The good news for America is that there are existing digital trade arrangements, involving allies which it can use as a model for the proposed Indo-Pacific agreement. This includes the digital trade chapter of the US-Mexico-Canada Agreement (USMCA), the US-Japan digital trade agreement, the e-commerce chapter of the CPTPP, and agreements signed by Singapore with Australia and separately with Chile and New Zealand (the Digital Economy Partnership Agreement, or DEPA).
The US imprint on all these agreements are visible because they are built on the proposition that digital trade should be free of tariffs, non-discrimination based on country of origin, high national standards for customer data protection and privacy, protections for intellectual property, and the need to discourage the pervasive practice across the region requiring companies to house national customer data onshore rather than offshore. In effect, the proposed digital trade pact encompasses Washington’s broader vision for a “free and open Indo-Pacific”, which has become a code phrase for countering China’s regional ambitions.
For Asian nations sitting on the fence, undecided on whether openly to take sides in the evolving US-China battle for supremacy, a digital trade agreement is a difficult choice. Just like United States, China has embedded itself in the region’s trade and investment architecture by forging FTAs such as RCEP and by pledging to invest billions in infrastructure via its Belt Road Initiative (BRI). For its part, Beijing can reasonably assert that it too has taken steps at home to strengthen customer data and privacy and by constraining the growing influence of national tech champions such as Alibaba, Tencent, ByteDance and others.
Indeed, China’s heavy-handed actions against its big tech companies has many antitrust advocates in Washington watching this process with envy since US’s own efforts at home have stumbled. Beijing’s increasing enthusiasm to join the CPTPP, for which it has made a formal application, should be regarded as an attempt to score points, and build its case with undecided Asian nations. In a surprise move, China recently applied to join the DEPA.
Geopolitics aside, there is a business case for Asian nations to consider framing sensible national and cross-border rules governing digital trade. The nascent efforts by Japan, Australia and Singapore could be building blocks for a more substantive regional digital trade agreement. The US has an alternative which it is refusing to pursue – rejoin the CPTPP and strengthen the digital trade chapters in that agreement. For Biden, that option would be politically toxic at home. Forging a separate, exclusive DTA that includes a smaller group of nations would exacerbate ongoing tensions with China – and that would play well domestically.