Digitrade Digest #12

Tech wars are new trade wars; Smaller nations see opportunities in DEPA; East Asia and digital trade; US-Japan on digital trade cooperation

The Digitrade Digest delivers the latest developments in global digital trade right to your inbox every week. To get the news as it happens, follow us on Twitter @DigiTradeDaily

Digital Trade

Technology wars are becoming the new trade wars

Financial Times: The interconnections of the digital age have blurred the distinctions between economic and security issues. Dominant tech companies are both engines of economic growth and channels of security risks. They also enjoy outsized profits, global market penetration and the ability to set industry standards. Trade and industrial policies are therefore easily hijacked by broader security and geopolitical priorities. “Technology wars are becoming the new trade wars,” write Garcia-Macia and Goyal. In the past, many countries have blocked imports to protect national champions and their often monopoly profits. What makes the latest technology disputes unusual, and unnerving, is that the dominant players are trying to block exports from third countries, too.

Smaller Economies See Big Opportunities in Digital Trade Pact

VOAnews: DEPA officials say the partnership is designed to focus on specific issues, including artificial intelligence (AI), digital identities and digital inclusion. Digital inclusion includes, for example, New Zealand's commitment to its Maori population.

"The DEPA is a stand-alone, open plurilateral agreement to which other World Trade Organization members are eligible to join," says a statement on the Canadian government website. "It is constructed as a living agreement, which allows for continual updates and modernization as required."

Wolfe said Canada is likely attracted to DEPA because it is an agreement in transition with plenty of room to grow. "My suspicion is they see a chance to get in relatively early on the ground floor, get our trading and negotiating interests put on the table," he said.

"I think New Zealand's agenda, and I'm sure Canada shares this, is to negotiate this among a small number of relatively small economies, get a framework that serves our interests well, then assert this into bilateral and multilectal agreements, including the WTO."

Wolfe adds that the three initial signatory countries are "all relatively equal in power. None of these three countries is going to dominate relations."

Boston University professor Jorge Heine says DEPA helps to fill a need made more urgent by the coronavirus pandemic, which "has accelerated the demand for digital services, both domestically and internationally."

"Given the fact that most international trade rules were set up for the trade in goods, this was badly needed," said Heine, who previously served as Chile's ambassador to China, India and South Africa.

"The DEPA is only a first step, and much more remains to be done, but it is a step in the right direction," he told VOA. "For issues related to e-commerce, e-invoicing and data location, it is critical to find common ground and common rules, and the DEPA aims to achieve that."


Managing digital trade in Asia

EastAsiaForum: While the digital world has many characteristics in common with physical commerce, one key difference is that the internet does not readily recognise national borders. Indeed, one of the great promises of the digital revolution was that firms could become ‘multinational’ regardless of their size. Anyone could launch a global business from their own home.

The global nature of digital trade required officials to grapple with appropriate regulatory oversight in a collective way. But officials were uncertain about the nature of the digital environment and the best ways to manage a growing set of complex challenges. Uneven distribution of digital growth meant that not all governments were looking at the same set of issues at the same time.

The result has been a proliferation of policies and a growing patchwork of regulations, laws and requirements in different markets. This explosion of regulatory interest is set to continue. But policymakers are still struggling to find the right forum to discuss how to harness the best of digital trade while protecting consumers and avoiding unfair market dominance and illicit commercial activity. COVID-19 has accelerated the urgency of finding collective solutions, as firms have rapidly shifted online in order to navigate lockdowns and severe disruptions to local markets. Digital trade works best when the largest number of governments have similar regulatory policies in place.

Despite the growing importance of digital trade, the ability of governments to effectively manage the online environment still lags behind the pace of business innovation. Domestic-level regulatory and legal adjustments to better accommodate digital trade can be complicated. Negotiations between governments to ensure greater consistency of policy frameworks are often time-consuming. By the time policy settings adjust, the commercial environment could appear quite different.

East Asia leads e-commerce and the digital trade revolution

EastAsiaForum: East Asia is leading the global e-commerce revolution. Business-to-consumer (B2C) platforms (e-commerce, online travel, advertising technology, transport, e-services and digital media) generated US$3.8 trillion in revenue in 2019, with US$1.8 trillion of it in Asia. E-commerce alone accounted for US$1.9 trillion in revenue globally and US$1.1 trillion regionally. China is at the front, accounting for 45 per cent of e-commerce transactions. Online sales already represent 12 per cent of total retail sales in Asia, compared with 8 per cent in Europe and North America. The digital economy is expected to add US$1 trillion to Asia’s GDP in the next 10 years.

North America

U.S.- Japan Joint Leaders’ Statement: “U.S. – JAPAN GLOBAL PARTNERSHIP FOR A NEW ERA”

The White House: The United States and Japan are committed to maintaining and further strengthening our robust bilateral trade relationship while advancing shared interests, including digital trade cooperation, the development of trade policies that support climate change objectives, World Trade Organization (WTO) reform, and promoting inclusive growth in the Indo-Pacific. We will continue to work together bilaterally, as well as within the G7 and the WTO, to address the use of non-market and other unfair trade practices, including violations of intellectual property rights, forced technology transfer, excess capacity issues, and the use of trade distorting industrial subsidies. We reaffirm our commitment to achieving prosperity and maintaining economic order in the Indo-Pacific region while engaging with other like-minded partners.

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The Digitrade Digest is a weekly publication of the Digital Rights Program at Public Citizen.