Rules on digital trade are rapidly taking shape as countries in Asia-Pacific and beyond strive to secure the benefits associated with e-commerce and the digitalization of trade in goods and services. At the multilateral level, the WTO holds promise to reach a plurilateral agreement on core e-commerce issues by the end of 2023. Although far-reaching outcome seems unlikely, e-commerce rules agreed in the WTO will potentially serve as baseline commitments on cooperation in digital trade. At the regional level, different approaches have emerged, and many preferential trade agreements (PTAs) already include increasingly comprehensive and advanced digital trade provisions (DTPs) and the number of Digital Economy Agreements (DEAs) is growing. Asia-Pacific economies are unevenly engaged in cooperation in digital trade rulemaking – East and South-East Asia economies have welcomed DTPs in their agreements and are taking the lead in developing DEAs, while Central Asia and South Asia economies are lagging especially in intra-regional cooperation within the subregions. The proliferation of DTPs reflects the expanding and deepening cooperation, it may, however, undermine the benefits of digital trade if the rules are not harmonized. The landscape is getting clearer as there is an emerging coherence in the coverage of DTPs across agreements. Nevertheless, further reducing regulatory heterogeneity will be important in enabling the effective participation of smaller firms and less developed countries in cross-border digital trade.
Although a large group of WTO members are actively having conversations on digital trade under the JSI, a far-reaching multilateral agreement on e-commerce appears to be unlikely. Therefore, regional and preferential agreements remain the main channel for the formulation of digital trade rules, especially for emerging issues. DTPs are increasingly being mainstreamed in PTAs. The more recent PTAs tend to have a broader coverage and more comprehensive DTPs, and a dedicated chapter on digital trade (or e-commerce) may become a standard feature in upcoming PTAs. The bigger players such as the US, EU, China, and Singapore have taken different approaches and are actively replicating their own templates across PTAs. At the same time, low and lower middle-income economies have been slow in incorporating DTPs in their trade agreements. In the Asia-Pacific region, East and South-East Asia countries are prominent in incorporating DTPs in their trade agreements, while Central Asia and South Asia countries lag.
The most common DTPs found in PTAs are those enabling and facilitating trade digitalization. The protection of consumers and personal information is also widely covered by PTAs, which reflects common regulatory needs. Common commitments across PTAs include: no customs duties on electronic transactions, paperless trading, reducing restrictions on cross-border transfer of data, and the protection of personal information. However, despite the emerging overlap in coverage, countries use different legal languages to adjust the level of binding in different areas. Nonetheless, the most common commitments across agreements have the potential to shape some universally applicable disciplines.
The more advanced Asia-Pacific economies, especially Singapore, are taking the lead in signing DEAs. The recent surge in signing dedicated DEAs provides a novel, useful and flexible approach to negotiations on digital trade. DEAs include a wider range of DTPs addressing key and emerging issues of digital trade and the development of digital economy, and in many DEAs these DTPs are structured in modules which could allow parties to choose different levels of commitment. Creating a new “noodle bowl” of inconsistent agreements should be avoided. However, creating a new “noodle bowl” of inconsistent agreements should be avoided. The growing number of bilateral DEAs may make the digital trade environment unnecessarily complex, in particular for smaller firms in developing economies. Interoperable standards and mutual recognition mechanisms may be needed to address the existing digital regulatory heterogeneity and prevent further fragmentation in digital trade rules.
Looking ahead, given the growing importance of digital trade as an engine of growth and development, less developed countries need to keep abreast of the existing DTPs and develop a clearer understanding of their own needs and situation. Participation in multilateral level efforts may be particularly important for them given that they may be de facto excluded from preferential trade negotiations. Smaller and less developed countries may stress the inclusion of MSMEs in digital trade, capacity building, transfer of digital technologies and other means of reducing the digital divide. Further, progressive commitments may be a good strategy to promote for them when negotiating DTPs, particularly since they will often need time and to enhance domestic legislation on digitaleconomy-related issues, such as online consumer protection, personal information protection, and internal electronic transactions.
For deeper cooperation and closer integration in digital trade, legal and technical interoperability need to be promoted. To enhance interoperability, countries should refer to and build upon existing international standards and instruments when developing their domestic regulatory environment. For example, countries are encouraged to adopt the existing UNCITRAL model laws related to electronic commerce, including the model law on electronics transferable records, as well as relevant UN/CEFACT technical standards for electronic business. Similarly, at the multilateral and regional level, countries should also actively participate in existing multilateral or regional cooperation frameworks and agreements, before considering creating new ones. For instance, the UN treaty called the Framework Agreement on Facilitation of Cross-border Paperless Trade in Asia and the Pacific (CPTA) already provides an inclusive and neutral platform for the pilot testing of cross-border paperless trade solutions among over 50 member states, enabling harmonization of electronic trade data and document exchange rules and systems currently being developed only at the bilateral or subregional levels.38 Such agreements and frameworks may be directly referred to in relevant DTPs. At the global level, active participation in the on-going WTO JSI discussions on e-commerce, as well as initiatives such as the UNCTAD-led E-trade For All capacity building initiative should be positively considered, with the ultimate goal of achieving an inclusive digital trade environment supportive of the sustainable development goals.Multilateral and Regional Cooperation
To read the full working paper, click here.