An agreement signed recently by New Zealand, Singapore and Chile tries to establish ground rules for digital trade — e-commerce, cloud computing and other so-called "weightless" exports.
While this is a great example of creative trade policy among small, open, agile economies, the real value will come from getting others to join the party.
There would be few New Zealanders who have not used e-commerce at some point to buy something from overseas on Amazon or Alibaba. But the term digital trade encompasses many other virtual ways of doing business across borders, such as selling services via a website, streaming creative content like movies or music, videogaming, the use of digital technologies in supply chains such as blockchain, cloud-based customer databases or back-office tools, and many others.
Digital transformation has largely outpaced the development of trade rules. New Zealand has grappled with this through a handful of recent trade deals, including the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).
However, a new agreement with Singapore and Chile, the Digital Economy Partnership Agreement (DEPA), helps lay the groundwork for a far more digitally-focused trade policy — all the more timely given the lessons of Covid-19 on the importance of digital ways of working and doing business.
DEPA includes twelve modules, or subject-specific sections, spanning from the relatively mundane (for example, acceptance of electronic versions of export certificates) through to undertakings to work on principles for complex new technologies such as artificial intelligence (AI).
Digital transformation has largely outpaced the development of trade rules.
In the more detailed sections, the agreement builds on provisions already been enshrined in the CPTPP, for example on e-commerce. In other areas, such as cybersecurity and innovation, the emphasis is on deepening mutual understanding and collaboration towards eventual rules. The agreement also aims to ensure that the benefits of the digital economy can be shared as widely as possible — for example, by encouraging co-operation on upskilling women and indigenous people in the digital economy, and by setting up a Digital SME Dialogue to promote the agreement's opportunities for small businesses.
For New Zealand exporters, the biggest short-term benefits are likely to come from the way DEPA tries to unlock practical digital tools — for example, being able to use e-invoicing when doing business with customers in Singapore or Chile. In the longer term, new rules that may be elaborated — on key emerging technologies such as AI or digital identity, cybersecurity, or ensuring a level playing field for business — should help to create a more trusted, safe and innovative digital environment for Kiwi firms and consumers. Inputs from businesses and others on various DEPA workstreams, which the Ministry of Foreign Affairs and Trade is encouraging, will help policymakers to understand what matters most.
This agreement burnishes the reputation of New Zealand, Singapore and Chile as creative thinkers when it comes to trade. But DEPA's significance does not sit primarily with the current members; it matters most for its demonstration effect to the wider world. The agreement has been designed to be open to newcomers, and to expand in both scope and membership over time. Obvious candidates would include others in CPTPP, on which many of its more substantive provisions are based; it would be good, too, to triangulate with Australia, given the close integration of economic activity across the Tasman, including on areas such as e-invoicing, and in light of a similar agreement that Australia signed earlier this year with Singapore. Looking further afield, British Minister of State for Trade Policy Greg Hands noted in a recent webinar with New Zealand stakeholders on the prospective UK-New Zealand FTA that the UK was interested in the DEPA model too. And the agreement could also influence those taking part in the WTO negotiations on e-commerce currently facing headwinds in Geneva. Why might others seek to join?
In short, if adopted more broadly, in whole or in part, DEPA could help enable truly global, 'borderless' modern trade.
●Stephanie Honey is Associate Director of the NZ International Business Forum