Trade changed significantly in the years following the creation of the World Wide Web in 1990, and then again exponentially with the advent of the first iPhone in 2007. Rather than more traditional trade shipped by sea or air, “digital trade” can now be weightless, instantaneous and low-cost. But if trade has not stood still in the last thirty years, trade rules are having to play catch-up. A new agreement signed last week by New Zealand, Singapore and Chile is a helpful step along the path – just as COVID-19 is underscoring the centrality of digital connectivity in all aspects of life.
What is “digital trade”?
Global digital business is a very modern phenomenon, but can sometimes be hard to recognise as “trade”: while e-commerce is relatively straightforward (buying and selling physical goods via Amazon or Alibaba, for example), the term also encompasses the use of digital technologies such as blockchain to manage supply chains and ‘smart’ contracts, selling services or creative content via websites or email, streaming (think Netflix or Spotify), videogaming, back-office tools like Xero or cloud computing, and many other “weightless” ways of doing business across borders. In short, digital trade is a modern business reality.
However, trade rules have struggled to keep pace with the very rapid evolution of these new ways of doing business. New Zealand and a number of other countries in the Asia-Pacific have, over the last few years, tried to put in place some rules, mostly focused on goods e-commerce, through the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and a handful of earlier trade deals. However, the signature last week of a new agreement (fittingly, conducted entirely by virtual means), the Digital Economy Partnership Agreement (DEPA), helps to lay the groundwork for a more ‘digital-friendly’ trade policy going forward. And, as if we needed reminding, COVID-19 has vividly demonstrated the vital importance of better digital capability and connectivity for all kinds of business, both within and across borders.
“If adopted more broadly, in whole or in part, DEPA could help to grow an enabling environment for truly “borderless” modern global trade.”
What does DEPA do?
DEPA is an agreement between New Zealand, Singapore and Chile. It is divided into twelve “modules”, or subject-specific sections, spanning from the relatively mundane (“trade facilitation”, entailing, for example, recognition of electronic versions of export certificates, or support for the use of payments via the internet), through to the lofty heights of grappling with principles and ethics for regulating complex frontier technologies such as artificial intelligence and digital identity. In some areas, DEPA simply puts in place an undertaking to collaborate on the development of new rules, new policy approaches or improved ‘interoperability’ (either technical or regulatory) to help systems to work seamlessly across the three countries.
The agreement also aims to ensure that the benefits of the digital economy can be shared as widely as possible. To that end, DEPA includes innovative approaches such as establishing programmes to foster the participation of women and indigenous peoples in the digital economy, or setting up a “Digital SME Dialogue” to promote the benefits and opportunities in DEPA for small businesses.
Shrinking the world – digitally
For New Zealand exporters, the ‘tyranny of distance’ has been an ever-present challenge. The digital economy, by contrast, offers the potential to shrink the world, with instant global access to customers and reduced costs – whether you’re in the business of milk powder, smart medical devices or software engineering. The biggest commercial impacts in the short term are likely to come from the way DEPA encourages the use of digital tools across borders – for example, eventually being able to use e-invoicing when doing business with customers in Singapore or Chile, or having greater confidence about the quick delivery of e-commerce shipments into other markets. But because of the growing role of emerging technologies such as AI, the work that DEPA has begun in order to deepen collaboration on how best to design “trade” rules for these elements will be increasingly important.
DEPA is certainly not perfect: it has not been able fully to resolve some of the most complex and contentious issues of the modern digital cross-border economy, including around privacy, security and data governance, although it creates a solid basis for collaborating to make progress on these challenging areas. It will be crucial to keep working on these aspects: in particular, establishing and maintaining trust (for individuals, for businesses, for countries and across borders) is fundamental to the growth of the digital economy, and getting interoperable and effective approaches on cybersecurity and personal data protection across borders should be a high priority.
It will also be helpful to press ahead on the areas where only the ‘roadmap’ has been put in place – on elements such as AI, open data, digital identities, competition policy and other potentially transformative new elements, inputs from business, including from the tech sector, will be really important in helping policymakers to understand what matters most, and ensuring that new approaches deliver inclusive, trusted, fair and ethical outcomes.
Here’s hoping that others join the party
New Zealand, Singapore and Chile are three small, agile countries, well-known not just for their openness but also for their creativity when it comes to trade. DEPA burnishes that reputation. That said, DEPA’s significance does not sit primarily with the current members, or even with others in CPTPP (on which many of its provisions are built). DEPA matters most for its demonstration effect to the wider world. If adopted more broadly, in whole or in part, DEPA could help to grow an enabling environment for truly “borderless” modern global trade.
This post was prepared by Stephanie Honey, Associate Director of NZIBF