BUSAN—The 10th round of negotiations in the Regional Comprehensive Economic Partnership (RCEP) are finishing up in Busan, South Korea, this week. Sixteen Asian economies are taking part (Australia, Brunei, Cambodia, China, India, Indonesia, Japan, Korea, Laos, Malaysia, Myanmar, New Zealand, Philippines, Singapore, Thailand, and Vietnam).
One of the more innovative areas under discussion in RCEP has been the launch of negotiations in e-commerce. These discussions have the potential to create new rules and regulations governing an increasingly vital portion of 21st century trade in the region.
Our overall proposal for e-commerce negotiations within RCEP is broad, encompassing specific rules for goods, services and payments, as well as including necessary background conditions for e-commerce to flourish. Without careful consideration of the rapidly evolving environment for e-commerce and digital trade, RCEP officials might slow the spread of new channels of delivery for goods and services and undermine growth opportunities for many small and large firms.
Officials must think carefully about the range of e-commerce activities. The sector provides more opportunities than simply buying a book online and having it delivered to a customer’s home. Firms can be buying and selling both goods and services to one another (B2B), to consumers (B2C) and even from consumers to other consumers (C2C).
The Asian Trade Centre held a stakeholder outreach session in Busan on October 14, followed by a discussion session on e-commerce. The setting of the workshop in Korea was important. Korean companies are at the forefront of delivering many new digital trade services and consumers here are extremely savvy customers of a wide range of e-commerce options. The subway trains, for instance, are full of young and not-so-young people consuming digital services.
These digital services cannot provide information if necessary frameworks are not put into place. For example, without ease of movement for information across borders, many firms will struggle to reach outside markets where many valuable commercial opportunities can be found.
In the past, firms that wanted to export goods and services had to invest significant resources. With the advent of the internet and digital trade, however, even the smallest companies in the most far-flung locations can find customers and plug into regional and global markets. Connecting to these new business opportunities and expanding the customer base can happen relatively easily and inexpensively.
Asia is at the forefront in many ways of the coming e-commerce and digital revolutions. Asian companies are increasingly becoming global powerhouses in various settings. More consumers are online or connected via mobile than nearly anywhere else in the world.
Much of this growth has taken place in a largely unregulated environment. Governments have not yet created a thicket of rules, licenses and procedures to govern e-commerce trade in the region in similar ways to their approach to off-line trade and commerce. However, as e-commerce continues to boom and as more goods and services are migrating to digital platforms, the incentives for Asian governments to try to create policy are growing.
Creating smart policies can be challenging, in part because e-commerce sits at the intersection of multiple areas and falls between jurisdictions of ministries. For trade negotiators, as an example, effective e-commerce rules are likely to require sensible policies in intellectual property rights. Tight protection and enforcement of copyright can get complicated very quickly in the digital world. At a time, for example, when hundreds of hours of content and videos are uploaded every minute of every day, policing all this information is going to be difficult or impossible to do effectively.
It is therefore necessary for officials in RCEP to consider e-commerce and portions of the intellectual property rights chapter in conjunction. The areas of particular interest from the perspective of digital trade, besides careful consideration of copyright rules, include rules to determine who is responsible (or not) for particular types of content, and what levels of protection are appropriate.
What makes this especially tricky for officials is that determining appropriate policy measures may create new, distorting effects on markets. For example, a determination that one set of measures is acceptable for solving a specific problem—such as requiring that information and data can only be held or stored domestically—could rapidly lead to unintended consequences. Firms might find that local providers of data storage are less careful with information or companies may face significantly higher prices. Policies designed to determine which types of information must remain onshore are also likely to prove problematic in practice.
In rapidly shifting markets with evolving technology, whatever specific solution or technology officials promote may ultimately turn out badly. This is not to suggest that regulations are never a good idea. Rather, officials should be encouraged to think about the end-goals and legitimate policy objectives that they want companies to meet.
Company experiences can highlight the shifts in market opportunities created by new regulatory frameworks. For example, changes in payment systems have allowed many firms to flourish in foreign markets and build up their brands with new buyers. New regulatory environments can encourage direct purchasing from online vendors of all stripes. Poor policy choices can stifle growth and development, leaving smaller firms unable to compete. Speed to market and lower costs are critical to the success of small companies.
As RCEP officials wrap up their sessions in Busan, it is important to consider cross-cutting policies for e-commerce and digital trade that connect across and between multiple chapters. Taking a holistic view of the changing nature of trade will help ensure that RCEP is and remains relevant in the future. Greater engagement with e-commerce and digital companies is also needed to help officials craft the best types of policy outcomes to meet business and consumer needs in this dynamic environment.
***Talking Trade is a blog post written by Dr. Deborah Elms, Executive Director, Asian Trade Centre, Singapore***