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UNCTAD Report: Revisiting Old Issues in Managing Cross-Border Data Flows

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Today, information space has become a field of confrontation involving major digital platforms, governments, societies and individual users. Stories featuring latest cyberattacks or state-sponsored attempts to limit the influence of social networks and regulate the digital sphere, where there is no governance at the international level, are those that grab the headlines of many online media outlets.

Given the current climate, it is then no surprise that the United Nations is paying close attention to the issues related to the digital domain. On September 29, United Nations Conference on Trade and Development released its Digital Economy Report 2021, which focuses on the issue of managing cross-border data flows. The piece is rather comprehensive in terms of the issues covered, seeking to analyze the inhibiting factors that prevent us from working out an exhaustive definition of what “data” is, while exploring the specific approaches of states to regulating cross-border data flows. The report’s authors pay particular attention to the digital divide that has emerged between developed and developing nations. That said, we would argue that the report is more of a descriptive paper rather than a real step towards erecting a system of global governance.

The first section of the report addresses the lack of clarity on the definition of “data”, whether in research or among practitioners. With no unified terminology, communication between stakeholders appears to be complicated, much as the process of designing public policy as regards the digital sphere. A generally accepted and unified terminology would no doubt make it easier to foster closer cooperation, although this is certainly not a defining prerequisite. International efforts to fight against terrorism can be a case in point here, as there is no conventional definition of “terrorism,” while this does not hinder inter-state cooperation, both regionally and globally. While this cooperation may not always proceed smoothly, any problems encountered tend to be the upshot of political squabbles rather than the implications of the fact that no single definition of “terrorism” is to be found.

The UNCTAD report brings up another underlying premise, which is that data should be treated as a global public good. This will allow citizens, acting as “producers” of raw data, to claim the benefits of it being used by digital platforms. This issue has already been discussed at the EU, with the approach tested in a number of cities. Transferring some control over the flow of data from corporations to users is an important step towards ensuring that human rights are upheld in the digital environment.

The UNCTAD report also explores the technological and digital divide, whose dimensions span developed and developing countries as well as urban and rural areas within a particular country. This problem is nothing new: it was only last year when UN Secretary-General António Guterres referred to the need to bridge the gap, arguing that it was instead widening amid the COVID-19 pandemic. At the same time, he proposed a Roadmap for Digital Cooperation.

Besides, the report notes the massive impact of digital platforms. These, the authors believe, “are no longer just digital platforms” but “global digital corporations” that have the necessary capabilities for processing information, which puts them in a privileged position. Further, digital platforms are able to influence policymaking through lobbying their interests. In terms of spending, Facebook and Amazon are the most active lobbyists in the United States, while Google, Facebook and Microsoft are the biggest spenders in Europe. The report suggests that the privileged position of digital corporations—such as their ability to process massive bulks of data and derive profit from raw information—leads to something of an imbalance between the private and the public sectors when it comes to recruiting talent. Accordingly, the gap is widening, which means that the tech giants are moving even further out in front.

Finally, fragmentation of the digital space into competing models of managing cross-border data flows is another challenge to the digital domain and its prospects. Should such fragmentation occur, this may create new obstacles to communication and economic development, as the existing models (those of the U.S., the EU, Russia, China and India) offer different regulatory practices that have their own flaws and inefficiencies. The report identifies the broad shortcomings of these practices, making note of poor coordination between government agencies; ambiguous formulations deliberately used to denote key concepts (such as “critical infrastructure” or “digital sovereignty”); and setting unrealistically high technical requirements, including the requirement to store personal data locally—something that entails greater costs for smaller businesses and is detrimental to end consumers of digital products and services.

The Digital Economy Report implies the solution lies in establishing a new institutional framework to meet the challenge of global governance in the digital domain. This new institution should contain the “appropriate mix of multilateral, multi-stakeholder and multidisciplinary engagement.” At the same time, the report argues for ad hoc interaction between stakeholders given the inherent complexity of the framework. The new organization should become a coordinating body for digital governance with a sound mandate.

Indeed, the main stumbling block for global governance to emerge in the digital sphere has to do with the model of interaction to be chosen. The epitome of the intergovernmental approach is the International Telecommunications Union (ITU), while the Internet Corporation for Assigned Names and Numbers (ICANN) is illustrative of the multi-stakeholder approach.

