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Unfettered data flows and e-commerce are vital for the health of the global digital economy. Some have called data the “new oil,” because so much modern economic activity relies on it. The analogy is not perfect, however; the Organisation for Economic Co-operation and Development has noted that unlike oil, data is not scarce and it can be distributed at virtually no cost. Cross-border data flows have grown dramatically, now that more than half of the world is believed to be online compared with just 20% only about a decade ago. The advent of the Internet of Things and increasingly-sophisticated artificial intelligence has boosted data demand, though some governments view the free flow of data across borders as a threat to sovereignty and their citizens’ right to privacy. This has led to the erection of barriers, or “data localization.” China and Russia in particular have sought to regulate content and to suppress any deemed to pose a security threat. Meanwhile the European Union has implemented the General Data Protection Regulation to give people more agency over the use of their personal data - which places a burden on foreign companies hoping to engage online with EU residents. In a bid to avoid the negative impacts of restricting data flows, an increasing number of countries have included provisions on the free flow of data in trade deals - and prohibitions on data localization. Examples include 2018’s Comprehensive and Progressive Agreement for Transpacific Partnership, the updated Singapore-Australia free trade agreement, and the United States-Mexico-Canada Agreement. These deals have also addressed other means to enable digital trade such as a permanent moratorium on custom duties on electronic transmissions, electronic contracts, electronic payments, and paperless trading. The EU has taken a relatively cautious approach to regulating digital trade, reflected in negotiated deals with Australia, New Zealand, and Tunisia. After many years of negotiation, the Regional Comprehensive Economic Partnership was signed by Asia-Pacific nations in November 2020 - it includes a chapter on electronic commerce that might be a good indication of the kind of related agreement we can expect at the World Trade Organization (should there be one). The RCEP’s signatories include the 10 member states of the Association of Southeast Asian Nations (ASEAN) as well as Australia, China, Japan, New Zealand and South Korea.

Digital Trade

KEY TRENDS

Trade and Investment