This op-ed first appeared in The Business Times.
Last month, in a low-key, virtual signing ceremony, three Asia-Pacific governments took an important step that we may look back on as a turning point in international commerce. Singapore, New Zealand and Chile signed a new kind of trade agreement–the Digital Economy Partnership Agreement (DEPA)–to secure a strong digital future. In the process, they showed real leadership at a time when international economic cooperation seems harder to come by than ever.
Fifteen years ago, these same three countries, together with Brunei, led the world by signing an high-standard trade agreement called the Trans-Pacific Strategic Economic Partnership (or "P4") Agreement, which later evolved into the breakthrough Trans-Pacific Partnership (TPP).
At the time, I was serving as Deputy US Trade Representative in President George W Bush's administration, with responsibility for overseeing US trade relations with Asia. Having just concluded a series of bilateral free trade agreements, the P4 Agreement caught our attention as a potential model for the next phase of trade liberalisation–a plurilateral agreement that was bold and future-oriented.
Now, in 2020, these countries have forged ahead with an agreement that may yet again serve as an international template. DEPA establishes new rules to facilitate cross-border digital trade. It builds on the most advanced agreements like the US-Mexico-Canada Agreement (USMCA) to ensure open data flows which underpin the modern economy. And it includes standards that will enable cross-border electronic payments and ensure privacy and cybersecurity. Just as traditional trade agreements help reduce regulatory friction between trading partners, the adoption of rules and standards on these important next-generation digital trade issues will facilitate the seamless integration of digital economies and create new opportunities for digital commerce.
Taking the Lead
But DEPA also recognises that to ensure the proper functioning of the digital economy, we need more than a series of do's and don'ts. In a first for trade agreements, DEPA sets out cooperative fireworks on emerging tech issues such as Artificial Intelligence (AI), data innovation and digital identities. In these evolving digital spaces, no one country has all the right answers–and cooperation is critical to build common and interoperable frameworks to unleash these new technologies.
We can learn a few things from this first-of-its-kind trade agreement.
First, when it comes to global leadership, ideas still matter–and high-quality ideas can come from anywhere. Singapore, New Zealand and Chile are not the largest countries in the world. But they have consistently punched above their weight in pioneering international trade initiatives that go on to gain wide traction. In DEPA, they have developed a new agenda on digital trade that should be an inspiration for other countries, both large and small, that are looking to establish trade arrangements for the digital era.
Second, at a time when international cooperation seems to have fallen out of favour, these three countries have doubled down on international collaboration. Bowed neither by the pandemic nor growing protectionist trends globally, they worked together to create a meaningful new international regime focused on the sector that will define the 21st century economy. And in so doing, they have confirmed their positions as global leaders.
New Way to Do Business
Third, providing business certainty in uncertain times matters. Displaying a strong commitment to open and transparent digital trade rules will be as important as fiscal and monetary measures in driving economic recovery. In a more resource-constrained world, this can give countries a competitive edge in attracting quality investments that will generate good jobs and benefit the broader economy. DEPA is a clear signal that Singapore, New Zealand and Chile intend to remain open and attractive places for trade and investment, even as they continue to focus on domestic economic recovery.
The digital economy's power to enable trade, resilience and opportunity has been on full display during the Covid-19 crisis. Even as borders were closed, travel curtailed and lockdowns imposed, cross-border online purchases remained strong. And in many countries, small businesses have been able to survive only because of digital tools.
This shift towards greater online commerce and digital trade is expected to continue, as consumers opt to limit their physical interactions, get used to the convenience of online shopping and look for more competitively-priced products in the global marketplace as they cut back on spending. For businesses–especially small ones–depressed demand growth makes it even more important to go digital and global to diversify risk and gain new customers.
With DEPA, Singapore, New Zealand and Chile have strengthened their economies to compete and thrive in a more challenging global economic environment. Policy-makers around the world would be well-served to pay close attention to this fresh approach on digital trade, and work towards a global digital trade architecture that builds upon it.
Karan Bhatia is vice-president of Government Affairs and Public Policy at Google, a corporate member of the Council of the Americas.