E-commerce in Asia is growing much faster than in the United States or Europe, with a growth rate accelerated by the pandemic. It is estimated, for example, that within three years, Asia will have nearly two-thirds of 5G subscribers worldwide.
This makes the region the epicenter of the competition for the nature of the rules that will shape digital commerce and the philosophy behind them.
The United States is promoting a deal similar to the digital trade deal Australia signed with Singapore late last year.
It will not be easy for the United States to list all of the countries it targets in the region. Australia, Japan and New Zealand are likely to be very open to the idea, depending on the details, but others like South Korea, Singapore and Malaysia will be concerned about a reaction from China.
This agreement included commitments preventing restrictions on the transfer and location of data (there is no obligation to store data in both jurisdictions), protections for source codes (no disclosures or forced transfers) , compatible electronic billing and payment frameworks, consumer protections, paperless customs procedures, provision for digital signatures and improved access to publicly available government data.
Like an agreement reached between the United States and Japan in 2019 and an agreement between New Zealand, Chile and Singapore earlier this year, Australia’s agreement with Singapore reflects an effort to to promote free trade in digital products and services, even if it includes certain public policy exceptions to preserve sovereignty. .
China’s approach to digital commerce doesn’t quite match Xi’s desire for an “open, fair and non-discriminatory” digital business environment.
China insists on localization of data – it increasingly protects the data of its own companies, as evidenced by the recent crackdown on its major US-listed tech companies – while insisting that company data foreign companies operating in China are stored in China. Foreign companies cannot directly offer cloud computing services in China.
It effectively forces technology transfers, although less overtly than before, operates behind the “Great Firewall of China” which filters all Internet traffic through China and restricts cross-border data flows more broadly.
Its policies promote and protect its domestic businesses from competition, and while this week’s assertions about statement-sponsored cyber attacks against businesses and governments around the world are correct, its commitment to cybersecurity is very one-sided.
Thus, the United States offers a vision of an open and level playing field for digital companies, although it favors American technology companies because of their size, while China promotes a more fragmented future, shaped by agendas. countries, where it can leverage the influence it has gained across the region through its Belt and Road initiative – and the power provided by access to its own economy – to dominate the region’s digital economy. and thwart America’s ability to counter it.
This collision of visions is of particular significance to the future of artificial intelligence, where China’s vast population and its collections of data about it give it an edge over other countries – AI is relies on big data and the more data collected, the more sophisticated the AI. technologies will be.
The United States and other Western countries want international rules that protect privacy and govern the ethical use of AI – a key technology for machine learning, autonomous driving, the future of finance and business. medical diagnostics and an open range of other applications that will shape the rest of this century. China is not as committed to confidentiality and ethical considerations.
The Biden administration’s efforts to promote its version of a new digital order for the region contrast with the isolationist stance of the Trump administration that preceded it.
One of Trump’s first decisions was to pull out of the Trans-Pacific Partnership – the centerpiece of Barack Obama’s “Pivot to Asia” – an agreement designed to expand US influence in the Asia-Pacific and contain China.
The domestic politics of the TPP in the United States would make it difficult for Biden to revisit the TPP – many Democrats have opposed the free trade agreements because they see them as threats to domestic industry and labor – but a The digital trade pact could be presented as a counter-China with benefits for US technology companies and US small and medium-sized businesses.
One of the great benefits of digital trade agreements is that they make it much easier and cheaper for SMEs to operate across borders.
It will not be easy for the United States to list all of the countries it targets in the region.
Australia, Japan and New Zealand will likely be very open to the idea, according to the details, but others like South Korea, Singapore and Malaysia will be concerned about a reaction from China – to the like his “punishment” of Australia for a range of perceived infractions – if they agreed to a deal against the will of the region’s largest economy.
Yet if the United States could simply sign its traditional international allies into a single digital trade deal that, at this stage in the development of the digital economy, would likely give those countries enough leverage to lay the groundwork for a open digital trade and add another dimension to the containment strategy towards China that the United States is pursuing with as much vigor under Biden as it is under Trump.
The Business Briefing newsletter features important articles, exclusive coverage and expert opinions. Sign up to get it every morning on weekdays.