In DEPA Need of China

China first requested to participate in the Digital Economy Partnership Agreement (DEPA) in November 2021 and its formal accession process began on August 18. The DEPA has since established a panel wholly dedicated to China’s negotiations with members.

The DEPA, signed in June 2020 by Chile, New Zealand and Singapore, arose from a common interest in benefiting smaller economies via a framework accommodating Internet communication and technology companies. It marks a new type of trade partnership agreement seeking to bolster digital trade by regulating issues related to the digital economy, including digital inclusion, data flow plus protection, and artificial intelligence. The agreement is divided into 16 modules, including business and trade facilitation, data issues, business and consumer trust, innovation and the digital economy.

However, the combined digital trade of New Zealand, Singapore and Chile only accounts for a small fraction of the world’s total. So why is China so eager to join?

The DEPA offers a template for new arrangements in the global economic system at a time when digital technologies are driving transformative change worldwide. The signing of an agreement on the digital economy, on top of existing global trade and investment agreements, signifies the standardization of its burgeoning power.

According to Washington, D.C.-based Brookings Institution, cross-border data flows have surpassed trade and investments in contributing to global GDP growth. Yet the widespread lack of awareness and regulation could threaten future innovation and increase fragmentation of the digital economy.

The World Trade Organization (WTO) has been trying to establish a set of international rules on digital trade. In 2017, 76 of its members, including China, launched the E-Commerce Joint Statement Initiative which became effective in 2019. The initiative aims to agree on common rules in areas such as enabling e-commerce and promoting openness and trust in e-commerce.

But a WTO agreement on digital trade doesn’t seem to be in the cards just yet and international digital economic rules still lag far behind its swift pace of expansion. In this sense, the DEPA is well ahead of the WTO.

Joining the DEPA is in line with China’s efforts to deepen reform and conduct a higher-level opening up. It will help intensify China’s cooperation with members in the digital economy and promote both innovation and sustainable development.

Since its formal application to join the agreement in 2021, China has conducted numerous dialogues with the platform’s member states at various levels, clarifying China’s perspectives on digital economy and outlining prospects for cooperation under the DEPA framework.

And China’s status as a leading digital trader can lift the platform’s potential to a new level.

In 2020, the top three power players in digital trade were the United States, China and Germany. China’s digital economy was valued at $6 trillion, accounting for 38.8 percent of its GDP and maintaining a 9-percent annual growth rate. China’s DEPA membership will provide a vast market for other members and consolidate digital economic cooperation, consequently contributing to the openness and long-lasting prosperity of the digital economy in the Asia-Pacific region and the world at large.

The three primary forces dominating global digital trade regulations are: the U.S.—supporting digital free flows; the EU—stressing privacy; and China—emphasizing governance of digital sovereignty. China’s choice to join the DEPA demonstrates the country’s recognition of the agreement’s procedures as well as revealing a similar approach to digital trade on both sides. China’s accession to the agreement is expected to promote the formation of a high-standard market system for the digital economy.