Digitrade Weekly Digest #7
China Targets AI, Chips Among Seven Battlefronts in Tech Race With U.S.; India, South Africa oppose plurilateral initiative for e-commerce at WTO; Post-Brexit UK Trade Strategy Needs To Engage China
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North America
China Targets AI, Chips Among Seven Battlefronts in Tech Race With U.S.
Wall Street Journal: “The five-year plan lists seven strategic areas considered essential to “national security and overall development.” These include AI, quantum computing, integrated circuits, genetic and biotechnology research, neuroscience and aerospace. China plans to create national laboratories and bolster academic programs to incubate and buttress some of these technologies, the report said. Vaccines, deep-sea exploration and voice recognition are also targets for development.
‘Leading in AI and computing enables China to reap huge benefits in hybrid warfare and intelligence gathering.’— Alex Capri, a senior fellow at the National University of Singapore’s business school
“Leading in AI and computing enables China to reap huge benefits in hybrid warfare and intelligence gathering,” said Alex Capri, a senior fellow at the National University of Singapore’s business school. Other cutting-edge technologies will allow the country to extend its military capabilities in the Indo Pacific, play a leading role in the militarization of space, digital trade and commerce, and in work on an ecosystem around digital currency, he added.
China’s role is already growing. The country recently overtook the U.S. in terms of the number of journal citations on artificial intelligence, according to a Stanford University report this month.”
US criticizes India at WTO over increasing restrictions on trade
Mint: “The US said it has also seen a recent increase in measures that could create technical barriers to trade in other sectors, including in information and communication technology products, medical devices, and chemicals. “India continues to expand the list of products required to undergo conformity assessment only in India. Such testing requirements and mandatory quality control orders that are not in line with international standards continue to limit India’s ability to attract investment," it said.
Navnit clarified that most of India’s technical regulations rely on international standards and are implemented in close consultation with all stakeholders. “None of these measures are discriminatory or create any unwarranted obligations that could be termed as trade barriers. They are also equally applicable to both domestic and foreign manufacturers," he said.
The US complained that while India has benefited from access to WTO members’ services markets around the world, India prohibits or significantly limits foreign participation in sectors such as retail, e-commerce, and insurance. “The digital economy is also a powerful force for domestic and global economic growth, but India has implemented digital trade barriers that likely will undermine that growth. The US encourages India to refrain from introducing barriers to digital trade, including restrictions on cross-border data flows and data localization requirements," it said.
India said member countries should not be forced to pre-maturely bind themselves to international e-commerce rules at this stage, when most related issues are not fully understood. “Developing countries and LDCs need to focus on improving their domestic physical and digital infrastructure to bridge the digital divide and enable benefits of digitalization to be equitably shared," Navnit said.”
Africa
India, South Africa oppose plurilateral initiative for e-commerce at WTO
The Hindu BusinessLine: “India and South Africa have opposed an on-going joint initiative at the WTO by some countries, including influential members such as the US, the EU, Canada and Australia, to frame a pact on e-commerce rules. The two said that the urgent need is to build capacity in digital skills and digital infrastructure, rather than negotiating binding rules.
The United States, in its comments at the recent meeting of the WTO Council for Trade in Services, said the interventions by South Africa and India were a ”distraction” to the rich discussion taking place on electronic commerce at the council, a Geneva-based official told BusinessLine.
Others such as the EU, Canada, Chile and Nigeria, too, spoke in favour of holding plurilateral discussions on e-commerce.
South Africa and India had recently submitted a paper questioning the legal basis of the joint initiatives and said that they thought plurilateral efforts were detrimental to the rule-based multilateral trading system under the WTO.”
Europe
The Danger of Blindly Navigating Data Nationalism
The National Interest: “Currently, we are at about the same stage on data flows that we were for trade in goods before World War II. At that time, there were a number of bilateral trade agreements dealing with goods, but no comprehensive multilateral rules. As a result, there was no overarching framework under which businesses and governments could operate. Even when the General Agreement on Tariffs and Trade (GATT), the first multilateral trade agreement, took effect in 1948, there was uncertainty about what the rules meant. There were words on paper, but it was not clear what impact they would have on actual trade flows. The nuances of the rules were only sorted out after decades of experience with discussions and disputes at the GATT and then the World Trade Organization (WTO), its successor organization.
Now we have the same problem with digital rules. There are some bilateral and regional rules on data that have been pushed by the United States, as well as by the European Union and other countries. But these are competing international frameworks, rather than a comprehensive multilateral solution. In addition, these rules have not been tested and most people have little sense of what they mean. The lack of clarity means uncertainty for both businesses and regulators.
To take an example from the U.S. agreements on digital trade, there are some broad obligations in the United States-Mexico-Canada Agreement (USMCA) related to the flow of cross-border data. At the same time, there are also multiple exceptions to the obligations. There is a specific exception to the cross-border data provision for government measures that are “necessary to achieve a legitimate public policy objective.” There are general exceptions for certain designated public policy objectives, which apply to all obligations in the agreement. Additionally, there are extremely deferential “security” exceptions that could come up if governments restrict data flows due to concerns about cybersecurity.
