DEA

The Final ATC Talking Trade

The Final ATC Talking Trade

It was an exciting time to be in the region.  Governments were enthusiastically signing up to a wide variety of trade agreements.  For example, Laos completed accession procedures to become the 158th member of the World Trade Organization (WTO).  We were in Bhutan for two workshops to support a renewed consideration of joining the WTO.  We also had several training activities in Timor Leste with members of Parliament and across the government to support accession to the WTO in conjunction with plans to become part of ASEAN.  Mongolia, the last WTO member to not have a free trade agreement (FTA), asked for training to complete an FTA with Japan. ASEAN itself was rapidly pursuing greater internal integration, with plans for the ASEAN Economic Community (AEC) pushed forward from 2020 to 2015.  It was also working on a range of agreements called ASEAN+1s with major powers in the region including Australia, China, India, Japan, New Zealand, and South Korea.  There was also a lot of activity to integrate Asia more closely to the rest of the world.  The first meeting in what would become the Trans-Pacific Partnership (TPP) took place in Singapore on the sidelines of APEC.  The TPP, as regular Talking Trade readers will recall, rapidly expanded and finally concluded in 2014.  The European Union was actively involved in working with members of ASEAN to create an eventual bloc-to-bloc agreement, starting with a bilateral FTA with Singapore.

Crafting a Climate Trade Agreement (CTA)

Crafting a Climate Trade Agreement (CTA)

Part of the problem is that the entire policy landscape for managing sustainable trade with a focus on climate or environment remains at an early stage. Climate has been managed by officials through the UN Framework Convention on Climate Change (UNFCCC). Trade officials, agencies or ministries may participate, but are not driving the agenda. Many of the ideas circulating to address climate and trade are quite new as well. It isn’t entirely clear, as an example, what sort of trade implications will come from the growing use of carbon border adjustment taxes. The trade consequences of green subsidies are likely to be significant, but uncertain. There are some elements of a trade and climate agenda with more consensus, including the potential inclusion of clauses on pollution or managing endangered species. Some trade agreements include commitments to sign on and implement a variety of climate-related international treaties and conventions. The critical importance of the “climate and trade” agenda is clearly crying out for a suitable response. Yet existing mechanisms for delivering results seem limited. Adding climate to trade agreements, as noted above, tends to be unsatisfactory. Asking global or regional institutions to manage any possible trade-related fallout from climate actions taken by the UNFCCC or others is also problematic. One solution that seems achievable is to create a new style of trade agreement, the CTA. It could pull out the most useful and innovative element of a digital counterpart, the DEPA.

An American Digital Trade Agreement?

An American Digital Trade Agreement?

In short, there are some sensible reasons for pushing the US to pick up and lead a new digital agreement. However, the Americans are not—to use a sporting metaphor—stepping onto a clean pitch. The game has already been underway for some time, particularly with important American trading partners and likely participants in any digital arrangements. The US will have to operate within an increasingly crowded landscape. More than 80 WTO members have been working on e-commerce through a Joint Statement Initiative (JSI) for some time. Other ongoing digital activities include the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP), the Regional Comprehensive Economic Partnership (RCEP) and also, as noted, upgraded commitments in AANZFTA or Japan’s various trade deals, as well as ASEAN’s E-Commerce Agreement which is entering into force this year. There are also two types of digital-only trade deals already in place. The Digital Economy Partnership Agreement (DEPA) is a stand-alone deal. It builds on the CPTPP commitments and included three original members of the agreement: Chile, New Zealand and Singapore. It is currently in force for the latter two countries and is likely to undergo expansion with the addition of new members shortly. There are also growing a number of Digital Economy Agreements (DEA) in place for Singapore. One is already in force with Australia with two more nearing the finish line: with South Korea and the UK. The DEAs are designed to build on existing bilateral free trade agreements. This means that they need not replicate all the features of a comprehensive agreement, including dispute settlement or the agreement management infrastructure, but compliment existing policies and procedures. If the US shows up and is prepared to work on a digital economy agreement, the first question will be what is to be included in such an arrangement that is not already covered under the JSI, CPTPP, RCEP, AANZFTA, DEPA, DEAs or other e-commerce and digital trade chapters in bilateral trade agreements?

Designing Next Generation Trade Agreements for the Digital Economy

Designing Next Generation Trade Agreements for the Digital Economy

From a business perspective, getting an agreement on digital rules among the widest number of countries is best.  Such a decision will create conditions for improved stability, lowered risk and reduced compliance costs in engaging in trade and business everywhere, with similar or identical rules and regulations in place.  But there is a trade-off between getting an agreement with many parties and getting an agreement in a timeframe that businesses would view as helpful.  While governments can operate in cycles of years, companies are concerned about results every quarter.  This mismatch between expectations and timing is particularly acute in the digital world, where business developments are often made at light speed.  Governments are sometimes struggling to even understand the ideas and principles of digital trade and are faced with particular challenges in crafting sensible regulations. Digital trade was largely unregulated, or lightly addressed, in most places up until a few short years ago.  With few exceptions, firms were free to do whatever they wanted in the digital space, as long as they did not violate existing non-digital rules.  Governments tried to adapt physical rules, in some instances, to the digital realm.  This situation has grown increasingly untenable.  The exponential growth rates of the digital economy means that governments cannot go on trying to shoehorn analogue rules to digital products and services.   So how should governments manage the increasingly important digital world?  There are at least four broad responses so far.