B7 Digital Policy Recommendations

B7 RECOMMENDATIONS ON DIGITAL POLICY Connecting the world: For trustworthy and human-centric innovation for all

23. March 2022

B7 Digital Policy Working Group

B7 Recommendations on Digital Policy

Table of Contents Introduction and Key Principles ............................................................................................................... 3 Data Economy ............................................................................................................................................. 4 Trustworthy data economy is a strong driver for innovation ..................................................................... 4 Recommendation for action ...................................................................................................................... 4 Enable Cross-Border Data Flows .......................................................................................................... 4 Data Governance & Innovation .............................................................................................................. 5 Foster Sound & Competitive Regulatory Environments ........................................................................ 5 Secure and Trustworthy Data Infrastructure & Online Environment ...................................................... 5 Skills, Inclusion & Women Empowerment ............................................................................................. 6 Semiconductors ......................................................................................................................................... 7 Semiconductors are vital for economic success and stability ................................................................... 7 Recommendations for a strategic and open semiconductor policy .......................................................... 7 Cybersecurity .............................................................................................................................................. 8 Cyber-resilience is a basis for trust in digitalization .................................................................................. 8 Recommendations .................................................................................................................................... 8 Cooperation and coordination in critical and emerging technology standards ................................ 10 The impact of technology is determined by how it is used...................................................................... 10 Recommendations .................................................................................................................................. 10 Imprint........................................................................................................................................................ 11

2

B7 Recommendations on Digital Policy

Introduction Digitalization is one of the strongest growth drivers for modern economies, closely integrated into a global digital ecosystem. Currently, a political and value-based discourse is taking place on how and whether the digital economy should be further regulated, be it for big platforms, for artificial intelligence, or data protection and transfer, while staying competitive and innovative. Particularly in the area of the digital economy, the like-minded democratic governments of G7 and India, Australia and South Korea, for instance, must define their role and lead by example showing how to be successful and competitive in the digital economy while respecting democratic and ethical values, as well as tackling ecological, societal and economic challenges. In a period where our economies and societies are challenged, not only by a pandemic, but also by a climate crisis that forces us to act quickly in order to preserve wellbeing and prosperity for all, B7 sees opportunities for joint action and improving cooperation. Due to its importance for long-term prosperity for all partners, developing a sustainable, future-proof ground for cooperation on international standards and rules based on democratic values and human rights, while achieving the UN Sustainable Development Goals 2030 should be the goal for this German G7 presidency.

Key Principles Trustworthy data economy is a strong driver for innovation •

Enhance a data economy that promotes innovation and growth.

•

Enable cross-border data sharing with trust.

•

Tackle the increasing need for highly skilled professionals, encourage equity and diversity across innovation and digitalization skill profiles through inclusion and female empowerment.

Semiconductors are vital for economic success and stability •

Develop common strategies and strengthen cooperation among the G7 nations with close allies and partners to secure the semiconductor supply chain for all relevant categories of semiconductors, in close coordination with business.

Cyber-resilience is a basis for trust in digitalization •

Promote cyber resilience across organizations.

•

Establish cooperation fora with industries in order to enhance the innovation potential and the overall capacities to tackle cyber incidents.

•

Strengthen cryptography to promote trust in the digital transformation.

Cooperation and coordination in critical emerging technology standards •

Promote market-driven and consensus-based international standards as a basis to create common ground in innovative key technology areas.

•

Ensure due process, robust intellectual property (IP) protections, and transparency in standardization bodies in order to avoid misuse of standardization.

3

B7 Recommendations on Digital Policy

Data Economy Trustworthy data economy is a strong driver for innovation Enabled by the growth of the internet, the process of digitalization has broken down geographical barriers in the past decades. Digitalization has significantly increased economic growth, supported the well-functioning of our society, fueled innovation of products and services and enriched people’s lives. All of this is incredibly dependent upon crossborder data flows. One of the most promising applications of data-enabled innovation is artificial intelligence (AI). Trustworthy data infrastructures and cloud-based solutions will define the success of data-driven ecosystems and the capacity for innovation in modern societies. The increasing reliance on cloud services to manage data across virtually every sector of the economy requires an increasing need for a balanced approach to regulation to ensure a trustworthy data economy. The B7 believes the best model of sustainable growth requires resilient network infrastructure through a diverse supply chain. Further, to protect freedom and stability in liberal democratic societies, it is important for government, civil society, and the private sector to cooperate to combat illegal content, harmful content and misinformation online. Further, a balanced approach to liability and transparency is as necessary as a trustful free flow of data across borders supported by international data protection standards. Regulation needs to find the right balance between innovation and data protection in order to guarantee competitiveness for the G7 economies in the future. To fully exploit the potential of the data economy, digital skills are an essential factor. Improving IT skills, especially for the underrepresented proportion of women in data science and tech sector, is crucial for innovation and growth of the G7 states.

