The road to Riyadh: Digital trade for a global recovery

Report from the event

Speakers who contributed to our discussion:

• MEP, Vice Chair, INTA Committee, Anna-Michelle Asimakopoulou
• Head of Canada Mission to the EU, H.E. Chris Cooter 
• Minister in the Economic section, Japan Mission to the EU, Akihiro Okochi
• Head of Unit, Services and Digital Trade, DG Trade, Christophe Kiener
• Counselor, Australia Mission to the EU, Juliana Nam
• Chair Digital Trade Policy Group, DIGITALEUROPE, and Senior Trade Manager, Samsung Electronics, Diane Mievis

The debate was moderated by Cecilia Bonefeld-Dahl, Director General, DIGITALEUROPE.

As the Covid-19 pandemic rages on, the importance of digital trade has never been clearer: economies were kept running, if sluggishly; eCommerce and cloud computing got around border closures. How to translate these lessons into meaningful policy innovation?

The global trade agenda, a natural source of solutions, has faced massive impediments: WTO troubles, slow progress on multilateral and bilateral talks. Digital connectivity seems to be more helpful to the business world than to negotiators.

As a result, this year’s G20 faces mounting pressure to pick up the pace on moving forward solutions that can spur global recovery. Political momentum is crucial to advance progress on eCommerce disciplines at the WTO, as well as expansion of the Information Technology Agreement – both essential tools to ensuring that digital trade can bolster the recovery, and render international commerce more crisis-proof. But more than ever, these plurilateral solutions will depend on a broad-based consensus on how to rebuild the world economy on the basis of open and fair trade.

Easy wins

Everybody emphasized the role of the pandemic in revealing how important ICT is in providing the under-carriage of modern economies and how much we owe to digital connectivity for mitigating economic and health damage in the fallout of COVID-19.

There was an equally strong consensus to support the multilateral system, with particular reference to WTO, OECD, G20. The latter structure also happens to be the latest, whose relevance was enhanced by the financial crisis of 2008: however informal, it helps more established organisations work on firmer grounds and in a more coordinated fashion.

All participants also called for tighter cooperation between industry and government as digital technology makes negotiations more complex, if more fruitful too.

A bumpy road to digital trade

Digital trade was portrayed as a catalyst for data-driven economies and societies, for international cooperation – including via ongoing WTO reform – and for the whole geopolitical democratic order. If data is the oil of the 21st century, proper regulation should be seen as the soft power weapon of choice to preserve and enhance international trade in a value-based context. This is where domestic agendas meet trade strategy: human-centric, inclusive plans aimed to make technology accessible to everybody, rich or poor, and every business, big or small, need to inform trade policy.

The EU agenda is a case in point : the Green Deal and the digital transformation, the main two pillars of growth, do inform all ongoing negotiations, whether bilateral or multilateral. As a consequence, the moratorium on customs duties on e-transmissions, paperless transactions, e-signature, e-declarations, etc, are now central to all trade negotiations, along with trickier issues such as free flow of data, cybersecurity, or net neutrality. Such technology-oriented trade commitments do not constrain the ability of countries to regulate domestic activities as they like, provided they do it in a non-discriminatory way. Digital trade is global in its very essence, however, so without a multilateral solution (e.g. under the aegis of the WTO) , there is a clear risk of regulatory fragmentation coming from the many bilateral and regional agreements containing rules on digital trade.

While bringing in added layers of complexity in the negotiating process, leading-edge technology such as AI, Big Data, IoT, Blockchain, etc opens new horizons for making ure that the digital transformation will benefit all citizens. The Global Partnership on AI is a good example: its 15 signatories are committed together to confront head-on critical areas such as responsible AI, data governance, future of work, etc. Former Prime Minister Abe’s advocacy of Data Free Flows with Trust (DFFT) aims to combine the advantage of free flows of data which generate higher productivity, greater innovation and improved sustainable development with their safe circulation, which addresses challenges such as privacy, data protection, IPRs, security and the proper use of AI.

Look no further to understand why the e-Commerce negotiations matter so much.

Giving e-Commerce negotiations a chance

Like trust is the single most critical ingredient to take a nation’s citizens into appropriating technology, likewise all countries will not embrace digital trade without clarifying what’s in it for them. Given that agreeing a balance between freedom and protection among global partners remains a tall order, it sounded reasonable to build on the initiative of Australia, Japan and Singapore by having like-minded countries that share a sense of emergency form a critical mass and start evangelizing the rest of the world.

