While the WTO has to grapple with the interests of all its 164 members, some countries have taken it in to their own hands to address digital commerce. It is therefore worth looking at what a specific digital trade agreement looks like.
Three Pacific Rim economies have created what has been favourably commented on by analysts as a model digital trade agreement[1]. The SIN/NZ/CHL Digital Economy Partnership Agreement (DEPA) is a plurilateral trade agreement between Singapore, New Zealand and Chile that entered into force in June 2020[2]. It is the most comprehensive digital commerce trade agreement to date and has some interesting provisions that may influence similar agreements between other economies with respect to digital commerce as it is quite prescriptive.
The DEPA is the first binding EPA to specifically address digital commerce in a stand-alone trade agreement. All three are members of The Comprehensive and Progressive Trans-Pacific Partnership (CPTPP). It may be construed that the DEPA members do not see the CPTPP going far enough with respect to digital commerce, or it may be seen as an evolvement of the digital chapters of the CPTPP.
For example, the DEPA has recommended the recognition of data protection trustmarks to verify conformance with privacy standards. It has modules on e-invoicing and e-payments and has specified rules on non-discrimination for digital products. Other modules are forward looking to cover regulatory sandboxes for testing new ideas in data innovation.
These obligations are recognised in the first article as follows:
Article 1.2: Relation to Other Agreements
1.2.1. Recognising the Parties’ intention for this Agreement to coexist with their existing international agreements, each Party affirms:
(a) in relation to existing international agreements to which all Parties are party, including the WTO Agreement, its existing rights and obligations with respect to the other Parties; and
(b) in relation to existing international agreements to which that Party and at least one other Party are party, its existing rights and obligations with respect to that other Party or Parties, as the case may be.
Whilst the entire agreement is relevant to Digital Trade, there are specific schedules that touch Cross Border Data Flows (CBDF) and that also encourage innovation;
Article 2.5: Electronic Invoicing
2.5.1. Each Party shall ensure that the implementation of measures related to e-invoicing in its jurisdiction is designed to support cross-border interoperability. For that purpose, each Party shall base its measures related to e-invoicing on international standards, guidelines or recommendations, where they exist.
Article 2.7: Electronic Payments
2.7.1. Noting the rapid growth of electronic payments, in particular, those provided by new payment service providers, Parties agree to support the development of efficient, safe and secure cross border electronic payments by fostering the adoption and use of internationally accepted standards, promoting interoperability and the interlinking of payment infrastructures, and encouraging useful innovation and competition in the payments ecosystem.
2.7.2. To this end, and in accordance with their respective laws and regulations, the Parties recognise the following principles:
2.7.2. (c). The Parties shall endeavour to promote the use of Application Programming Interface (API) and to encourage financial institutions and payment service providers to make available APIs of their financial products, services and transactions to third party players where possible to facilitate greater interoperability and innovation in the electronic-payments ecosystem.
2.7.2. (d). The Parties shall endeavour to enable cross-border authentication and electronic know-your-customer of individuals and businesses using digital identities.
Notwithstanding Article 2.7 (Electronic Payments), a Party may prevent or limit transfers by a financial institution or cross-border financial service supplier to, or for the benefit of, an affiliate of or person related to such institution or supplier, through the equitable, non-discriminatory and good faith application of measures relating to maintenance of the safety, soundness, integrity, or financial responsibility of financial institutions or cross- border financial service suppliers. This paragraph does not prejudice any other provision of this Agreement that permits a Party to restrict transfers.
Article 4.2: Personal Information Protection
4.2.10. The Parties shall endeavour to mutually recognise the other Parties’ data protection trustmarks as a valid mechanism to facilitate cross-border information transfers while protecting personal informatio
Article 4.3: Cross-Border Transfer of Information by Electronic Means
The Parties affirm their level of commitments relating to cross-border transfer of information by electronic means, in particular, but not exclusively:
1. The Parties recognise that each Party may have its own regulatory requirements concerning the transfer of information by electronic means.
2. Each Party shall allow the cross-border transfer of information by electronic means, including personal information, when this activity is for the conduct of the business of a covered person.
3. Nothing in this Article shall prevent a Party from adopting or maintaining measures inconsistent with paragraph 2 to achieve a legitimate public policy objective, provided that the measure:
(a) is not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination or a disguised restriction on trade; and
(b) does not impose restrictions on transfers of information greater than are required to achieve the objective.
Article 4.4: Location of Computing Facilities
The Parties affirm their level of commitments relating to location of computing facilities, in particular, but not exclusively:
1. The Parties recognise that each Party may have its own regulatory requirements regarding the use of computing facilities, including requirements that seek to ensure the security and confidentiality of communications.
2. No Party shall require a covered person to use or locate computing facilities in that Party’s territory as a condition for conducting business in that territory.
3. Nothing in this Article shall prevent a Party from adopting or maintaining measures inconsistent with paragraph 2 to achieve a legitimate public policy objective, provided that the measure:
(a) is not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination or a disguised restriction on trade; and
(b) does not impose restrictions on the use or location of computing facilities greater than are required to achieve the objective. “The agreement adopts an open, plurilateral approach that allows other countries to apply to join as whole, select specific modules to join, or replicate the modules in other trade agreements.”
Canada opened discussions with the DEPA secretariat in February 2021, with public consultations a month later. These closed in May 2021 and no further announcements have yet been made. South Korea, with the support of Singapore, formally requested to join the DEPA in September 2021[3]. A feasibility study had been carried out in 2020, as well as public consultations and deliberations in the Korean National Assembly in mid-2021.
This indicates that a digital trade agreement may be created between countries that differ markedly in the standard measurements of their economies, such as GDP/GNP, etc., as proven by the DEPA.
In conclusion, Asia – Pacific countries appear not to want to wait for the WTO to act with respect to Digital Commerce and are moving ahead with their own agreements.
Mr Michael Mudd is a digital trade economist and the founder and Managing Partner of APP LP, an advisory providing opinion and insight into policy, knowledge management, data security and digital transformation for trade in Asia-Pacific, Africa and the Middle East. An appointed IT standards expert to JTC-1 of the ISO, he is also a member of the Government of Hong Kong’s Expert Group on Cloud Computing; working group on Cloud security and privacy. He is a member of the policy committee of the Hong Kong Computer Society and is the Chairman of the Public Policy Working Group of the Middle East & North Africa Cloud Alliance and Senior Digital Trade Adviser to International Economics Consulting Ltd. He may be contacted at asiapolicypartners@outlook.com.
References
[1]https://research.hinrichfoundation.com/hubfs/White%20Paper%20PDFs/DEPA%20at%20work%20(Stephanie%20Honey)/The%20DEPA%20at%20work%20-%20Hinrich%20Foundation%20white%20paper%20-%20Stephanie%20Honey%20-%20July%202021%20RV.pdf
[2] https://www.mfat.govt.nz/assets/Trade-agreements/DEPA/DEPA-Signing-Text-11-June-2020-GMT.pdf
[3] http://english.motie.go.kr/common/download.do?fid=bbs&bbs_cd_n=2&bbs_seq_n=870&file_seq_n=1
