Until the mid-2010s, the open digital economy rested on broadly shared assumptions: largely uninhibited cross-border data flows, globalised and interdependent supply chains, region-specific platform governance where multinationals adapted to local rules to maintain market access; and efficiency, scale, and interoperability as dominant organising principles of the system. States were mostly reactive, deploying competition law, privacy regulation, and taxation as corrective instruments rather than as tools of structural design.
That model is now under pressure across every layer of the digital stack: compute, cloud, and data infrastructures are increasingly being reframed as strategic assets comparable to energy grids or transport chokepoints. In this context, patterns of interdependence are becoming weaponised, as states exploit control over global networks to exert strategic leverage. Incumbent hegemons aim to preserve and extend their chokepoint power, as seen in US efforts to pressure multinational firms to align commercial operations with geopolitical objectives. Challenger powers, in turn, seek to reduce exposure and construct alternative chokepoints, as reflected in China’s efforts to retain AI innovation within domestic ecosystems through restrictive export controls.
While hegemons drive and compete within infrastructure geopolitics, middle powers face more existential constraints. Singapore, a highly digitised city-state which relies on trade openness, interdependence, and free information flows for its economic viability, cannot afford even partial decoupling from one or more hegemonic powers. Instead, Singapore has pursued a policy of sovereignty arbitrage: exploiting its position within structurally asymmetric networks as a “node” to extract strategic value from more than one party while maintaining flexibility, neutrality, and sovereignty.
The phenomenon of "Singapore-washing" captures the economic and political tensions that drive Singapore’s successful sovereignty arbitrage. When Manus, a Chinese AI agent startup, relocated to Singapore and was subsequently acquired by Meta, the episode illustrated how states can move to close jurisdictional gaps and “sovereignty gaps” in the same move. Singapore’s government did not orchestrate the acquisition, but its regulatory system made the transaction (an arbitrage between China’s restrictive political system and US capital markets) possible and attractive. As US and Chinese scrutiny of such arrangements intensifies, the scope for maintaining neutrality by letting the market lead narrows considerably. Sovereignty arbitrage is therefore a viable policy option for non-hegemonic powers seeking to survive and thrive within an emerging system of infrastructure geopolitics.
Digital Sovereignty Beyond Autarky
As states prioritise security over legal commitments, elevating regional and bilateral agreements as more flexible tools for governing digital interdependence, multilateral trade frameworks are becoming increasingly strained. While Singapore’s expanding network of Digital Economy Agreements (DEAs) with South Korea, Australia, the United Kingdom, Indonesia, and others reflect a concerted effort to adapt to infrastructure geopolitics, they are not a panacea. DEAs enable regulatory alignment and data flow continuity without subordinating domestic governance to either bloc’s political architecture, but Singapore remains dependent on foreign infrastructure for cloud computing, semiconductors, and foundational AI technologies controlled by US and Chinese ecosystems. However, its ability to navigate fragmentation as a bridge-builder highlights a strategy predicated on maximising agency within geoeconomic constraints. This contrasts with the EU, whose regulatory ambitions clash with its continued dependence on foreign cloud and data infrastructures.
Middle powers unable to match US–China competition over chokepoint control and full-stack ownership notice this divergence and shape their strategies accordingly. Switzerland, the canonical example of neutrality, is not attempting to will its own hyperscaler champions into existence to compete with global powers; it is instead leading multilateral AI governance efforts through its position on the Council of Europe, projecting influence through institutional leadership rather than infrastructure control. India is leveraging its historic authority as a Global South interlocutor to advocate for a "third way" on AI governance at convenings like the 2026 AI Impact Summit in New Delhi. Meanwhile, South Korea, Indonesia, Turkey, and Australia are each deploying aggressive domestic platform regulation as a tool of digital self-determination, leveraging their consumer markets and regulatory capacity to constrain powerful American and Chinese tech players.
Singapore’s strategy of sovereignty arbitrage reflects the constraints middle powers face within an emerging system of infrastructure geopolitics. While major powers act as “makers” shaping the architecture of digital infrastructure, states like Singapore operate as strategic “takers,” navigating these structures to maximise autonomy within externally defined constraints.