Recommendations for action The B7 advocates a data policy that provides legal certainty for the use and the exchange of data across borders with trust. Promoting trustworthy data infrastructures and cloud solutions, as well as encouraging innovation more broadly will define the success of data-driven ecosystems. This requires a clear commitment to international partnerships and cooperation, as well as sustainable data protection standards, in order to ensure public trust in the data economy.

Enable Cross-Border Data Flows

The ability to move data across borders—and access information across borders—is indispensable to modern economies. No company, regardless of sector, can do business or engage in international trade without the ability to transfer data. The free flow of data is essential to the creation of global value chains and permits companies of all sizes to access the global market. Businesses are concerned about industrial policy interventions that are unjustly restrictive for data flows. B7 recommends:

•

Providing legal certainty for the use and the exchange of data across borders with trust.

•

Cross-border access to data for criminal investigations, law enforcement and government surveillance based on a sound (international) framework with mutual legal checks and balances in place that include adequate safeguards to protect data.

•

A clear commitment against unjustified forced data localization requirements. The G7 should also oppose measures that require the transfer of, or access to source code as a market access requirement.

4

B7 Recommendations on Digital Policy

Data Governance & Innovation

Data is central to the digital economy - as are the regulatory frameworks and standards that govern how data is collected and used. Data drives innovation, which in turn promotes economic growth and rising incomes. Companies invest in data collection and analysis, which should be recognized by governments. Onerous data sharing or access obligations of non-personal data should be avoided. B7 recommends:

•

Enhance cross-sectoral data-sharing to stimulate innovation in line with the OECD Recommendation on Enhancing Access to and Sharing of Data.1

•

In the area of B2G data sharing, voluntary cooperation between business and governments is clearly preferable to access obligations for data, which should be avoided.

•

B2G data sharing must be in line with the OECD recommendations on government access to personal data held by the private sector.2 The COVID 19 pandemic has shown that many companies are already cooperating successfully with public authorities without any obligation. More incentives for cooperation and data sharing with public authorities should be provided in order to enable companies to share their data voluntarily, cost- and effort-efficient through trustworthy technical tools.

Foster Sound & Competitive Regulatory Environments

A stable regulatory environment is important to stimulate economic growth and investment. Investment, innovation and competition on a level-playing field are essential to unlock the full potential of digitalization. B7 recommends:

•

Ensuring a level-playing field for open and competitive (digital) markets.

•

Supporting a diversity of various business models, especially in the field of B2B data platforms, and refraining from imposing too restrictive one size-fits-all regulatory responses, which hamper innovation.

Secure and Trustworthy Data Infrastructure & Online Environment

A secure, robust and trustworthy data infrastructure is the backbone of the digital economy and society. B7 recommends:

•

Supporting international cooperation for the development of data infrastructure including cloud infrastructure, based on common values and rules.

•

The G7 should enhance cooperation between industry and government on measures to counter online harms to keep citizens safe and to protect democracies from misinformation and disinformation.

1

Data governance: Enhancing access to and sharing of data - OECD from 6.10.2021 Government access to personal data held by the private sector: Statement by the OECD Committee on Digital Economy Policy OECD 2

5

B7 Recommendations on Digital Policy

Skills, Inclusion & Women Empowerment

To address and structurally tackle the increasing need for highly skilled professionals and more diversity in innovative technologies. B7 recommends:

•

Closing the skills gap and addressing the high demand for skilled workers in the STEM sector (mathematics, information technology, natural sciences, technology) taking into account that structural effects from digitalization, decarbonization and demographics will further increase demand.

•

Supporting more diversity through programs that improve digital skills starting from primary school education up to university vocational training and the further training of employees. Companies should also play their part by enabling their workforce to improve skills through a variety of digital skills programs.

•

There are several initiatives focused on encouraging women to be involved more in IT across the G7, such as WomenTech EU3, SheTransformsIT4 or Women in Tech5. Cooperation and an exchange of best practices between these initiatives should be strengthened.

3

Women TechEU (europa.eu) Digitalisierung braucht mehr Frauen | SheTransformsIT 5 Women in Technology | The future of Women in IT - Women in Technology 4

6

B7 Recommendations on Digital Policy

Semiconductors Semiconductors are vital for economic success and stability Few industrial sectors are as critical to our modern economies as the semiconductor industry. As semiconductors are found in virtually every technical product, from automobiles to smart home appliances, a reliable supply of chips is vital for economic success and stability. Furthermore, semiconductors are the key to enabling the invention and use of energy-efficient and intelligent technologies, which are critical for a green economy and society. In 2022, the global semiconductor market is expected to grow by around 9 percent to about 600 billion US Dollars. 6 At the same time, manufacturing semiconductors is a tremendously complicated and expensive process. Most of the manufacturing process currently takes place in Asia; however, no single state holds complete autonomy of all steps of the value chain.

