The arrival of standalone digital trade agreements?

The arrival of standalone digital trade agreements?

In recent months we have seen the signing of two agreements on digital trade within standalone agreements (i.e. not part of wider trade agreements). In August, the Singapore-Australia Digital Economy Agreement (SADEA) was signed (text). In September, The Digital Economy Partner Agreement (DEPA) was agreed, between Singapore, New Zealand & Chile (text).

Several questions come out of these agreements:

  1. Why are these countries signing new digital trade agreements?
  2. How do these agreements relate to previous agreements made by countries involved?
  3. Why have we seen standalone chapters on the ‘digital economy’ rather than as part of broader FTAs?

I will discuss these questions below:

Advocates of digital trade

In terms of the countries involved, such as Singapore, Australia and Chile, these countries are well-known advocates for open trade in general. For example, Singapore has historically supported trade, which has been core to its success as a global trade hub.

So, it is natural that these countries would be the leaders in supporting global digital trade rules, which support trade flows. Indeed, Singapore and Australia were two of the three countries (alongside Japan) to launch the Joint Statement Initiative (JSI) at the WTO following disagreements around the E-commerce agenda.

One perhaps surprising observation is that all these countries are signatories to the recent CPTPP (signed in 2018), and this already includes an extensive “Electronic Commerce” chapter. Why might the same countries sign another agreement on the same topic so quickly?

There are two options: firstly, perhaps specific rules in the CPTPP were seen as lacking, and these countries wanted to go further. Secondly, it might have an important symbolic role. Let’s examine these two options….

The CPTPP vs digital economy agreements

I will leave it to the law experts to undertake detailed analysis, but a brief look at more controversial digital trade rules highlights minimal differences around these contested areas (see table)

Selected Rules CPTPP (All countries)SADEA (Sg, Aus)DEPA (Sg, Nz, Chi)
Cross-border dataIdenticalIdenticalIdentical
Source codeSimilarSimilarNot present
No custom dutiesIdenticalIdenticalIdentical
Data localisationIdenticalSimilarIdentical

Examining the texts, the main difference is not significant changes to key rules, but that the two digital economy agreements are more comprehensive in coverage. The new agreements cover a number of new issues rarely seen in digital trade chapters. Examples include single windows (linked to import-export), express delivery (linked to e-commerce), digital ID and AI amongst others.

However, overall the actual clauses on these new issues is weak in the digital economy agreements (e.g. They commit to very mild rules or futher policy sharing). Given that these rules are weak, one can question if these new digital agreements are really necessary – the actual rules are unlikely to change much on the ground in these countries.

Symbolic role?

As suggested by commentary from Deborah Elms from the Asian Trade Centre, such agreements actually feel more like a “set of modules” for use in the future.

Rules on digital trade are still a relatively uncontroversial area in many countries (as highlighted by the lack of critical discussion on these two agreements). This means it takes less political capital to agree to digital rules between these aligned countries. By including only digital trade, these agreements sidestep more divisive issues outside this.

SADEA and DEPA, alongside the US-Japan Digital Trade Agreement (agreed in late 2019) might then be seen as “quick digital deals”. They push the agenda forward on digital trade. They allow liberalising countries to keep the momentum on this issue, particularly in the midst of the emerging trade wars.

But more than this, they define an expanded set of issues which grounds upcoming negotiations and discussion linked to e-commerce in the next WTO ministerial (which was cancelled due to COVID).

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