APEC digital economy and trade

Data is foundational for increasingly digital economies and the rapidly expanding world of digital trade. The Organisation for Economic Co-operation and Development (OECD) notes that the creation of economic and social value increasingly depends on the ability to move and aggregate data across a number of locations scattered around the globe.¹ According to the McKinsey Global Institute, global data flows grew at nearly 50% per annum between 2010 and 2019 and around 40% annually between 2019 and 2021.²

Expanding opportunities for digital trade has been a focus of APEC for many years. This has included work across a range digital trade issues and related regulations that affect cross-border data flows, such as privacy regulation. In 2017, APEC leaders sought to realize the potential of the internet and digital economy and adopted the APEC Internet and Digital Economy Roadmap (AIDER), which provides guidance on priority areas and actions to promote innovation and bridge the digital divide in the APEC region. In 2023, APEC ministers reaffirmed their “call to accelerate the implementation of the APEC Internet and Digital Economy Roadmap.” The AIDER has eleven key areas of focus that cover the full range of regulatory and other policy issues that affect digital trade, such as the need for access to broadband digital trade regulation, building trust in the use of information and communications technology, and expanding access and inclusiveness.⁴

In 2018, APEC created the Digital Economy Steering Group to facilitate development of the internet and digital economy and to advise senior officials on implementation of the AIDER. The roadmap is also a key element of the broader APEC Putrajaya Vision 2040, which sought a “an open, dynamic, resilient and peaceful Asia-Pacific community by 2040,” with three key economic drivers—(1) trade and investment, (2) innovation and digitalization, and (3) strong, balanced, secure, sustainable, and inclusive growth.⁵ Making progress on the AIDER will strengthen all these drivers and thereby move APEC toward its 2040 vision.

The significance of APEC’s digital trade outcomes in 2023

Beyond these high-level declarations of support, the U.S. APEC host year led to a number of specific working-level outcomes on digital trade. The most significant ones occurred in the areas of privacy, open government data, and cloud-computing electronic invoicing. These outcomes are all practical, action-orientated steps that member economies can pursue and expand on in following years. Progress in APEC on digital trade stood in contrast to setbacks at the World Trade Organization (WTO) and in negotiations for the Indo-Pacific Economic Framework. In October the United States announced that it was ending support for several key WTO proposals on data flows. The following month, the fourteen parties to the Indo-Pacific Economic Framework—all of them APEC members except for Fiji—failed to reach a consensus on the trade pillar, which the United States had hoped would be finalized and announced on the margins of APEC Leaders’ Meeting.

Privacy and data flows. One important outcome from APEC 2023 was establishing the Global Cooperation Arrangement for Privacy Enforcement (CAPE).⁹ A subset of APEC members (the United States, Canada, Japan, South Korea, the Philippines, Singapore, and Chinese Taipei) had previously decided to globalize the APEC Cross-Border Privacy Rules (CBPR) in April 2022.¹⁰ The APEC CBPR system builds on the APEC Privacy Framework as a baseline set of privacy protections agreed to by member economies to facilitate cross-border flows of personal data. The APEC CBPR stands in contrast to the European Union’s General Data Protection Regulation in that it does not require APEC economies to adopt any one member’s privacy rules and relies on companies to ensure that their privacy policies are consistent with the APEC Privacy Framework, supported by oversight in each participating member.

Open government data. Another outcome from APEC 2023 was endorsement by member economies of the Non-binding Principles for Facilitating Access to Open Government Data (OGD) in the APEC Region.¹¹ Governments store large amounts of data, much of which is nonsensitive—i.e., does not raise privacy or security risks—and could therefore be made available for public use at low or no cost. Making progress on expanding access to government data creates new opportunities for researchers, consumers, and innovators. In addition, OGD can be used to increase government transparency, service delivery, and accountability. Commitments to OGD have increasingly been included in digital trade chapters in traditional free trade agreements, such as the US-Mexico-Canada Agreement (USMCA).

There are various approaches and levels of ambition when it comes to making data sets held by governments accessible to the public. Perhaps the most straightforward is to identify data sets that do not contain sensitive or personal data and make them available online. To be useful, however, these data sets should be machine readable and, where possible, made available in a consistent format that can facilitate combining otherwise separate data sets to generate new insights. More ambitious forms of OGD include allowing vetted individuals and organizations access to more sensitive data for research or other legitimate purposes.

The non-binding principles provide a framework for governments when developing OGD that, if followed, would strengthen its impact on opportunities for innovation and growth in the digital economy. This includes, for instance, the principles that "datasets are published on interoperable and connected registers to allow for more comprehensive and insightful datasets" and to "ensure the accuracy, reliability, and timeliness of OGD." Another important element is to increase awareness of OGD and encourage use of data within as well as outside government. Some of the APEC OGD principles speak to these needs as well.

Cloud computing. Cloud computing is a key enabler of the digital economy, as the experience of the internet is increasingly intermediated in the cloud. Moreover, the cloud has become central to how AI models are trained and then delivered. For instance, ChatGPT is made available via an API accessible in the cloud. Cloud computing raises a host of regulatory issues that affect cross-border data flows or require data to be localized, which can prevent global cloud providers from offering the latest security and functionality. Developing cloud-computing centers also requires significant investment as well as access to reliable (and preferably green) energy.

In addition, APEC 2023 held a range of workshops and trainings aimed at building member economies’ understanding and skills for the digital economy. The APEC Digital Month, held in August in Seattle alongside the third set of senior officials’ and ministerial meetings, included multiple workshops and capacity building on a range of digital topics, such as addressing barriers to micro, small, and medium-sized enterprises engaging in digital trade, digital assess, digital health, and standards for emerging technologies.