Rather, there is a high degree of mutual interdependency between nations and regions. Considering increasing geopolitical tensions, interdependencies, and bottlenecks along the value chain – such as global logistics – the semiconductors value chain has been in the center of political attention in recent months. To ease the current semiconductor shortage in the long-run, government support should include such considerations as access to raw materials, support for basic research and R&D, protection of IP and technological know-how, and the availability of a skilled workforce.

Recommendations for a strategic and open semiconductor policy •

Due to the globally intertwined character of the semiconductor ecosystem, efforts to strengthen the semiconductor industry among the G7 nations and with close allies and partners should be coordinated and complementary to each other to support the entire value chain. This is also fundamental to avoid overcapacity and inefficient use of financial resources.

•

Cooperation on standardization is key to achieving economies of scale and delivering benefits to end users in the form of affordable, high-quality products. With rapidly growing technology trends such as autonomous driving, the Industrial Internet of things (IIoT), electric vehicle (EV) charging, 5G/V2X communication, cloud computing, and quantum computing, a globally harmonized standardization system is vital for all members of the value chain, as well as for users and consumers.

•

Develop common strategies, in close coordination with business, to secure the semiconductor supply chain of all relevant categories of semiconductors, including semiconductor equipment, materials, and raw materials by identifying bottlenecks in the value chain and working towards a more balanced global supply chain.

6

Forecast by World Semiconductor Trade Statistics (WSTS): Recent News Release (wsts.org)

7

B7 Recommendations on Digital Policy

Cybersecurity Cyber-resilience is a basis for trust in digitalization Increasingly complex cyberattacks against governments and commercial entities represent a growing risk to business processes. Malicious cyberactivity causes serious damage running into billions annually. On a global scale, according to the Allianz Risk Barometer 2022,7 cyber incidents are ranked highest as the greatest business risk to companies.

The ever-increasing digital interconnectedness entails major security challenges that need to be managed. Phishing, malware infection and theft of precious business data attacks have so far commonly been used by malicious actors and criminals. Security and trust are essential for a successful digital transformation. Strong cybersecurity and the implementation of cybersecurity controls can improve resilience resulting in increased confidence in the digital transformation in the long-run. A closer collaboration between businesses, politics and civil society is vital not only for businesses and government’s cyber-resilience, but also for public confidence in digitalization.

Recommendations •

Promote cyber-resilience across organizations through targeted training. To enhance the cybersecurity level of commercial enterprises, government agencies as well as citizens, as an overall increase in knowledge of IT security measures is paramount. Moreover, the G7 governments should help businesses – especially SMEs – to adopt cyber risk mitigation measures that will provide a risk-adequate level of resilience. To this end, the G7 should promote and make interoperable internationally recognized cybersecurity toolboxes which provide businesses with best practices and concrete help. The G7 should develop their respective efforts on offers that already exist, such as those by the German “Alliance for Cyber Security” (Allianz für Cybersicherheit).

•

Promote responsible state behavior in cyberspace in international fora. Over the past years, the international community has developed voluntary baseline principles on responsible behavior by countries in cyberspace within “The United Nations Group of Governmental Experts (GGE) on Advancing responsible State behavior in cyberspace in the context of international security”. In the United Nations, as well as in the G7 and G20 context, governments should work towards more binding, internationally accepted, and applied rules for state action in cyberspace.

•

Innovation in the cybersecurity space is essential for ever-evolving prevention, timely detection, and swift deterrence of cyberattacks. Governments must establish cooperation fora with industries in order to enhance the innovation potential and the overall capacities to tackle (international) incidents, also in dialogue with relevant public bodies and agencies.

•

Strengthen cryptography to promote trust in the digital transformation: Encryption is crucial in helping people exercise certain human rights, such as the right to privacy and freedom of expression. When communicating in the digital realm or sending sensitive business know-how among companies, privacy preserving techniques such as cryptographic methods (e.g. end-to-end encryption) strengthen trust in digital communication tools such as e-mails and messenger services. To protect citizens and companies from cybercrime and to prevent industrial espionage by third countries, the G7 should massively support the broad deployment of encryption and cybersecurity solutions. To ensure that such cryptographic methods fulfil the expected aim, governments must refrain from weakening encryption by requiring providers of online communication tools to provide intelligence agencies or other public entities with backdoors or “master keys”. Their mere existence would significantly weaken the protective effect of cryptography as cybercriminals could exploit backdoors or might even get hold of “master keys”.

