Digital Economy Agreement

Congressional Testimony: Trade Policies in Asia

Congressional Testimony: Trade Policies in Asia

The trade and economic landscape in Asia is rapidly evolving. While there are many activities that I could mention, I will focus my testimony today on four regional trade arrangements: the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP); the Regional Comprehensive Economic Partnership (RCEP); a set of digital trade deals known as DEPA or DEAs; and the upcoming American-led Indo-Pacific Economic Framework (IPEF). I will attempt to explain how and why these agreements matter for Asia and describe some of the implications of this evolving regional architecture for the United States. I will conclude with a few brief suggestions about how craft an IPEF that best fits into a complex economic landscape. Let me begin with the CPTPP. The CPTPP came into force in late December 2018 and now has eight active members: Australia, Canada, Japan, Mexico, New Zealand, Peru, Singapore, and Vietnam. The UK is in the middle of accession talks and hopes to be part of the group by the end of this year. Three additional formal letters of application were received last fall, from China, Taiwan, and Ecuador. South Korea’s outgoing government pledged to submit an accession request this month. There are three important items on the CPTPP agenda for this year: members must review the agreement; conclude accession negotiations with the UK; and decide on a process for addressing pending applications.

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.