The problem is, when these obligations and exceptions are considered together, it is not clear what impact these agreements have on actual data restrictions imposed by governments in the real world. Nevertheless, it is important to start somewhere, and, as with trade in goods, the specific meaning of the rules will have to be fleshed out through implementation and enforcement.”
Post-Brexit UK Trade Strategy Needs To Engage China – Analysis
Eurasia Review: “There is no denying gravity — trade volumes are linked to the size and proximity of one’s partners. So signing trade agreements exclusive of China and forging alliances against Beijing will not deny China’s role as the overriding economic force in Asia. Nor will it improve China’s poor compliance with World Trade Organization (WTO) rules.
This is not to argue against the Australia–UK FTA or UK aspirations to join the CPTPP. The gains are likely to be modest, especially because the European Union is also negotiating with Australia, eroding the value of preferential access for the United Kingdom — but there will be gains.
And the presence of a relatively liberal United Kingdom in Asia Pacific trade arrangements will make it less likely that a state-centric ‘Beijing Consensus’ will ever take hold. But the important requirement is to prevent any ‘contain China’ associations from emerging in these initiatives — they would detract from efforts to engage Beijing in strengthening multilateral trade rules.
This brings us back to the central question of digital trade and electronic commerce. Negotiations currently under way among participating WTO members on e-commerce are doubly important, offering a template for engaging China on trade rules.
First, the negotiations address issues whose importance has been accelerated by the digitalisation effects of the COVID-19 pandemic.
Second, they represent a ‘plurilateral’ initiative that does not require the elusive goal of compliance by all WTO members, while bringing the major players to the negotiating table. This involves both the United States and China, providing a welcome, if incremental, area of cooperation to help temper the inevitable strategic competition unfolding between Washington and Beijing.
An enforceable digital trade agreement under the WTO would create incentives for China (the main proponent of the Digital Silk Road) to improve its domestic governance and strengthen compliance with intellectual property rights. Increasing discipline on issues such as ‘safe harbour’ — a data protection measure suspended from the TPP after Washington’s departure — would also yield tangible welfare gains for the international trading community.”
Asia-Pacific
U.S. trade report flags challenges from ‘Make in India’ policy
The Hindu: “U.S. objectives in this negotiation included resolution of various non-tariff barriers, targeted reduction of certain Indian tariffs, and other market access improvements. The United States also engaged with India on an ongoing basis throughout 2020 in response to specific concerns affecting the full range of pressing bilateral trade issues, including intellectual property (IP) protection and enforcement, policy development affecting electronic commerce and digital trade, and market access for agricultural and non-agricultural goods and services,” the report said.
These issues remain unresolved, leaving inconclusive, negotiations that lasted until close to the end of the Trump administration.
In a country-wise section on Digital Service Tax (DST), a Section 301 investigation on India’s DST, which began in June last year, is highlighted. The investigation is ongoing, as per the report.”
Biden’s team says it will use ‘all available tools’ to fight China’s unfair trade practices
CNBC: “President Joe Biden’s team will use “all available tools” to fight China’s unfair trade practices, according to a report outlining the new U.S. administration’s trade agenda.
The document released on Monday did not specify the tools that the administration will use, but it formalized statements made by Biden and members of his team in the last few months on how they will handle China and other trade priorities.
“Addressing the China challenge will require a comprehensive strategy and more systematic approach than the piecemeal approach of the recent past,” read the report.
“The Biden Administration is conducting a comprehensive review of U.S. trade policy toward China as part of its development of its overall China strategy,” it added.
Do the first hundred days matter?
The report outlined a few “detrimental actions” from China, such as barriers to restrict market access, “government-sanctioned forced labor programs” as well as unfair subsidies.
“They also include coercive technology transfers, illicit acquisition and infringement of American intellectual property, censorship and other restrictions on the internet and digital economy, and a failure to provide treatment to American firms in numerous sectors comparable to the treatment Chinese firms receive in those sectors in the United States,” the report said.”
Countries must come together to uphold rules-based global trading system: Chan Chun Sing
The Straits Times: “Countries must also work together to improve cross-border digital integration by negotiating economic agreements in forward-looking areas such as data, finance and technology, he said.
Said the minister: "The greater and safer the global digital commons, the better our chances to leverage data and digital services to propel our next wave of growth. Deeper cross-border intercompany linkages will also help to reinforce the reality that economic integration is key for global recovery."
Mr Chan said Singapore has a vested interest in ensuring that the rest of the world steps up to manage these challenges. As an open and connected economy, the Republic's progress is ultimately linked to the success of the global economy.
"We have put in place policies to help Singapore navigate the fractious global trading environment. Our starting assumption is that we are not going back to a pre-Covid world. Instead of looking backwards, we are looking forward to the opportunities in a Covid and post-Covid world."
Mr Chan said Singapore is also doubling down on efforts to reinforce its position as a global business hub.
"We believe there is still a role for trusted hubs where businesses can aggregate talent, mobilise capital and protect intellectual property," he said.
To reinforce its position as a business hub, Singapore is working closely with like-minded international partners to improve physical and digital connectivity.
Examples of such efforts include Digital Economy Agreements signed with Australia, Chile and New Zealand, as well as agreements to improve access to trade financing, such as the one signed with the US last December, he said.”
The Digitrade Digest is a weekly publication of the Digital Rights group at Public Citizen.