Geographies in Depth

3 reasons why data is not the new oil - and why this matters to India 

Cables run into the back of a server unit inside the data center of Equinix in Pantin, near Paris, France, December 7, 2016

Are fibre-optic cables the new oil pipelines? Only to a point - and their differences are of crucial importance Image: REUTERS/Benoit Tessier - RC113C466560

Samir Saran
President, Observer Research Foundation (ORF)
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The New Data Economy

This article is part of: India Economic Summit

The 1970s saw heated debates in the international community with regard to the ownership of natural resources, centered on the methods and institutions that would manage their price and supply, and the strategic routes and chokepoints that determined access to these resources. Oil was the most important such resource—simultaneously a fuel for 20th century industrialization and a source of geopolitical instability and risk.

In time, the international order did create a new set of arrangements - although not always efficiently. The UN adopted a resolution guaranteeing states’ sovereignty over their national resources — remember the New International Economic Order (NIEO)? — and while cartels like the Organization of Petroleum Exporting Countries (OPEC) became critical to negotiating prices, the sea lanes were protected by mandates under international maritime law. In fact, it would be the US, which opposed the NIEO, that stayed out of the UN Convention on the Law of the Sea for fear it would impede commercial exploitation of the deep seabed.

It is not hard to see why the management of oil was a contentious affair. Like data today, oil was a crucial input for economic, military and strategic advancement. And as such was a perennial cause for tensions in international politics, which is why the comparison continues to enjoy relevance. Similar concerns animate data governance: ownership, economic growth and national security.

As the number of internet users in India mushrooms, so will the amount of data they produce
Image: Statista

Nevertheless, this characterization of data does not always present an accurate template for policymaking. As negotiations on cross-border data flows continue to exacerbate multilateral and bilateral tensions, it is essential for India to appreciate why the ‘data is oil’ analogy is important, and where it falls short. Delhi must prioritise three considerations in this debate.

The first relates to national security. Unlike oil, the flow of data creates a wealth of information that provides granular insights into the preferences, habits and behaviours of individuals and large communities. For centuries, such information was considered essential to intelligence gathering and statecraft. Even today, it is a force multiplier for national power.

The proliferation of data and digital systems has created a very wide catchment area for the application of state interests. Protecting natural resources was a function of a states’ military power; securing cyberspace, however, will require strong cooperation between governments, platforms and academia. In the US, technology platforms are increasingly frontline actors in national security decision-making. How should net-data exporters like India that are dependent on foreign technology systems manage these risks? So far, no reliable templates have emerged.

The second is economic. Unlike physical commodities, the value of data does not necessarily accrue to those who exercise jurisdiction over it. The largest oil companies, whether owned privately or by the state, belong to those nations with easy access to the resource. In many cases, businesses are offered very long-term leases over a resource whose ownership by the state is not disputed. However, while India is home to 600 million active internet users, North America hosts 13 of the worlds 15-largest technology companies by market capitalization, with China hosting the remaining two.

Therefore, the value of data is captured not at the point of extraction but in transit — when it flows, and supports new products, business methods and industries. Indeed, data flows already generate more value in the global economy than goods and services. This may be an obvious point, but its implications are not. The regimes managing the globalization of goods, services and capital were written to privilege Western economic interests. And while developing states enjoyed economic gains from the outsourcing of manufacturing industries, the value addition from investments, royalties and taxes were almost entirely captured by the West.

There is a real risk that digital globalization will lead to the same outcomes. Restricting the flow of data alone will not remedy the challenges for India. However, Delhi should use this moment to renegotiate the commercial, financial and intellectual property regimes that will govern the flow not only of data, but that of wealth and people. The flow of Indian data and personal information cannot be freely bartered. It must be conditional on an architecture that prioritizes equitable development and economic outcomes.

The final consideration is political. Many argue that data should not be thought of as a resource or commodity at all; rather, it should be regarded as the sole and exclusive property of the individual. Data cannot, after all, be mined in isolation - it is the digital interactions of humans and technologies that produce an infinite supply of raw data. In this, data is entirely dissimilar to natural resources. (That said, some analogies can be drawn: what is the point of conferring property rights to underprivileged Indians if their social and cultural status prevents them from exercising this right?) The human rights implications of data generation and flows certainly necessitate the creation of a new set of legislative and institutional protections for individuals.

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Nevertheless, it is hard to imagine that this responsibility belongs to actors other than the state. Silicon Valley cannot wear the mantle of a guarantor of rights, because technology companies are exactly what they are: companies. When these platforms are unresponsive to the concerns of their own sovereigns, the probability that they will devote resources to developing states is low.

Moreover, even if data is thought of as inherent to individuals, the Westphalian order continues to privilege the authority of the state in determining the mobility of individuals and their property.

During the Doha round of WTO negotiations at the turn of the century, there was intense debate about the modalities for labour mobility. Under the proposed GATS regime, fast-track pathways would facilitate the mobility of highly skilled labour, while low and medium-skill workers were left out of the bargain - despite the fact that most developing countries enjoyed a comparative advantage in these categories. As it was then, it is hypocritical for the developed world to pick and choose which individuals, and which ‘parts’ of the individual (read: data) can flow freely.

Despite what the thrust of this piece might suggest, data should flow freely. This is the most optimal outcome for the international community. However, this process cannot occur in isolation. This piece is a provocation to address some of the regulatory impulses that have driven the push for localization. Cross-border data flows are compelling structural changes in the global economy. Unless complimentary and ancillary rules and institutions mature, the benefits of these flows will be distributed unequally, creating new digital divides and national security risks. It would be against India’s national interest to uncritically accede to regimes that mandate free flows of data without accommodating its political, development and security concerns.

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