Since neither is perfect, this naturally leads us to the conclusion that a combined approach is what is needed. This approach can possibly provide states with a much-needed platform for broader involvement in issues of digital governance, while ensuring that non-state actors and expert community retain their positions. The UNCTAD report refers to the United Nations Economic and Social Council (ECOSOC) as a perfect example of such a “hybrid” international organization. At ECOSOC, interaction with NGOs takes place through the Conference of Non-Governmental Organizations in Consultative Relationship with the United Nations. Expert bodies made up of representatives of individual countries as well as of independent experts also operate within the framework of ECOSOC.

Indeed, ECOSOC is a good example of how international institutions can interact with NGOs. However, it will not do to simply copy its mechanism, and it is so for several reasons. First, final recommendations within ECOSOC are adopted by representatives of member states. This harms its usefulness as a model to be replicated, since there will always be the risk that issues are politicized—this will be the case even if the new institution is designed with the combined approach in mind. Besides, should this body take on the role of the principal coordinator in the digital space, issues will become more politicized and disagreements will be more heated, thus slowing down decision-making. Second, the question remains as to how the new institution will interact with the existing organizations, namely the Internet Architecture Board and the Internet Engineering Task Force. The ad hoc mechanism to engage NGOs in other areas, which works perfectly fine for ECOSOC, may not be enough when it comes to technical standards that need to be constantly updated. Third, the General Assembly elects ECOSOC members every three years. However, this would not be feasible for the new coordinating body as the digital domain has its own leaders, and leaving them overboard would be incredibly detrimental to its effectiveness. In such a case, there remains the above-mentioned risk of discussions between the U.S./EU and Russia/China becoming politicized.

Moreover, the choice of decision-making mechanism presents certain difficulties given the dominant position of the four, both on the international stage and in terms of data processing. Operating on the basis of consensus may hinder negotiations or become an instrument to block unwanted decisions, while a simple majority will likely result in these nations establishing ad hoc coalitions to try and swing votes in their favour. Therefore, it seems prudent to design a complex voting mechanism based on qualified majority, possibly drawing on the system used in the Council of the European Union. Still, this mechanism will not rule out struggles unfolding behind the scenes.

Finally, the fact that the two sides have fundamental disagreements as to the concept of sovereignty in the digital space should be accounted for, as this could put an end to the new coordinating institution before it has even been established. The only way to move forward with a truly effective platform for cooperation in the digital space is to temporarily improve, if not to normalize, the relations between the leading states in this area.

No global governance in the digital domain is better than a poorly regulated system spinning its wheels. Our modern world is too dependent on technological advances that ensure that all regions and facets of life are complementary. Any failure of the mechanism can be extremely costly. However, increasing fragmentation of the digital space may be even more costly—for developing and developed countries alike. One possible way forward amid the international environment mired in uncertainty is to search for common ground on the most basic of issues. While the differences in national regulations persist, there are a number of issues that are common to all: these include cyberterrorism, cybercrime, illegal access to data or threats to critical infrastructure.

Multilateral agreements that do not address the fundamental differences in the stances taken by states may lay the foundation for global governance to emerge in the future. It is in this context that the joint U.S.–Russia draft resolution on the responsible behaviour of states in cyberspace, if legally unbinding, bears utter significance for cooperation between nations who espouse two different models as well as for overcoming the negative background of broader political disagreements.

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International Law

Why International Institutions Survive: An Afterword to the G20 Summit

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Media Center G20 Indonesia/Prastyo Utomo/wsj/hd/22.

We, of course, are extremely critical of the very idea of global institutions and the prospects for their survival amid the emergence of a qualitatively new international order. Basic ideas about how such organisations appear and why they work, as well as the practical experience of the past decades, constantly demonstrate how unprepared such forms of interaction between states turn out to be to solve their most important hypothetical task — limiting selfish manifestations in the behaviour of their own creators. However, the institutions persist and, moreover, their number is increasing due to the formation of new specific regional platforms and global gatherings of powers, which is happening both formally and informally.

