Starting a digital economy trade agreement

There is no doubt that the Trans Pacific Partnership trade agreement in its present form is dead. With the dominant trading country, the United States, not interested, there is no point going forward.

But there is merit in Singapore's position that countries should continue to pursue the TPP - not in its entire form, perhaps not even with the same name, but certainly some elements of it.

In particular, parts of the agreement that touch on the digital economy should be preserved and implemented.

The TPP is a trade agreement among 12 countries in the Pacific Rim - Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States and Vietnam. Notably absent is China. The agreement was signed by trade ministers of all 12 countries in February 2016, but needs to be implemented by domestic legislation in order to come into force.

The agreement would be the US' largest free trade agreement, covering issues ranging from market access to trade-related issues such as labour and environmental standards.

The TPP has been referred to as the trade agreement for the future because it is a trade agreement that is also about the digital economy. And Singapore can play a leading role in helping trading partners come to international agreement on trade in the digital economy.

Most of the terms in the TPP that refer to digital trade or e-commerce are already practised in Singapore: no Customs duties on digital products, prohibition of spam, privacy protection, no forced disclosure of software source code, no requirement that service providers locate data locally, cooperation in cybersecurity and legal immunity of Internet Service Providers (ISPs). Subject to exceptions that are agreed upon, parties to the TPP would have these practices written into their law.

Singapore has modelled some of these practices. We were the first country in the world to exempt Internet service providers (ISPs) in the mid-1990s from legal liability for the content they carry and for almost a decade thence, the provisions were studied by every country considering the subject. Our Electronic Transactions Act, a law that enables e-commerce, was similarly used by other countries to draft their own e-commerce laws.

Because these practices lubricate the friction in e-commerce, global adoption will benefit Singapore but also global trade as more of it turns to e-commerce. The companies that operate in the digital space are likely to support such a digital economy trade agreement. The provisions not only help their companies but also make sense when viewed objectively.

But there is a catch.

The TPP has a bad press in the digital space. To address the factors behind the bad press will require a different approach in trade negotiation.

The TPP began in the mid-2000s, just when discussion about Internet governance was taking off. One mantra that came out of the report of the Working Group on Internet Governance, a committee to which the author was appointed by then United Nations Secretary-General Kofi Annan, and later adopted at the Internet Governance Forum was that the multi-stakeholder approach ought to be adopted in Internet governance for legitimacy.

Here the multi-stakeholders are the public (government) and private (business) sectors along with civil society, a mixed bag of activists, academics and those in the technical community. Civil society groups in the Internet arena feel they have a stake in discussions concerning the digital space because critical parts of the Internet were invented by them.

The TPP, like all previous trade agreements, did not include this noisy, messy, unorganised third group.

Second, negotiations around the digital economy have to be done openly and in a transparent manner. It is possible now, particularly at international meetings, to participate without being physically present, to watch live video feed, hear the conversations, pose a question and get a response. In practice, this means that government officials have to get used to lining up behind, say, a graduate student in computer science, in order to make the point at an "open mic" session.

How trade terms are to be negotiated under such conditions is something that governments may have to learn. The horse-trading typically required of such agreements will have to be done in open discussion. It will be complicated but without such a process, the agreement is likely to lack legitimacy.

What about China, which had been left out of the TPP?

Well, the Chinese have in effect built a digital Great Wall as the requirements they impose make it difficult if not impossible for other countries to enter their market. By shutting out foreign competition, Chinese companies have been able to grow and become globally competitive giants. Researchers like me wonder if this is part of the strategic long-term thinking that the Chinese are renowned for.

In the long run, however, such shutting out cannot be good for the Chinese economy. China would have to open its doors to global digital trade if it wishes to sign on to a trade agreement for the digital economy.

Singapore's small domestic market gives us credibility when we say that we want a trade agreement that benefits the digital economy.

Whatever benefit may accrue to us will also accrue to others who sign on with us and sets up best practices for the future. It will be uncharted territory - to negotiate a trade agreement for the future using methods not tested before.

But if we want to push forward on the digital economy, it is only right that we use the means that those in the digital economy would endorse.

  • The writer is professor at the Wee Kim Wee School of Communication and Information, Nanyang Technological University.
A version of this article appeared in the print edition of The Straits Times on November 30, 2016, with the headline 'Starting a digital economy trade agreement'. Print Edition | Subscribe