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Digital trade

Southeast Asian nations should tell the US what they want on the digital economy

Published 16 November 2021

The economic benefits of US-ASEAN partnership through the Digital Economy Partnership Agreement (DEPA) are clear. The pact would be a useful addition to the region's policy toolkit, while enhancing its extra-regional connectivity. Now is a good time for Southeast Asian leaders to voice their aspirations to Washington and join the US as equal partners in shaping the future of digital trade.

This article was originally published in The Straits Times

Despite compelling reasons to pursue a digital economy agreement focused on Asia, conversations on the matter inside the US government appear to have stalled. Concerns about the outsized impact of Big Tech have exacerbated debate and dithering among Washington policymakers about their options.

For the nations of Southeast Asia, however, this stalemate offers a timely opportunity. To help ensure that any US effort at a digital trade deal delivers for Asean too, now is the right time for the region’s leaders to proactively tell the United States what they want and do not want in a potential pact.

This collaboration can start with collective membership in the Digital Economy Partnership Agreement (Depa), a platform that initiators Chile, New Zealand and Singapore are keen to expand. That pact usefully focuses on access for small businesses, smoothing of cross-border data flows, digital inclusivity, and cybersecurity – arguably the approaches that might have the greatest near-term impact in bridging the digital divide and channelling Silicon Valley powerhouses towards supporting sustainable digital economy growth in Asia.

There is plentiful economic and political rationale – for both the United States and for Asean - to work together to write clear and open rules for cross-border commerce.

What DEPA offers

The economic benefits of US-Asean partnership through the Depa are clear. The Asia-Pacific region constitutes more than half of the global online population, and internet use continues to grow. E-commerce and digitally delivered services are thriving.

The Asean nations comprise the world’s fastest growing digital economy and expect gross merchandise value to triple to US$300 million billion in the next five years. In 2020 alone, more than 40 million people became new users of digital services. Digital payments will also expand. For example, the launch of a real-time link between Singapore’s PayNow and Thailand’s PromptPay is set to inspire imitators.

Here’s another incentive: digital trade facilitation. Module 2 of Depa on ‘Business and Trade Facilitation’ eases one-stop-shop processes, from expediting customs procedures for express shipments, to enabling paperless trading and electronic invoicing, and setting up interoperability for data and document exchange.

The Depa also encourages members to share and adopt new technologies, leading to potentially more cost-efficient deliveries for Asean countries. Indeed, by addressing emerging digital technologies such as Artificial Intelligence, the Depa will help members to reduce overall trade costs while improving their technical expertise.

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In addition, as the agreement is non-binding, ratification requires less political capital. Its modular format also allows members to choose less contentious areas of potential cooperation as first steps towards broader commitments. Members whose data privacy regulations are made interoperable, for example, can start with collaboration in that area and eventually shift to other focus areas.

Lastly, as the agreement is a living document that can absorb innovations, Depa members get a front row seat to shape regional and potentially global rules for digital trade.

Several countries are already eyeing the opportunity to determine the future of digital trade. South Korea plans to join in September and China has also applied to be a member.

ASEAN's choices

Granted, Asean has choices, as evident by the members’ digital masterplans and roadmaps, the most recent of which is the Asean Digital Economic Framework Agreement (Defa). The Depa would be a useful addition to the region’s policy toolkit, while simultaneously enhancing its extra-regional connectivity.

As for the United States, Washington’s current focus on efforts to contest the perceived monopoly power of America’s “Big Tech” companies is understandable.

But that policy standoff also underscores that, in such an environment, an approach that mimics the relatively high-standard US-Japan Digital Trade Agreement or the digital chapter of the US-Mexico-Canada free trade agreement would be a tough sell in Southeast Asia. Fairly or unfairly, both are seen as favouring the interests of big business, especially regarding digital taxes and tariffs.

When visiting Washington in September, Singapore’s Minister for Foreign Affairs Vivian Balakrishnan reminded the United States to consider Asean “in its own right,” not just as an extension of US-China competition.

Now is a good time for regional leaders to exercise their roles as peers and clearly state their aspirations and preferences. If Southeast Asian leaders prefer that the US join the Depa rather than try to construct a separate agreement out of whole cloth, now is a good time to say so – and to join the US as equal partners in shaping the future of digital trade.

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Merle A. Hinrich has dedicated his 60-year career to promoting global trade, as the Founder and Executive Chairman of Global Sources, and as the Chairman of the Hinrich Foundation. His work is driven by the belief that sustainable and mutually beneficial global trade can bring stability in international relations and growth.

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Kurt Tong

Ambassador Kurt Tong is a Partner at The Asia Group, where he leads the firm’s work in Japan and Hong Kong, and on East Asia regional policy matters.

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