7

Allianz Risk Barometer | AGCS

8

B7 Recommendations on Digital Policy

•

G7 governments must commit to informing companies about vulnerabilities in ICT products and solutions in accordance with the responsible disclosure principle and not to exploit them for intelligence procedures. Governments should turn over security vulnerabilities known to them and promptly align coordinated vulnerability disclosure processes and procedures to international standards when security vulnerabilities are found, and deploy transparent processes for vulnerability handling, reporting, and disclosure that are subject to meaningful oversight.

Only when vulnerabilities can be fixed and patched in time, can cybercriminals not exploit them to the detriment of the secure and uninterrupted functioning of critical infrastructures. If government authorities hold back such highly relevant information in order to potentially exploit them for intelligence operations, they play into the hands of cybercriminals or malicious third parties.

•

While businesses are being regulated to certain cybersecurity standards and invest significant financial and human capital resources in cybersecurity, governments must also commit to adequate cybersecurity practices and risk management. This may include trainings and general awareness of good cybersecurity, risk management practices, and common cyberattacks, particularly “social engineering” attacks. Cyber hygiene among the general public is also a crucial element of cybersecurity, for which effective policies must be designed in cooperation with industry.

•

G7 should promote shared research, both public and private, on new technologies, such as post-quantum cryptography, to ensure an adequate level of cyber-resilience, in light of the continuous developments of digital technologies. Given the high risk that quantum computing poses to the currently available cyber risk mitigating measures, the G7 governments should promote quantum computing research in the space of cybersecurity, in order to discover new ways and means to protect IT systems from future cyberattacks.

9

B7 Recommendations on Digital Policy

Cooperation and coordination in critical and emerging technology standards The impact of technology is determined by how it is used Standards are an important factor for an efficient and internationally competitive economy. Almost all globally traded products, their manufacturing processes and many associated services are directly or indirectly related to standards.

Internationally recognized and applied standards reduce trade barriers and equalize market access conditions in favor of the free movement of goods. Digitalization induces constant change into regulated markets at a high and formerly unseen pace. Furthermore, digital technologies, be they the Internet, smart objects, or AI, have a strong societal impact.

As a result, requirements for safety, cybersecurity, and quality need to be continuously reviewed and readjusted. This dynamic also offers an opportunity to jointly shape the digital future, resulting in more structured cooperation in the development of new international standards. Technical standards and ethical principles for the application of future technologies must be set by direct participation of companies in the standardization process. Only if the know-how from the companies and their requirements for standards are integrated into the process, can it be guaranteed that the standards are marketable and do not hinder the development and application of the systems but rather promote innovation. The question of standardization is strategically important given that standard-setters will have competitive advantages.8 Against this background, the B7 sees a need to establish an approach for cooperation and coordination in critical and emerging technology standards, such as AI, semiconductors, telecommunication networks, cybersecurity, and cloud and data governance. The G7 community share common values as liberal democracies. We support the ambition to increase joint efforts in international standardization to make sure that they are trustworthy and humancentered, and emerging digital technologies such as AI are compliant. There must be institutionalized cooperation on technical aspects, taking into account the latest advances in technology development.

Recommendations •

Market-driven and consensus-based international standards are important as a basis to create common grounds in innovative key technology areas. They must be voluntary, open, transparent, market-driven, globally recognized, consensus-based, and technology-neutral. Therefore, multilateral and bilateral cooperation must be expanded.

•

Coordination on risk-based regulatory approaches to AI, and technical requirements through international standards and norms are important, as well as best practice sharing on supervision and enforcement of rules.

•

In order to make the fourth industrial revolution safe, trustworthy and legally secure, international standards must be jointly developed. Standards serve as an important strategic instrument for open markets and promote innovation, competition and trustworthy, human-centered technologies.

•

The approach proposed under the WTO/TBT Treaty, as well as many other international trade facilitation agreements, consists of adopting international standards into national sets of standards. The G7 should adhere to this approach.

•

In order to avoid misuse of standardization, a due process, robust intellectual property protections, and transparency in standardization bodies must be ensured.

8

Geopolitics-of-digital-standards-Dec-2021-1.pdf

10

B7 Recommendations on Digital Policy

Imprint Business 7 www.b7germany.de The B7 comprises the leading business and industry federations of the G7 states: Canadian Chamber of Commerce (CCC), Canada Confederation of British Industry (CBI), United Kingdom Confederation of Italian Industry (Confindustria), Italy Federation of German Industries (BDI), Germany Japanese Business Federation (Keidanren), Japan Movement for French Enterprises (MEDEF), France US Chamber of Commerce (USCC), United States BusinessEurope, European Union

BDI Document Number: D1535

11