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Global digital governance can start in Asia

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A worker assembles servers on the assembly line of China's Dawning Information Industry Co., also known as Sugon, in Tianjin, China, 14 March 2018 (Photo: Reuters).

In Brief

Data is not the new oil, it’s much more. The digital economy is the new economy and will underpin productivity growth and recovery from the pandemic.

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Healthcare, education and service delivery were all enabled during COVID-19 lockdowns and social distancing as digitalisation of economies accelerated by several years in a few months.

Sources of innovation and technological progress are increasingly diffuse across the globe and physical distance matters less for international commerce and exchange. So we appear to be on the crest of a new wave of globalisation and connectivity. Information sharing and the cost of transporting digital services is virtually zero.

But digital protectionism is also on the rise and geopolitics are propelling a digitally divided global economy. The strategic rivalry between China and the United States is leading to digital decoupling and contributing to digital economic fragmentation.
The difficulty for governments is to balance the competing policy objectives of privacy, intellectual property protection, consumer protection and competition policy. There is an absence of multilateral rules governing the digital economy so Europe, the United States and China as well as other countries are pushing ahead with their own systems as the world tries to navigate them.

In our lead article this week, Shiro Armstrong, Rebecca Sta Maria and Tetsuya Watanabe argue that getting things right in the Asia Pacific can help avoid a fractured global digital economy. Armstrong, Sta Maria and Watanabe are authors on a report released today, Towards an Asia-Pacific Digital Economy Governance Regime.

‘The Asia Pacific includes China, the United States, and countries that are proactively engaged in rule-making’, Armstrong, Sta Maria and Watanabe argue. ‘East Asia is the most data rich region in the world’ and ‘there are shared global interests and common challenges, as well as huge potential productivity and growth gains, that should encourage agreement on principles and rules to govern the digital economy’.

Trying to find a way for the United States and China to agree to multilateral rules and principles on digital governance — not just find ways to make their regimes compatible — is ambitious and unlikely to happen. But global prosperity is at stake. ‘Middle powers like Australia and Japan will need to find creative solutions and groupings that are inclusive. ASEAN must also be at the centre of finding multilateral solutions and keeping regional arrangements open and outward oriented’, Armstrong, Sta Maria and Watanabe claim.

Japan has already shown agreement on principles is possible with its Data Free Flow with Trust initiative at the G20 in Osaka in 2019, which had both Chinese and American sign-on.

System differences do not mean a multilateral agreement cannot be reached. The global trading system allows countries to set their own policies and retain sovereignty. And agreed rules can limit discrimination, promote transparency and predictability, and constrain governments of all shapes, sizes and colours from protectionist policies.

The Asia Pacific is already home to arrangements like the Digital Economy Partnership Agreement (DEPA) between Chile, New Zealand and Singapore, and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and Regional Comprehensive Economic Partnership (RCEP), mega regional agreements that have dedicated chapters and provisions around data use, storage and e-commerce. Australia and Singapore have an advanced bilateral Digital Economy Agreement. APEC’s Cross Border Privacy Rules (CBPRs) help set privacy standards that can guide some regulatory coherence between different jurisdictions.

Existing agreements all have security exemptions. Those carve-outs, whether explicit or hidden in fine print, all leave large gaps in digital governance between countries. Those gaps will need to be substantially closed but the security risks will need to be addressed as well.

There are major security challenges around data privacy, use and sharing, as well as cyber security. Armstrong, Sta Maria and Watanabe argue that these risks ‘are not uniquely posed by China and their mitigation and management will determine the pace of technological progress globally’.

Competition, technical solutions and agreed principles and rules can help manage and mitigate risk. Introducing more competition takes time and needs to be done with governance that identifies and reduces risk within and across borders, requiring international cooperation and experience sharing.

To make real progress on a regional governance regime for the digital economy that will further global governance, the regional agenda will have to comprehend a wider range of issues beyond traditional trade issues and existing agreements to include trusted access to data, protecting privacy and security, competition policy and formulating agreed norms to govern artificial intelligence and fintech.

Where can countries start?

The economic cooperation process needs to involve multiple stakeholders, including governments, big tech, small and medium-sized companies, entrepreneurs, investors, workers, consumers and technological experts. These groups can be mobilised in existing cooperation frameworks like APEC. An economic cooperation agenda should be developed around shared and common interests in areas such as digital trade facilitation with real and demonstrable gains for all.

The United States likely won’t deal directly with China on digital economy issues, even in regional forums with other countries present. Many countries see China as the problem, and the solution, in the digital economy space. Yet there are shared interests in regulating big tech companies, managing cyber security and protecting data, for example, that suggest dialogue and cooperation can build confidence and trust. That should start in Asia where the interest in realising the huge gains from digitalisation and the experience in working with both China and the United States are strong.

And the upcoming US–Japan summit…

Japanese Prime Minister Yoshihide Suga heads to Washington later this week for President Biden’s first face-to-face with a foreign leader. It’s a meeting that will be important in setting the tone of the new administration’s alliance management in Asia and the Pacific. China will be the central issue on the agenda, alongside North Korea and its recent missile tests, alliance coordination with Seoul, the Olympics and climate change. As Ben Ascione will note in upcoming pre-visit analysis of the visit, ‘the Biden-Suga summit provides an important opportunity to get US–Japan cooperation back on track after four years of work just preventing a Trump-induced disaster in alliance relations. But to deepen cooperation and prevent perception gaps, the two allies need to not shy away from uncomfortable discussions’.

The EAF Editorial Board is located in the Crawford School of Public Policy, College of Asia and the Pacific, The Australian National University.

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