Just a few days ago, another G20 summit took place in Indonesia — a meeting of the 20 supposedly most developed powers. These economies first convened 13 years ago to discuss the fight against the global consequences of the financial crisis in Western countries. This association is not a formal international organisation, unlike the UN or the World Trade Organization, and does not have its own secretariat or specialised agencies. However, in its composition, the G20 has turned out to be one of the most promising institutional undertakings of the entire post-Cold War period.

The reason is that the G20, first, is quite objective in terms of participation criteria and, second, is completely non-democratic in terms of the formation of its membership. In the simplest terms, it was created by the leading powers of the West — the G7 countries — at a historical moment when they felt the need to make their decisions more legitimate, to gain a new way to influence growing economies, and, finally, share some of their own economic difficulties with the rest of the world not only in fact, but also organisationally.

Other countries of the world included in the G20 list compiled by the USA and Britain were glad to accept this invitation. First of all, because they saw an opportunity to limit the West’s monopoly on making the most important decisions, or, at least, to get new chances to reflect some of their interests there. Thus, both groups of participants made a very pragmatic choice amid circumstances where the West was still strong enough that no one could expect to survive without its consent.

The G20, as we can see, was created for special purposes in special circumstances, which, by the way, also applies to any international institution set up during the second half of the 20th and early 21st century. Even the United Nations (UN) was an intellectual creation of the United States and Britain, aimed to preserve and strengthen their influence on international affairs after the World War II. Another thing is that the UN still tried to live its own life, and now the presence of Russia and China in its “Areopagus”, i.e. among the permanent members of the Security Council, creates the appearance that the hypothetical pinnacle of world governance relatively adequately reflects the distribution of aggregate power capabilities. However, during the Cold War, as now, we see that all really important issues regarding war and peace are decided by the great powers among themselves.

As for the impact on the main processes in the world that emerged after the end of the Cold War, here it was the G20 that was considered a suitable palliative solution juxtaposed between the omnipotence of the West and the desire of the rest to get at least a part of the “pie” of the global distribution of goods. Moreover, 14 years ago, when the G20 began to meet, none of the major countries of the modern World Majority imagined a direct confrontation with the West and all sought to integrate into the globalisation led by it, even without a special revision of the rules and norms that existed there before. This fully applies to Russia, which quite sensibly assessed its strength. There were still five years left before the ambitious Xi Jingping came to power in China, when most observers considered the strengthening of Beijing’s economic and political proximity to be the most plausible scenario for Sino-American relations.

However, it was the financial crisis of 2008-2013 that turned out to be a turning point, from which everyone seemed to have realised that it is not necessary to count on the existing model of globalisation to solve the basic problems of development and economic growth. The cyclicality of economic development and the accumulated imbalances in trade, global finance and everything else made it clear that a return to sustainable growth in the US and Europe was unrealistic, and saving what had already been created would require a much tougher policy in relation to the distribution of benefits on a global scale. The emerging economies, of which China quickly took the lead, could expect a more sustainable position, but also doubted the West’s ability to act as a benevolent engine of the global economy. In other words, it was at the very moment when the G20 emerged as an institution that the leading states realised that it was no longer possible to save globalisation in its previous form, and economic shocks would very likely lead to violent geopolitical clashes.

Therefore, the extremely informal and, at the same time, representative G20 arose precisely as a mechanism for a “civilised divorce” of countries actively involved in globalisation on the eve of its inevitable crisis.

In this respect, it was indeed the pinnacle of the institutional approach to problem-solving that marked the entire 20th century. What follows should be either the formation of a new balance of power and the adaptation of institutions to it, or their complete disintegration with an unclear prospect for states going beyond bilateral agreements or relatively narrow regional associations and forums.

We see that the most successful multilateral projects of our time are either a continuation of those that have already taken place, like ASEAN or NATO, or completely new regional groupings with uncertain prospects and internal structures. The promising Shanghai Cooperation Organisation should be included among the latter. The latest SCO summit in Uzbekistan revealed that its participants were highly able to single out from the whole set of international problems of Eurasia and their own development issues those that make sense to discuss at the multilateral level. In addition, Sino-Russian leadership in the SCO leaves hope that other participating countries will be able to build their interests into the priorities and integrity limits of the two Eurasian giants. India only adds pluralism, allowing alternatives to the increasingly solidarity positions of Moscow and Beijing to be put forward.

