Driving Digital Trade with DEPA

By Liu Xiangdong

Countries around the world now regard the digital economy as a key new driver of economic growth. Development of digital trade has become an important means to drive the growth of the digital economy as well as a new trend amid the evolution of international trade and related rules. Against this background, different countries and regions have established various versions of digital trade rules. Among them, the Digital Economy Partnership Agreement (DEPA) is the world’s first digital-only regional agreement and has become a model for integration of high-standard rules of digital trade.

An intelligent robot arm processes E-glass fiber composite material at a plant in the New Material Industrial Park of Shangyou County, Jiangxi Province, on April 19, 2022. (VCG)

Developing Unified Global Digital Trade Rules

DEPA was signed online by Singapore, New Zealand, and Chile on June 12, 2020, and took immediate effect. With an open modular structure, it allows new members to choose from the 16 modules on its menu to conduct negotiations to meet their needs. South Korea, China, Canada, and other countries have expressed interest and willingness to join the agreement.

Countries around the world are now exploring digital governance rules, while the World Trade Organization (WTO) still lacks specific rules for digital trade. Without unified global digital trade rules, countries have been actively seizing the initiative to formulate relevant rules by placing their respective proposals in bilateral, multilateral, or regional trade agreements, which has resulted in “fragmentation” of relevant rules.

At the bilateral level, the U.S. and Japan signed the U.S.-Japan Digital Trade Agreement (2019), and Europe successively released the Digital Agenda for Europe (2010) and the General Data Protection Regulation (GDPR, 2018). At the multilateral level, in January 2019, 76 WTO members including China officially launched e-commerce negotiations and made substantial progress on relevant provisions such as electronic signature and verification, online consumer protection, paperless transactions, and internet access. At the regional level, the Regional Comprehensive Economic Partnership (RCEP), the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), and the U.S.-Mexico-Canada Agreement (USMCA) all address, to varying degrees, the rules and provisions of the free flow of cross-border data, localized data storage, source code protection, and information privacy and security.

At the end of October 2021, Chinese President Xi Jinping officially announced China’s decision to apply to join DEPA at an international platform, initiating the process of communication and negotiation with member states. In August 2022, China formally established a working group on its accession to DEPA to advance substantive negotiations with relevant member states. The measure demonstrated China’s pragmatic attitude and willingness to expand its high-level opening-up.

Considering its huge volume of digital trade, China will strive to open greater space for rules negotiation and create an open and safe environment for the development of the digital economy. It will actively participate in practical cooperation on the digital economy, maintain and improve the regional framework for digital economy governance, and actively promote rules generally accepted by all parties to make Chinese contributions to the improvement of rules and innovative development of DEPA.

Promoting China’s Digital Trade

China’s accession to DEPA aligns with the inherent requirements for accelerating its development of digital trade. Over the years, China has placed great importance on development of digital technology and the digital economy. It has been committed to building an internationally competitive digital industrial cluster with the “Digital China” initiative upgraded to a national strategy. Today, the digital economy has become the sector of the Chinese economy with the most active innovation, the most rapid growth, and the most profound impact. It’s an important piece of the global digital economy landscape that will provide important support for China to build a new development paradigm featuring mutual reinforcement of domestic and international circulations.

By 2021, China’s digital economy had reached 45 trillion yuan (US$6.95 trillion), accounting for 39.8 percent of its GDP. Its trade in digital services reached 2.33 trillion yuan (US$0.36 trillion). In the last five years, cross-border e-commerce imports and exports increased nearly tenfold. China ranks first in the world in terms of volume of e-commerce and mobile payments transactions. China’s accession to DEPA will help it seize opportunities to develop the global digital economy, accelerate the development of its digital trade, and build a “new engine” to achieve the goal of becoming a strong trading nation. 

China’s advancing accession to DEPA is an important manifestation of the country’s high-level opening-up. With commitment to the fundamental national policy of opening-up, China is seeking to open up to the outside world on a wider scale, in broader areas, and at deeper levels. China’s door to the outside will only open wider.

The digital economy features natural characteristics of openness and connectivity. Developing digital trade demands embracing internet trends and pushing for economic globalization that is more open, inclusive, balanced, and beneficial to all. Development of digital trade also urgently requires that institutional opening-up in the field of digital trade be accelerated, with focus on forming international consensus on rules for cross-border data flow, storage localization, intellectual property rights, and cybersecurity. Actively joining DEPA will become an important measure to coordinate the openness of commodities and factor mobility as well as rules and institutions.

Accession to DEPA has become a key driver for China to participate in digital trade governance. Open platforms such as pilot free trade zones have helped China take the lead in trial cross-border data flow. China has also sought to promote compatibility with the high-standard rules of DEPA and explored new mechanisms for international cooperation on digital trade.

China has always considered data security and personal privacy protection extremely important. Digital trade governance should strike a balance between free flow of data and data security. The country’s position is that an orderly and secure cross-border data flow mechanism should be built on the basis of the China-proposed Global Initiative on Data Security. China is now actively involved in the formulation of international standards for data flow, data security, certification and evaluation, digital currency, and other areas, which will be conducive to the establishment and improvement of international and domestic digital trade governance systems.

By adapting to the rules of DEPA modules, China can optimize regional economic and trade institutional arrangements such as RCEP to establish an integrated digital trade market with interlinked rules and compatible standards. At the same time, China and ASEAN are working together to build a closer digital economic partnership, expand mutually beneficial cooperation in emerging digital areas such as e-commerce, develop new business forms and models such as cross-border e-commerce and smart logistics, and deepen cooperation on digital connectivity and digital transformation.

About the author: Liu Xiangdong is a researcher and deputy director of the Macroeconomic Research Department at the China Center for International Economic Exchanges.

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