The UK signed two more free trade agreements (FTAs) this past week, adding to the already impressive total of 57 and nearly £200 billion worth of trade that many sceptics had felt would be impossible once outside the EU’s protective sphere. By making further ground in Asia (after the success with Japan) the UK is in a strong position to help establish global rules in the vitally important sphere of digital trade, now one of the focal points of economic activity in many sectors.
The second most-recent UK FTA (after Vietnam, done the day after) is with the energetic city-state Singapore, the UK’s largest trading partner in south-east Asia. As with the recent Canadian deal, the UK-Singapore FTA is a continuity agreement which will allow the UK to retain the benefits it had enjoyed under the EU’s FTA with Singapore following the UK’s exit from the EU’s treaty network after the end of the Brexit transition period. The Singapore agreement will cover more than £17 billion of trade in goods and services, maintaining zero tariffs on 84 per cent of goods, with additional tariff reductions being phased in through 2024. The Singapore FTA is the first between the UK and a member of the Association of Southeast Asian Nations (ASEAN), the high-growth 10-nation regional bloc that also includes countries such as Indonesia, Thailand, Malaysia and the Philippines.
In recognition of the growing significance of digital trade to the two economies, the UK and Singapore also agreed last week to begin negotiations on a Digital Economy Agreement next year – a crucial development that could help pave the way towards a global consensus on the rules governing digital trade. The World Trade Organization (WTO) is currently seeking, through its Joint Statement Initiative (JSI) on Electronic Commerce, to negotiate a plurilateral agreement on trade-related aspects of electronic commerce, ideally eliminating tariffs and discrimination on data flows, preventing data localization and providing security for digital transactions. So far progress here has stalled, and it remains to be seen what form eventual multilateral, or near multilateral rules in this area will take.
Digital trade featured in the Regional Comprehensive Economic Partnership (RCEP), the mega-regional agreement concluded among various Asian countries including Singapore as well as the giants China and Japan. Singapore also made digital trade commitments as a signatory of the 11 nation Comprehensive Progressive Trans-Pacific Partnership (CPTPP) which the UK has stated an intention to join in the near future (and which Singapore welcomes). Singapore has signed Digital Economy Agreements with Australia (the SADEA) and is a party to the Digital Economy Partnership Agreement (DEPA) with Chile and New Zealand. These agreements are broadly liberalizing in their approach, aligning digital rules and standards, facilitating interoperability between digital systems, supporting cross border data flows and safeguarding personal data and consumer rights. They also encourage cooperation between economic partners in new fields such as digital identities, Artificial Intelligence and data innovation.
Following the path that Singapore has laid in its FTAs and the one the UK has pursued in its FTA with Japan, the proposed UK-Singapore DEA will likely establish modern rules on cross-border data including financial services between Europe and South-east Asia, promoting cross-border digital connectivity and interoperability of digital standards and systems by facilitating free flow of data and preventing costly, inefficient data localization.
One of the major stumbling blocks on the road towards liberalization in digital trade, apart from the EU’s tight restrictions on privacy which have already threatened trans-Atlantic data flows, appears to be the mega-regional RCEP, of which, as noted above, Singapore is a signatory. Unlike the more open system contained in the CPTPP, the RCEP allows signatories to impose whatever national regulatory restrictions they wish, as long as they are applied in a non-discriminatory way. Furthermore, RCEP’s dispute settlement system does not apply to its digital trade chapter, rendering some of the provisions, such as non-discrimination, largely meaningless. It also has a self-judging national security exemption, allowing fundamental restrictions on data flows, including data localization, which was likely included at the behest of China. The RCEP also worryingly lacks commitments on non-disclosure of source code. If the RCEP may be seen as a blueprint for the eventual WTO framework on digital trade, since it evidently reflects the lowest common denominator in agreed terms, this could be a setback for global digital commerce.
We can hope that the UK’s foray into Asia, including a strong DEA with Singapore based on the language of the CPTPP can help establish more open rules for digital trade, preventing unnecessary or arbitrary barriers where possible. Future UK FTAs with Australia and New Zealand will also hopefully include these kinds of commitments as they are the most conducive to international trade in data-reliant industries. Supplemented by the UK’s advocacy at the WTO for strong global rules on digital trade could work towards unlocking this key aspect of global economic growth for the 21st Century.
For more information on Digital Trade – see the Digital Trade Research Group at City
See also City’s Trilattrade ESRC Research Project on UK-EU-Japan trade relations
Professor of International Economic Law
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