Digital Trade in International Trade Agreements: What Businesses Need to Know Now
International trade agreements increasingly include provisions relating to digital trade. Recent examples include the UK-Singapore Digital Economy Agreement, the UK’s free trade agreements with Japan, Australia and New Zealand, and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership. Digital trade provisions create obligations on the states that are party to the agreement and seek to liberalise digital trade between them by reducing barriers to market access. Businesses carrying out digital trade should be aware of the benefits of these provisions, as well as where they might give rise to compliance considerations.
Digital trade provisions in international trade agreements
Digital trade rules in international trade agreements typically include:
- Provisions requiring states to not restrict the cross-border transfer of data or to require computing facilities to be located in that state in order to access its market. These provisions could benefit businesses with data-intensive operations such as cloud service providers, e-commerce companies and financial services, and could facilitate the use of centralised data hosting services or global hubs.
- Provisions that prevent states from demanding access to source code as a condition for market access, which allow businesses to retain control over their technology and IP. This is of relevance for companies developing innovative software, machine learning models or artificial intelligence looking to enter new markets.
- Provisions that prevent states from denying the legal validity or effect of electronic contracts and signatures. This provides businesses with legal certainty when entering into contracts in new markets and reduces administrative time and cost associated with paperwork.
- Provisions preventing states from discriminating against digital products (such as computer programs, text and videos) of the other party. This promotes a level playing field and fair competition for digital exporters, particular those in media, entertainment and software-as-a-service sectors.
- Provisions promoting interoperability of frameworks for electronic invoicing, authentication, and digital identities. Such provisions seek to reduce regulatory divergence, facilitating a more predictable trading environment for businesses.
These provisions create favourable conditions for digital trade and facilitate market access for businesses in this sector. However, digital trade rules often also include provisions that could give rise to compliance considerations for businesses, including provisions requiring states to maintain rules around data protection, and provisions requiring states to regulate unsolicited commercial electronic messages (i.e. spam).
Considerations for businesses
It is important for businesses to be aware of potential regulatory impacts of these various provisions. Practical steps businesses can take to stay on top of developments include:
- Monitoring digital trade provisions in international trade agreements and identifying opportunities arising from liberalisation of digital trade. For example, rules in international trade agreements around cross border data flows measures could influence decisions around location of data storage facilities. Prohibitions on requirements for computing facilities to be located within a state could make that state a more attractive destination for investment and establishment.
- Monitoring domestic implementation of digital trade rules by governments where it might modify the compliance landscape, for example in relation to data protection or regulation of electronic messages.
- Participating in government-stakeholder engagement, by providing valuable assessments of the on-ground implementation of digital trade provisions, and engaging with trade advisory groups, industry associations, and working groups established under international trade agreements. This can be an opportunity to contribute to policy development and ensure businesses’ experience of implementation of digital trade rules is taken into account in state-state negotiations.
Looking forward
The global digital trade landscape is rapidly changing, with new forms of technology driving regulatory changes, public concerns around privacy and artificial intelligence accountability, tensions between digital trade and digital sovereignty as well as regulatory divergences across countries.
Businesses should work with trade and tech law experts to stay on top of regional and international developments on digital trade policy, in order to anticipate regulatory shifts and adjust market access approaches. By actively monitoring such shifts, businesses can also participate meaningfully in stakeholder consultations, trade advisory groups and industry associations.