Digital trade. The above outcomes can enable specific components of digital trade, such as cloud computing, while also enhancing digital trade by facilitating cross-border flows of personal data. APEC 2023 delivered on some of the nuts and bolts of digital trade itself, specifically the agreement on Principles for the Interoperability of Electronic Invoicing Systems in the APEC Region.¹⁴ Electronic invoicing can facilitate digital trade by reducing administrative costs and facilitating payment in a more timely manner than is possible with paper invoices. Indeed, trade agreements that have provisions on e-invoicing have increased trade in digitally delivered services by 44%.¹⁵ Many of the principles for e-invoicing draw on what has been developed in trade agreements with strong digital provisions, such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership and the USMCA. In addition to giving electronic invoices the same legal effect as paper invoices issued for the sale of goods or services, these actions establish the policies and infrastructure necessary to facilitate the use of e-invoicing and allow buyers and sellers to exchange documents in a secure manner. These developments promote the use of common, open standards and protocols to enable interoperability among different e-invoicing systems.

Looking forward to APEC 2024

APEC 2024, hosted by Peru, has a lot to build on following the United States’ host year. Perhaps the top priority is to continue to make progress on the outcomes from 2023, particularly cloud computing, OGD, CAPE, and digital trade issues. For instance, when it comes to digital trade, APEC could further the work around electronic invoicing to remove other barriers to cross-border e-commerce, such as recognition of digital signatures, digital authentication, and digitization of customs procedures to support trade facilitation. The outcomes on OGD should also be seen as a first step. APEC economies have approached the issue of open government data with different levels of ambition and experience. More could be done to share lessons on navigating technical and cultural barriers and making more government data available for use. Agreement on CAPE continues the momentum of globalizing the APEC CBPR that is being carried out now by the Global CBPR Forum. However, the Global CBRP Forum has added only two members (Australia and Mexico) and one “associate” (the United Kingdom). APEC needs to not only increase participation in the CBPR regime within APEC but also expand membership globally to create the network effects that will allow CBPR to successfully support the cross-border transfer of personal data.

One area where APEC made minimal progress in 2023, but could do more in the future, is AI. Specifically, it should focus on realizing the economic and trade opportunities of AI among its member economies. The release of GPT-4 and continued growth in foundational AI models have drawn global attention to the economic potential and the capacity for AI to have important developmental outcomes. AI projects to boost responses to climate change and improve access to healthcare are just two areas where APEC could develop specific initiatives. AI will also have an impact on job markets, and here APEC could focus on training and upskilling needs.

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Adapted from the original article by the National Bureau of Asian Research.

[1] OECD, OECD Digital Economy Outlook 2020 (Paris: OECD Publishing, 2020), https://www.oecd-ilibrary.org/science-and-technology/oecd-digital-economy-outlook-2020_bb167041-en.
[2] Jeongmin Seo et al., “Global Flows: The Ties That Bind in an Interconnected World,” McKinsey Global Institute, Discussion Paper, November 15, 2022, https://www.mckinsey.com/capabilities/strategy-and-corporate-finance/our-insights/global-flows-the-ties-that-bind-in-an-interconnected-world.
[3] APEC Committee on Trade and Investment, “Economic Impact of Adoption Digital Trade Rules: Evidence from APEC Member Economies,” March 2023, https://www.apec.org/publications/2023/04/economic-impact-of-adopting-digital-trade-rules-evidence-from-apec-member-economies.
[4] APEC, Digital Economy Steering Group, https://www.apec.org/groups/committee-on-trade-and-investment/digital-economy-steering-group.
[5] APEC, “APEC Putrajaya Vision 2040,” November 2020, https://www.apec.org/meeting-papers/leaders-declarations/2020/2020_aelm/annex-a.
[6] APEC, “2023 Leaders’ Declaration,” November 2023, https://www.apec.org/meeting-papers/leaders-declarations/2023/2023-leaders-declaration.
[7] Joshua P. Meltzer, “Towards International Cooperation on Foundational AI Models,” Brookings Institution, November 16, 2023, https://www.brookings.edu/articles/toward-international-cooperation-on-foundational-ai-models.
[8] “U.S. 2023 APEC Outcomes,” U.S. Department of State, Fact Sheet, November 17, 2023, https://www.state.gov/u-s-2023-apec-outcomes.
[9] The Global Cooperation Arrangement for Privacy Enforcement is available at https://www.globalcbpr.org/wp-content/uploads/Global-CAPE-2023.pdf.
[10] The Global Cross-Border Privacy Rules Declaration is available at https://www.commerce.gov/global-cross-border-privacy-rules-declaration.
[11] APEC Committee on Trade and Investment, “Non-binding Principles for Facilitating Access to Open Government Data in the APEC Region,” available at https://www.apec.org/docs/default-source/publications/2023/11/appendix-14-non-binding-principles-for-facilitating-access-to-open-government-data-in-the-apec-region.pdf?sfvrsn=ce3d72ca_2.
[12]  “Recommendations for Cloud Transformation in APEC,” APEC, August 2023.
[13]  “Recommendations for Cloud Transformation in APEC (Endorsed),” APEC, August 2023, http://mddb.apec.org/Documents/2023/TEL/TEL67-PLEN/23_tel67_plen_017.pdf.
[14]  “Annex 1: Principles for the Interoperability of Electronic Invoicing Systems in the APEC Region,” APEC, 2023, https://www.apec.org/meeting-papers/sectoral-ministerial-meetings/trade/2023-apec-ministers-responsible-for-trade-statement-of-the-chair/annex-1.
[15] APEC Committee on Trade and Investment, “Economic Impact of Adoption Digital Trade Rules,” 31.

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