E-quest for success

Creating a more open, inclusive and universally-beneficial digital market will promote common development and prosperity

Digital trade has injected new momentum into global trade and is gradually becoming an important driver for the transformation and upgrading of the global economy. However, the development of this new form of trade faces numerous obstacles.

First, there are huge gaps in infrastructure. The least developed countries are far behind developed countries in terms of hardware, such as network coverage, information and communication technology infrastructure, and distribution of servers and supercomputers; capabilities such as global data centers and computing power, digital technology level, digital education, and talent training; as well as research and development of operating systems and chips.

Some developing countries only have relatively rapid development in a few areas such as digital infrastructure.

Second, imbalanced development. There is a huge disparity in digital trade between countries with different income levels. In 2020, low-income countries accounted for less than 1 percent of the total global digital trade.

At the same time, the distribution of multinational digital platform enterprises is extremely uneven. Forty-one of the top 100 such enterprises are located in the Americas, mainly in the United States, and some have formed transnational digital monopolies.

Third, the backward business environment. Regulatory and legislative gaps in the global digital anti-monopoly and anti-unfair competition systems and insufficient legal construction have led to market disorder. Artificial barriers such as rigid personal data protection regulations and technology alliances in some countries are hindering normal market access.

There is also room for improvement in the governance level and capabilities of various countries, in terms of digital tax setting, e-government services, as well as formulation and implementation of digital development strategies.

Fourth, lack of internationally agreed rules. Across the globe, digital trade is not defined or measured consistently, posing challenges to statistics and research. Existing governance models are outdated and fragmented, and can hardly be integrated into a unified global governance framework. Subject to geopolitical pressures, the setting of digital rules has become an arena for great power competition.

In response to these issues, the international community has actively engaged in various forms of cooperation to advance the open development of digital trade.

Digital infrastructure efforts are primarily carried out at the multilateral level, with the aim of closing the "digital divide" and helping build and upgrade the digital infrastructure in developing countries.

Among them, the Digital Silk Road, part of the Belt and Road Initiative, has achieved fruitful results by building various public service platforms, promoting infrastructure and standard setting, and establishing "Silk Road e-commerce" cooperation mechanisms with multiple countries.

In addition, the Build Back Better World Initiative proposed by the G7 and the A Globally Connected Europe Initiative have also received attention.

Also, global digital trade rules are being constructed at multiple levels.

At the multilateral level, the World Trade Organization's Information Technology Agreement has expanded to cover 82 member countries, which account for 97 percent of global trade in information technology products. In 2019, the WTO launched negotiations on e-commerce, with 86 members participating.

In addition, multilateral mechanisms, including the G7, the OECD, the G20 and the Belt and Road Initiative, have not only established digital rules that cover a wider range of topics with greater depth, but are also exploring rules in new fields.

At the regional level, digital governance rules are usually designed on the basis of the demands of representative member countries. Technologically advanced developed countries prioritize the liberalization of digital trade, while developing countries focus on national security and domestic industry protection. Currently, there are the "US model", the "European Union model", the "Regional Comprehensive Economic Partnership model" and the "Digital Economy Partnership Agreement model".

At the bilateral level, digital trade rules were initially reflected in bilateral agreements. In 2000, the US-Jordan Free Trade Agreement included e-commerce provisions for the first time. In 2003, Singapore-Australia Free Trade Agreement included a separate chapter on e-commerce. In 2021, the US-Japan Digital Trade Agreement covered digital taxes as separate provisions for the first time.

At the same time, we must also be aware that the rules-setting of global digital trade has been turned into a battleground for strategic competition among great powers. Digital governance is increasingly tied to geopolitics.

With the Democratic Technology Alliance led by the US, the EU Strategy for Cooperation in the "Indo-Pacific", and Japan's Data Free Flow with Trust Initiatives, a digital circulation circle among the US, Europe and Japan is in the making.

Alliances between major powers aim to dominate digital rules-setting and maximize self-interests. They not only link digital technology with values such as the rule of law, political institutions and even human rights, but also play geopolitical tricks and launch a digital new Cold War against China. By doing so, the major powers seek to safeguard their digital hegemony and global leadership, and construct a "digital alliance" or "strategic encirclement" against China.

The Digital Economy Partnership Agreement model is now receiving wide attention from countries around the world. It is a digital trade agreement signed online by Singapore, Chile and New Zealand on June 12, 2020, which aimed at strengthening digital trade cooperation and establishing relevant norms among the three countries. Its unique feature lies in a modular design, which allows countries to choose to join specific modules based on their interests and domestic situations. This undoubtedly facilitates the contracting parties to quickly reach a consensus in key areas, avoids lengthy negotiations, and minimizes costs while maximizing benefits.

Currently, little progress has been made in international negotiations on e-commerce and other digital trade rules within the framework of the WTO, and global governance continues to be fragmented. Against this backdrop, the Digital Economy Partnership Agreement may help create a more open, inclusive and universally-beneficial digital market based on respect for the characteristics of various countries and regions. Through cooperation, a continuously optimized digital market will promote common development and prosperity.

Ni Yueju is a research fellow of the Institute of World Economics and Politics at the Chinese Academy of Social Sciences. Niu Yurou is a master degree candidate of the School of International Political Economy at the University of Chinese Academy of Social Sciences. The author contributed this article to China Watch, a think tank powered by China Daily. The views do not necessarily reflect those of China Daily.

Contact the editor at editor@chinawatch.cn.