However, the fact that the G20 is, in reality, a tool for the civilised dismantling of the existing order rather than their renewal does not mean its immediate death. After all, we already know examples where organisations created to “divorce” participants retain their vitality beyond solving the most important problems associated with this unpleasant process. The latest G20 summit was overshadowed by the desire of the Western countries, which, together with their satraps from the European Union institutions, make up the majority, to turn the political part of the meeting into a fight against Russia. However, at the same time, we saw that the Indonesian presidency used such intentions to increase its independence in world affairs and rejected all Western claims regarding Russian participation. In addition, an important personal meeting between the leaders of the United States and China took place on the sidelines of the summit, which allowed them to temporarily dispel the expectation of an inevitable clash, which seemed likely only three months ago.

Of course, we are far from thinking that China, India or other developing countries, not to mention Russia, see the G20 as a way to take global leadership away from the West. In Moscow, Beijing, New Delhi and other capitals, they know that those institutions that do not fully meet American interests are easily sacrificed to the current circumstances. However, first, such a radical US approach still has a chance to change under increasing pressure from outside and inside. Second, the G20 is still a platform that can survive as at least a club filled with contradictions, precisely amid the complete decline of formal global international institutions. And it looks like we won’t have to wait very long.

From our partner RIAC

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International Law

Cooperation in a Changing World: A Discussion on New Regionalism and Globalisation

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The two main trends that have shaped the World Economic Order are 1) multilateralism, which sets global rules for international trade without favouritism, and 2) new regionalism, which sets up several zones of regional free trade and cooperation that can apply development and economic growth more quickly and flexibly but have a limited geographic scope.

Hettne (1995) says that “new regionalism” is not a single policy but a set of policies that focus on economics or other factors. “Regionalism” refers to a complex change process involving state and non-state actors at the global, regional, and national levels. Since actors and processes interact at many different levels and their relative importance changes over time and space, it is impossible to say which level is the most important (Soderbaun, 2001).

This article highlights the discussions between the experts on regional cooperation and integration and the supporters of multilateralism and globalisation. The objective is not to extend arguments that can be endless due to rich literature, however, it is to show the major points of contention that can lead to more research and discussions.

Gilson (2002) and other scholars argue that regionalism divides the international system into different and separated competitive blocks, despite arguments to the contrary from authors and analysts like Hettne (1998, 2005), Beeson (2009), and Dent (2004). Regionalism, especially forms of closed regionalism, acts as an obstacle on the path to globalisation (Dent, 2008).

Authors in the first category argue that globalisation and regionalism are not mutually exclusive concepts. Their reasoning rests on the GATT-WTO conception of regionalism and regionalisation as integral to and predating globalisation. As of 2022, the WTO had informed about 356 Regional Trade Agreements (RTAs) in force (and its predecessor, the GATT), while several others are thought to be in effect but have yet to be reported (see: WTO, 2022 database).

 Regional trade liberalisation and cooperation arrangements have been considered important intermediate measures, enabling nations to cope with the risks and opportunities of the global market and embrace new multilateral regulations (Katzenstein, 1997). The developing tensions between economic regionalism and economic multilateralism directly result from the mutually reinforcing nature of regionalism and globalisation. As seen with the end of the Uruguay Round, when integration into the EU prompted some member states to adopt the GATT deal, and with NAFTA’s significant impact on the liberalisation of investments, regional cooperation can be a good stepping stone to an accessible international economy. According to Summers (1991), regionalism affects the multilateral international trade system and will increasingly serve as a driving factor towards liberalisation. Summers contends that regional liberalisation is the best approach towards liberalisation and globalisation.

In contrast, the second category of experts’ places greater emphasis on the notion that discriminatory regional and sub-regional accords are a response to globalisation. As an example, Bhagwati (1993) argues that protectionism, mercantilism and other regionalism delay global liberalisation and threaten the multilateral trading system. Bergsten (1997) says that the European Monetary Union (EMU) shows how it sets priorities that differ from those of the world. Furthermore, regional blocs can contribute to geo-economics conflicts, which may have political implications.

