The post-TPP future of digital trade in Asia

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Electronic Frontier Foundation | 2 March 2018

The post-TPP future of digital trade in Asia

by Jyoti Panday

On March 8, trade representatives from eleven Pacific rim countries including Canada, Mexico, Japan, and Australia are expected to ratify the Trans-Pacific Partnership, now known as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). The agreement has been slimmed down both in its content—22 items in the text have been suspended, including the bulk of the intellectual property chapter—and also in its membership, with the exclusion of the United States which had been the driver of those suspended provisions.

What remains in the CPTPP is the agreement’s Electronic Commerce (also called digital trade) chapter, which will set new, flawed rules for the region on topics such as the free flow of electronic data, access to software source code, and even rules applicable to domain name privacy and dispute resolution. But it’s not the only Asian trade agreement seeking to set such rules. There’s another lesser-known but equally important agreement under negotiation by sixteen countries, called the Regional Comprehensive Economic Partnership Agreement (RCEP).

Like CPTPP, RCEP would cover issues that are critical to the digital economy such as custom duties on electronic products, supply of cross-border services, paperless trading, telecommunications, intellectual property, source code disclosure, privacy and cross-border data flows. But unlike CPTPP, RCEP includes the giants of China and India, meaning that the agreement would represent a massive 28.5 percent of global trade. While India’s commitment to the deal has become somewhat equivocal, RCEP holds an important place in China’s ambitions to consolidate its leadership role in the region.

India Not Ready to Compromise

The RCEP negotiating parties met last month in Indonesia between February 2 and 9, and although continuing secrecy in the negotiation process makes it difficult to accurately assess progress, a series of missed deadlines point to growing uncertainty about the conclusion of the talks.

One of the sticking points is that countries such as India are pushing for a strong services pact which would facilitate the free movement of professionals, whereas China, South Korea, Japan, Australia and New Zealand remain reluctant to commit. On the other hand the Indian government is being cautious about opening up its markets and has incentives to draw out negotiations with elections scheduled next year. India’s position on intellectual property is also different from other negotiating countries such as Japan and Korea, which are pushing for a harder, TPP-like line.

As pressure to conclude the deal has intensified, calls for India to exit or block an speedy conclusion of the agreement have also grown louder. At the Indo-ASEAN meeting in New Delhi, Indonesian Trade Minister reiterated that the ASEAN bloc expected India not to block attempts to conclude the RCEP this year. Mounting expectations may lead India to withdraw from the talks, a move that would impact the strategic and economic value of the agreement.

Can Digital Trade Improve Internet Freedom in China?

With India’s continuing participation in doubt, Beijing has thrown its weight behind the agreement. Chinese Foreign Ministry spokesperson Hua Chunying recently underscored that Beijing attaches great importance to the RCEP talks and plans to ensure ratification of the agreement by year end. Following the US withdrawal from the TPP, China sees an early conclusion of the RCEP as critical for creating confidence in and promoting its regional and global trade leadership, especially given its absence from the CPTPP.

Addressing the lack of progress on RCEP has gained urgency as China’s trade war with the US has intensified. US is contemplating legislation that would forbid U.S. government agencies from purchasing ICT equipment produced by Chinese ICT companies, or their subsidiaries and affiliates. If the law is passed government agencies would be restricted from doing business with any entity that uses equipment produced by those companies.

Last week, concerns about China banning the use of Virtual Private Networks (VPNs) as part of its proposed regulation for telecommunications networks prompted the US to demand an intervention from the World Trade Organization (WTO). What makes this development interesting is that it is the first time that a trade resolution has been sought to address, even incidentally, a serious human rights issue for Chinese Internet users. It is also interesting that the remedy sought is under the existing WTO rules, which at least raises questions about the added value of the new generation of digital trade agreements such as CPTPP and RCEP.

As countries head into the next round of RCEP negotiations the challenge before negotiators is reaching an speedy conclusion versus ensuring a balanced agreement. It’s going to be difficult to achieve that balance with the current level of secrecy and lack of consultation surrounding the agreement. Just as the same flaws in the negotiation process for the CPTPP have resulted in an agreement that fails to address users’ needs or to preserve their digital rights, RCEP is unlikely to have anything more to offer for Internet users and innovators.