion users” by Google to ensure greater digital access for Nigeria. Additionally, there are plans to open an AI technology development center in Ghana focused on several sectors such as health, agriculture, and education. The positive response from African governments to these investments shows their enthusiasm because technology is seen as a solution to problems in Africa. Collaboration between technology companies and governments in Africa is considered the best way to transfer technology and drive innovation in the region.
- International Cooperation – One form of international cooperation in the context of the digital economy is China’s Digital Silk Road (DSR) project. DSR was proposed by President Xi Jinping in 2015 and involves cooperation programs in the ICT sector, digital economy, AI, nanotechnology, and quantum computing with Belt and Road Initiative (BRI) member countries. As a reaffirmation, in the DSR development forum, Wang Young, vice chairman of the Chinese People’s Political Consultative Conference, stated that China wants to share the benefits of its digital economic development with BRI members, thus encouraging mutual connectivity and strengthening digital supply chains while maintaining an open, fair, and nondiscriminatory digital business environment.
Digital Diplomacy
Digital diplomacy has become a strategic instrument in international relations as it enables cooperation to address global challenges. Countries can leverage digital diplomacy to shape international frameworks, such as through participation in the G20. The G20 can serve as a platform to facilitate dialogue and joint decision-making on digital economic issues, including technology regulation, data protection, cyber security, and digital access equality. As a forum representing most of the world’s largest economies, the G20 holds significant influence over global economic activities. Through the inclusion of both developed and developing countries, the G20 plays a role in responding to economic crises, particularly those affecting regions such as Asia, Russia, and Latin America, with the aim of finding collective solutions to global economic challenges. Representing 80% of the world economy, 75% of international trade, and two-thirds of the global population, the G20 reaffirms its crucial role in shaping the direction of global economic policy (Gumilang, 2022).
International Cooperation in Supporting the Circular Digital Economy
Another challenge is ensuring that the digital economy is circular. This entails protecting the environment from the negative impacts of technology, such as electronic waste and high energy consumption. Countries need to collaborate to create more environmentally friendly practices and promote green technologies. While the digital economy may appear to utilize clean energy, the operational aspects of data centers, cooling systems for technology devices, and non-modular electronic product designs further underscore the need for international cooperation in supporting the implementation of a circular economy. Several collaborations have been established, including:
- Circular Electronics Partnership (CEP): In January 2019, the UN E-waste Coalition (including the International Telecommunication Union) with support from the World Economic Forum (WEF), Platform for Accelerating the Circular Economy (PACE), and the World Business Council for Sustainable Development (WBCSD) announced “A New Circular Vision for Electronics: Time for a Global Reboot.” Working together, the Circular Electronics Partnership (CEP) brings together key leaders in the private sector to drive a coordinated transition towards a economically viable circular industry. In realizing a circular economy, this partnership upholds the principle of maximizing the value of products, components, and materials throughout their lifecycle, using safe and fair labor practices, and relying only on circular resources. CEP aims to rethink the value of electrical products and materials using a lifecycle approach, reducing waste from the design stage to product use and recycling.
- The Global Partnership on AI (GPAI): Launched in June 2020 with 15 members, GPAI is the result of an idea developed within the G7. GPAI is a multi-stakeholder international initiative to guide the development and use of responsible artificial intelligence (AI) in line with human rights, fundamental freedoms, and shared democratic values, as reflected in the OECD AI Recommendations. One of its focuses is to promote the use of AI in creating solutions for the circular economy.
- Alliance for Affordable Internet (A4AI): Established in 2013, A4AI is a global coalition working to reduce internet access costs in low- and middle-income countries through policy and regulatory reforms. Through inter-country cooperation, A4AI aims to improve environmentally friendly digital infrastructure.
- International Telecommunication Union (ITU): ITU is a specialized UN agency that regulates information and communication technology issues. ITU has coordinated global radio spectrum usage, promoted international cooperation in determining satellite orbits, worked to develop telecommunication infrastructure in developing countries, established international standards for interconnecting various communication systems and endeavored to address current issues such as climate change mitigation and cybersecurity.
Conclusion
Competition in the digital economy has become a crucial element in international relations. Technological transformations and the social constructions built around technology not only change the way we do business and communicate but also affect global power dynamics, national security, and economic well-being. In facing the challenges and opportunities arising from this competition, countries need to develop fair regulatory policies capable of fostering innovation and investment to compete in the digital economy era.
Various impacts and influences arising from competition in the digital economy need to be addressed so as not to hinder technological development for other countries. Digital diplomacy and international cooperation offer new ways to influence international relations and promote national interests. Countries that can manage this competition wisely will be able to leverage the digital economy to drive growth and prosperity while maintaining international security and stability.