85 countries are now on board, way beyond the ‘usual suspects’ that are born free-traders: China, Brazil, Russia and a raft of developing countries have indeed decided to take part in the negotiations.

However, managing 85 delegations busy addressing more than 50 challenges, classic or brand new, will take time, especially as lobby conversations are momentarily impossible in-between formal sessions. Shedding stereotypes will be a healthy first step to ease further conversation. This being said, the only way out is fast forward, making it sound reasonably optimistic to bet on a deal by 2022.

Choice is probably a key instrument. Negotiators are seriously considering a staggered accession mechanism whereby not all signatories would be committed to all provisions from Day 1. Where there is a will, there is a way was a leitmotiv of this conversation, which showed that the pandemic has only added a sense of urgency among the main stakeholders in this coalition of the willing.

A nagging concern to be practical

If anything, the pandemic enhances the necessity to focus on practical steps. History shows that ruthless competition based on self-interest will occasionally follow great turmoil in the global economy. If  we are serious about digital trade, we should therefore address urgently this conspicuous blind spot: there are currently no common global rules at hand, except for the limited number of legal frameworks established through regional trade agreements such as the TPP and the Japan-EU EPA. There is no alternative, to avoid a state of turmoil and the “law of the jungle” in the digital space, to working together under the auspices of multilateralism.

Reinvigorating the WTO debate under the Joint Statement Initiative on Electronic Commerce was a no-brainer, not only for Australia in its capacity as co-convenor but for all participants in today’s conversation: this is a top priority, along with the long-lasting reform of the dispute settlement system, enhancing transparency and the issue of special and differential treatment. Interestingly, the Japan-UK EPA agreed earlier this month contains ambitious provisions in its e-Commerce Chapter, including on the free flow of data and the prohibition of data localization requirements, which go far beyond the provisions of the current Japan-EU EPA.

Other templates worth emulating

The mutual adequacy arrangement agreed between Japan and the EU in July 2018 created the world’s largest area of safe data flow based on a high level of protection for personal data. Similar negotiations are under way between the EU and other countries such as South Korea or in the Asian-Pacific region, mainly through the “Cross Border Privacy Rules (CBPR)” initiative of the APEC, a government-backed privacy certification which companies can join to demonstrate compliance with internationally recognized standards of data privacy protection. CBPR membership has steadily expanded during the past few years with Australia and Chinese Taipei recently joining.

On praising the role of digital technology in helping to weather the pandemic we cannot ignore the IT equipment that supports the circulation of data. 20 years after concluding the negotiations on the Information Technology Agreement (ITA), and 5 years after the expanded ITA2, an increasing number of products are now being connected to the ‘Internet of Things’, which makes it difficult to discern electrical appliances from IT products: this is a clear invitation to start discussing on which products should be covered by a further expanded ITA, in addition to continued efforts to widen membership of the existing agreement.

No less exemplary is the trilateral EU-US-Japan cooperation aimed to nurture the emergence of a level playing field by tackling hurdles such as industry subsidies, forced transfer of technology, ets, thus paving the way for later adoption by the whole WTO membership.

The voice of business

The digitally transformed business has set clear priorities:

• Agree global set of rules
• Remove NTBs and stay away from digital protectionism (forced localization or disclosure of source code, tech transfer, access to procurement, etc).

In the perspective of the European Commission’s Trade Policy Review, focus on:

• Data governance
• Open digital markets
• Access to information to boost innovation based on AI, IoT, Blockchain, etc
• Global digital infrastructures designed along common standards
• Cooperation on emerging technologies
• Economic cooperation dialogue in critical areas: taxation, green tariffs, climate change.

Closer cooperation is urgently needed in harmonizing export control and expanding the ITA so that companies operating from some regions of the world are not put at a disadvantage, which will backfire on the innovative capacity of the geography concerned.

This motto may help concentrate the mind on the cost of procrastinating: no trade, no growth, no jobs.

This workshop allowed participants to take heart from the extent of the common ground in multilateral trade environments, while sounding a wakeup call with respect to the unfinished business at hand.