Three key issues are raised by those who want complete dependence on the multilateral approach (Bhagwati and Panagariya, 1996):

  1. Trade is diverted by regional cooperation.
  2. The distraction of attention.
  3. The geopolitical consequences of regionalism.

 First, they point out that trade is diverted by regional cooperation that provides members favourable treatment over non-members. Members may also profit from favourable policies and regulations for restricted content in addition to differential tariffs. According to opponents, the disadvantage of regional liberalisation can be more than overcome by the impact of preferences, resulting in a diversion of the trade balance.

Also, they are worried that transferring tariff revenues under a preferential arrangement could hurt the way one member’s income is split. The distraction of attention is the second point raised by critics. They say that if countries get involved in regional projects, they might lose interest in the multilateral system, which could stop its growth and possibly make it less effective.

The United States’ rapid change in trade policy since the early 1980s has drawn particular attention. The international system had previously received top attention from the United States. It declined to take part in regional economic integration. The main reasons the U.S. agreed to the creation and growth of European integration were political and security issues. The U.S. wanted to keep Europe safe and out of war.

The geopolitical consequences of regionalism are the third issue. Regional trade agreements (and economic groupings more generally) may have caused political and even military conflicts between governments in former times. While modern regionalist critics do not expect such severe results, analysts are concerned that close and intense regional links may cause aggravations and even conflicts that extend beyond economics to more generalised domains of global affairs.

Regionalism proponents hold opposing viewpoints on each of these topics (Bergsten, 1996). First, they contend that regional agreements advance free trade and multilateralism in at least two ways: first, that trade expansion has typically surpassed trade contraction, and second, that regional agreements support both domestic and global dynamics that increase rather than diminish the likelihood of global liberalisation. For developing nations, the internal dynamic is particularly crucial since regional agreements, which can be negotiated considerably more quickly than global accords, lock in domestic reforms against the possibility that succeeding governments will attempt to reverse them. Internationally, regional agreements frequently set the stage for liberalisation concepts that can then be broadly applied in the multilateral system.

Second, regionalism critics pointed out that it frequently has considerable, verifiable impacts. Regional integration will likely lead to further multilateral initiatives when officials, governments, and nations adapt to the liberalisation process.

Third, proponents of regionalism argue that it has had more positive than negative political consequences. Because of trade and closer economic cooperation, a new war between Germany and France was almost unthinkable in the European Union. Argentina and Brazil have used it to end their long-running rivalry, which has recently taken on nuclear implications.

APEC’s primary objectives include establishing the United States as a stabilising power in Asia and creating institutional ties between nations that were once adversaries, like Japan, China, and the rest of East Asia. Therefore, the potential of carrying up peace through cooperation is greater than the likelihood of generating conflicts.

Defenders of regionalism point out that regional agreements are permitted explicitly by Article 24 of the GATT and, more recently, the WTO, recognising their consistency with the global trading system. Three requirements must be met for these agreements to be effective:

  1. They must substantially encompass all trade between member nations;
  2. They must not erect new barriers for outsiders;
  3. They must accomplish free trade among members by a specific date (usually to be at most ten years from the starting date).

Although it is generally acknowledged that the most significant regional agreements (the EU and NAFTA) have fully or largely met these criteria, the GATT and WTO have been largely ineffective in certifying and overseeing their implementation. Because of this, the important regions have had many reasons to say that they work well with the multilateral system.

In conclusion, regionalism and globalism are linked, but only if the major countries involved in the process manage it well. History shows they can succeed if they try to improve things for both sides. The outcome in former eras shows that this is also reasonably achievable if they desire to pursue one at the expense of the other. The process’s inherent dynamics are sufficiently balanced for the participants’ policy choices to be decisive.

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International Law

Institution’s evolution

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As the human civilization is evolving, the institutions that were once very relevant and inevitable have been becoming archaic and irrelevant and alarmingly becoming deleterious if remain enacted and rigid. Standing mass armies is one of such institutions, which is losing its relevance that it once earned through conscription of human resource and extraction natural resources. With the emergence of democracy coupled with the dilution of borders by globalization, the armies have lost their stage and much eulogized roles as the defender, protector and invaders. The yardstick to measure the strength of any nation was their military’s might which has now been replaced with other well established indicators.

