As businesses around the world pursue digital transformation to modernise their operations, politicians have realised digital trade, data rules, and services need to be enshrined in formalised agreements too.
Trade between nations is slowly evolving to include digital services and technological aspects that were previously unheard of. This has led to the UK, for example, aiming to break down digital trade barriers to help businesses export services abroad.
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Taking this a step further, some countries are formally ratifying digital agreements to cooperate when it comes to technology. The US and Japan, for example, signed a digital trade agreement in October 2019, which signified the importance of the digital economy.
While addressing the G20 Leaders’ Summit in October last year, Chinese President Xi Jinping revealed the country had decided to apply to join the Digital Economy Partnership Agreement (DEPA). This is a first of its kind agreement between Asia-Pacific and Latin American nations that establishes new approaches to digital trade and supports interoperability. If successful, China would be the largest economy to join the agreement.
What is DEPA?
This partnership is a trade agreement established in May 2019 between Singapore, Chile, and New Zealand. The deal was signed electronically, due to the pandemic, in the following June, before it finally came into force on 7 January 2021 for New Zealand and Singapore, and Chile in November.
The agreement, which was the first digital economy agreement signed by Singapore, establishes collaboration in digital trade issues, addresses concerns arising from digitalisation, and promotes interoperability between different regimes.
DEPA’s three signatories claim it’s the first agreement of its kind and represents a new breed of economic engagement and trade in a digital era, and comprises three key elements.
DEPA: Facilitating end-to-end digital trade
Digital identities: Develop safe and secure digital identities that are mutually recognised.
Paperless trade: Reduce time for document transit and cargo clearance.
E-invoicing: Shorter invoice processing time, fast payment, and cost savings.
FinTech and E-Payments: Promote cooperation among companies in the FinTech sector.
DEPA: Enabling trusted data flows
Personal data protection: Develop mechanisms to protect personal data that is transferred across borders, based on international frameworks.
Cross-border data flows: Businesses can send information across borders and serve customers, no matter where they are located.
Open government data: Expand access to and use of open government data to generate new opportunities for businesses.
Data innovation and regulatory sandboxes: Encourage the development of new products and services by promoting data-driven innovation across borders.
DEPA: Building trust in digital systems and facilitating opportunities for participation in the digital economy
Artificial Intelligence: Promote the adoption of ethical AI governance frameworks, with principles the countries must agree to, to harness AI responsibly.
SMB co-operation: Establish capacity-building efforts to promote information sharing and exchange.
Online consumer protection: Adopt laws that guard against fraudulent, misleading, or deceptive content that harms consumers in online commercial activities.
Digital inclusivity: Remove barriers to the digital economy and promote digital inclusion and participation.
Why does China want to join DEPA?
China’s ambitions to join DEPA are in line with plans to deepen domestic reforms and further open up the country to the outside world, which began forty years ago, officials say. Being part of the agreement would also help China strengthen cooperation with its members.
Chinese officials haven’t explicitly stated the nation’s motivations behind joining DEPA, but it’s an attractive proposition, given China’s economy and labour market transition from traditional industries towards high-tech and services-based sectors, according to Dezan Shira & Associates. It also helps China become a high-tech powerhouse if it can strengthen international cooperation and trade in the digital economy.
A key part of DEPA, particularly appealing to China, is the focus on boosting the participation of SMBs in the digital economy. SMBs form a key part of China’s economy and accounted for 80% of the nation’s non-government employment as of 2019. By joining DEPA, it should give China’s SMBs a boost by giving them an incentive to undergo digital transformation and engage with the digital economy.
Can China join DEPA?
Before being admitted to the agreement, China will have to modify its data laws, as DEPA demands high standards on data openness and transparency for its members. There are, in particular, requirements for cross-border flow of data and data storage, which may go against China’s Personal Information Protection Law (PIPL).
PIPL, for instance, requires companies that handle the personal information of users in China to undergo a security assessment before transferring the data overseas. DEPA, however, stipulates cross-border transfers of information by electronic means, including personal information, should be permitted.
DEPA also underlines that businesses or investors shouldn’t have to use or locate computing facilities in a country’s territory as a condition for conducting business in that territory. This goes against PIPL which requires operators to store personal data they collect in China within its borders. China’s new data laws may, on the other hand, even help its position, as PIPL contains strong measures for users online, aligning with DEPA’s objectives.
Aside from ensuring these data laws comply with DEPA, China’s fate is left in the hands of the agreement's members. When considering new applications, the current signatories to take into account whether China is prepared to follow the agreement’s provisions. The Asian Trade Centre says this is always true for accession processes, but might be even more relevant in a deal that’s built around shared norms and rule creation for the future.
Which other countries are trying to join DEPA?
China isn’t the only country that’s expressed an interest in joining DEPA. Canada registered interest to begin exploratory discussions to join the agreement in December 2020, which was welcomed by Singapore.
Then, in October 2021, New Zealand, Chile, and Singapore agreed to commence negotiations for accession to DEPA by South Korea. South Korea believes the pact could serve as an extensive platform for establishing a global digital cooperation network. Approval from DEPA’s joint committee is required for any nation to become a member, although there are currently no specific accession criteria.
