The Complex Geopolitics of Digital Regulation: The Three Body Problem

In a recent paper, Jorge Padilla and Vanessa Zhang examine how digital regulation has emerged as a central arena in global geopolitical competition. By analysing the contrasting approaches of the EU, US, China, UK, and other jurisdictions, the authors highlight how evolving digital frameworks are redefining trade dynamics, national sovereignty, and the structure of international economic law.

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Abstract

This paper explores the complex geopolitics of digital regulation by analyzing how divergent regulatory models in major jurisdictions-namely the European Union, the United States, China, the United Kingdom, and others-are reshaping global economic governance and digital trade. The paper examines how digital regulation increasingly functions as a Behind-the-border Trade Barrier (BTB), complicating cross-border data flows, market access, and competition. Special attention is given to the EU's Digital Markets Act (DMA) and its extraterritorial reach through the so-called "Brussels Effect", which has generated significant friction with the US and raised questions about digital sovereignty and regulatory hegemony. The analysis is situated within the broader context of the US-China technology rivalry, showing how regulatory asymmetries disproportionately affect firms from these two countries while offering middle powers, like the EU, leverage through norm-setting. Finally, the paper explores the potential escalation of regulatory disputes into trade conflicts, discussing the limits of existing trade agreements and the increasing use of retaliatory tariffs. The study concludes that digital regulation is becoming a critical vector of geopolitical competition, with far-reaching implications for international economic law and global digital governance.

Read the full paper here