Parties signing free trade agreements (FTAs) have begun adding new rules to regulate and harmonize provisions of importance to companies trying to operate across multiple jurisdictions. The latest Issue Paper, from the Asia Business Trade Association, highlights the similarities and differences between this set of cutting-edge agreements in some of the keys areas of interest to digital trade. Table 1 identifies sixteen key digital provisions across seven FTAs. All seven FTAs, described more fully below, have only two provisions in common. All contain provisions to include the elimination of customs duties on digital products or electronic transactions, and cooperation elements. The remaining 14 elements, however, show variation across the FTAs under examination. The United States/Canada/Mexico (USMCA) and Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), show the most advanced provisions under review in this paper. Both agreements, as an example, include safeguards to protect developers’ rights over their software source code against the demands of disclosure. In addition, the USMCA incorporates source code-related algorithms into the subject of protection, which makes this FTA distinct from previous agreements. This amendment should facilitate implementation by providing greater clarification on source code.
But as Søndergaard suggested, data is not like oil. For one thing, oil doesn’t go anywhere. It sits in the ground until it is brought up and used. It can be used all at once or just some at a time while the rest remains waiting. Oil can be stored forever (or at least for a very long time) without significant problems. Data, by contrast, is like an avocado. It has a clearly defined shelf-life. Data collected and used too early is pointless. Data harvested too late is often of no use at all. Søndergaard’s company runs what is billed as the world’s largest online wine marketplace. In his business, it does no good at all to rate a wine that does not exist as all the stock is gone or to recommend a wine to a customer that has already purchased something to drink for dinner. What matters is knowing what is needed in the moment when the information is “ripe.”
The list of obstacles could go on. The point is that the promise of selling globally comes with increasing challenges. Hence the very good news that the World Trade Organization (WTO) has launched talks in Geneva to begin to create some global rules to sort out some of these issues. For smaller firms, global rules can at least ensure that added expense and time becomes a necessary part of doing business, rather than an irritating element of doing business with some countries. The size of the “prize” is huge. Estimates are all over the place on the current size of the digital economy, but Asia tends to lead the way. An extremely useful series of reports just released by the Hinrich Foundation on eight economies in the region (five out now: Vietnam, China, Indonesia, Malaysia and Australia) shows how much additional trade might be gained from eliminating barriers to digital trade.
The Southeast Asian digital economy is already estimated to be worth US$72 billion. The digital economy is on track to hit $240 billion by 2025, more than $40 billion higher than originally projected in a Google/Temasek study. The region is increasingly home to important unicorns like Grab, GoJek, Lazada, Sea and Tokopedia. Getting these firms and others that follow to flourish requires a nurturing policy framework. So far, ASEAN member states have had limited experience in crafting complementary digital regulations. At the domestic level, many ASEAN countries are headed in problematic directions—creating policies in various areas that could dramatically impede the ability of future unicorns to grow and thrive and strangling the prospects for smaller firms along the way. Hence the necessity for ASEAN to start to tackle e-commerce and digital trade in a regional manner. The agreement reached in November puts in place some useful provisions to get going. It urges member states to use paperless trading schemes and the use of information (other than financial services) via electronic means. It encourages members to be transparent about consumer protection measures and urges online personal information protection.
Policymakers should not assume that MSME firms will always stay MSMEs. Yet frameworks in many economies seem designed to trap smaller firms into a set category and entrench them into a “small” mindset. There will always be MSME firms. They form the backbone of most economies, as much as 97 percent of companies across Asia, employing the overwhelming share of workers. The goal of MSME policies should be enabling the current crop of smaller firms to grow, allowing firms in the “medium” category to reach large scale in relatively short order, while encouraging new entrants to the MSME ranks. Trade policy is one tool to help MSMEs grow. In most economies, the domestic market alone can be too small or even too competitive for success. E-commerce and digital technology, however, have allowed MSMEs to reach regional or global audiences.