Description
The literature on geoeconomics and economic statecraft has shown that market size can shape a country’s industrial strategy. In particular, it can motivate a focus on negative economic statecraft - the use of policy tools to coerce adversaries – or positive economic statecraft – the use of policy tools to boost the domestic development and uptake of strategic technologies. But how do countries adjust their industrial policies after withdrawing from a sizable market? This paper seeks to answer this question by focusing on the case of the UK and its cloud computing ecosystem. In the aftermath of Brexit, the UK has withdrawn from the EU Single Market and vowed to become a science and technology superpower. Access to scalable computing power is considered crucial to achieving this strategic objective. While the EU has adopted stringent data sovereignty rules to bolster its cloud ecosystem and reduce its dependence on American cloud giants, the UK strategy does not feature any sovereign agenda. Rather, it emphasises the UK openness to foreign investment in the sector. We explain this by arguing that, after its withdrawal from the scalable EU Single Market, the UK has less bargaining power with US cloud giants and relies more on positive EC tools like attracting investments and increasing spending than negative EC tools such as data localisation mandates. To test our argument, we use data about UK inward foreign direct investment and UK research and development spending from the Office for National Statistics (ONS), as well as data on the UK computing ecosystem. Our findings inform scholarship at the intersection of international political economy and the governance of emerging digital technologies.