To shed light upon how and why the role of armies has been dwindled, we have to dive into the modern historical account of the events and reasons that once made the army inevitable and much desirable. As the raison d’etat for establishing the armies and galvanizing their influence   was to acquire the large swaths of land and the quantifiable amount of people to propel the engine of their state machine. Resultantly, the expanded territories were in dire need to be regulated and protected with the iron fist rule, which could not be done without strengthening armies.

Now the hitherto said aspirations have become obsolete and less desirable due to changing dimensions of a society as a whole thereby the military too. To give credence to these assertions it is adequate to allude towards the decline in the tendency of ragging the territorial acquisition wars specifically in the post peace era. Now there is no incentive to acquire the large latifundia or the large amount of people to be slave them as farm workers or to conscript them into armies.

As per the report of the freedom house, there were scant sixty-nine electoral democracies in 1990; today there are more than one hundred and fifteen electrical democracies, which are more than sixty percent. In recently emerged democracies, resultantly, the transition from the centrally planned economies to the economic liberalization spawned the era of entrepreneurship and innovation. Now these budding democracies have recently embarked on the journey towards more opportunities and rising incomes that remained chimera twenty years ago. To bolster this claim, the human security report is enough as it claims that state-based arm conflict has ebbed by 40 percent and which is waning the propensity of countries to wage a full-scale war.

Furthermore, well-established democratic peace theory hits the last nail in the coffin of the aspirations to reinvigorate the military might. The increasing number of democracies are less likely to wage a war with another democratic country, which in result declines the chances of war.

As initially claimed, the ab initio reasons of having standing armies have squarely been replaced; it comes naturally in mind what have replaced them. In a complex and entangled world woven with the fabric of trade, ideas, and innovations, the war-philic countries are the least fit for survival in the Darwinian sense. The countries who are doing wonders in the spheres of economy ideas, innovations inter alia services are less prone to war and aggression.

Many but naming few as the innovation, ideas, trade, and entrepreneurial tendencies have substituted the reasons, which once made the armies relevant and inevitable. Sweden, Norway, UK at the top of global innovation index 2021 and the countries deprived of bloated, mighty, and behemoth militaries, which are also circumscribed in the limited territories, are at the peak of ideas, prosperity, and innovation as compared to those who are bestowed upon with unassailable armies.

Ostensibly, after taking into account the recent shift in the reason of having large standing armies, it is now necessary to discuss about the nature of the future warfare which poses the threats, but here too while dealing with them make everyone wary of the institution of armies and militaries which are too rigid to abreast with the current dynamic nature of warfare, resultantly, they have to bear the brunt of their rigidity everywhere.

Therefore, the Character of the future warfare is dramatically changing which incorporates the novel means to materialize the desired and often mischievous aspirations. In this regard, hybrid warfare is one emerging character, which includes a diverse variety of activities and instruments to destabilize the society, which surely would be desirable for its user. These instruments are like interfering in the electoral processes in which the adversaries can influence the outcome of the electoral processes in the direction, which benefit the adversaries’ political aspirations – Putin’s interference in Trump’s election campaign and Cambridge analytica.

Other instruments are disinformation and false news, Cyber-attacks, and financial influence. Which all of them have already been employing in different dimensions and scales. In this domain, Russia is employing all of these instruments with great dexterity. To better deal with such recent emerging means and tools, it has become a need of hour to introduce the more integrated and sophisticated ways to deal with hybrid warfare and to replace the rigid, archaic and obsolete militarily solutions. In doing so, fostering democracy, inclusion of civil society investment in media literacy are few but viable solutions.

Succinctly, the justifications for raising the large armies, which were to expand the territories, to slave the people or to protect the volatile boundaries, have recently been replaced or become obsolete and irrelevant. Therefore, this institution should be abreast its pace with the dynamic and changing character of the threats posing the great dangers. Moreover, the gauge to quantify the power of any country has resultantly been changed from the strength of armies to the innovation, ideas, entrepreneurial spirit, trade, and socio economic and socio political stability. Contemporarily, it has become futile to strengthen and increase the sizes of armies, which have already lost their relevance, conversely, the changing Character of warfare or better known as hybrid warfare, demands more.

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