State of the Region 2020

About PECC
The Pacific Economic Cooperation Council (PECC) is a non-profit, policy-oriented, regional organization
dedicated to the promotion of a stable and prosperous Asia-Pacific. Founded in 1980, PECC brings together
thought-leaders from business, civil society, academic institutions, and government in a non-official capacity.
Together, PECC members anticipate problems and challenges facing the region, and through objective andrigorous analysis, formulate practical solutions. The Council serves as an independent forum to discuss
cooperation and policy coordination to promote economic growth and development in the Asia-Pacific. PECC is
one of the three official observers of the APEC process
The State of the Region Project
The State of the Region report is a product of a taskforce established by the governing body of PECC. Whileefforts are made to ensure that the views of the PECC members are taken into account, the opinions and thefacts contained in this report are the sole responsibility of the authors and editorial committee and do notnecessarily reflect those of the member committees of PECC, nor their individual members.
_________________________________________________________________________________________
Title
State of the Region Report 2020
Authors
Eduardo Pedrosa, Secretary General, Pacific Economic Cooperation Council
Christopher Findlay, Vice-Chair, Australian Pacific Economic Cooperation Committee (AUSPECC) and Honorary
Professor, Crawford School of Public Policy, Australian National University
Suggested Citation
Eduardo Pedrosa Christopher Findlay (2020), State of the Region 2020
Editorial Committee
Gordon de Brouwer, Chair, Australian Pacific Economic Cooperation Committee (AUSPECC)
Chul Chung, Vice-Chair, Korea National Committee for Pacific Economic Cooperation (KOPEC)
Chien-Yi Chang, Chair, Chinese Taipei Pacific Economic Cooperation Committee (CTPECC)
Charles E. Morrison, Senior Fellow, East-West Center, USPECC
Jose Rizal Damuri, Chair, Indonesian National Committee for Pacific Economic Cooperation (INCPEC)
Kenichiro Sasae, Chair, Japan National Committee for Pacific Economic Cooperation (JANCPEC)
Tan Khee Giap, Chair, Singapore National Committee for Pacific Economic Cooperation (SINCPEC)
Manfred Wilhelmy, former Chair, Chilean National Committee for Pacific Economic Cooperation (CHILPEC)
Zhao Yali, Vice-Chair, China National Committee for Pacific Economic Cooperation (CNCPEC)
Acknowledgements

We also thank Ambassador Jonathan Fried, Canada’s former ambassador and permanent representative
to the World Trade Organization and Dr Peter Lovelock, Director of the Technology Research Project
Corporate (TRPC) for their contributions. We also thank Ms Betty Ip and Nor Jibani for their work on thisreport.
PECC International Secretariat
Singapore2020
info@pecc.org

1

Contents
Message from the Co-Chairs ..........................................................................................................................4
Chapter 1: Impact of the Covid-19 Crisis Update ............................................................................................6
Economic Outlook .......................................................................................................................................6
Big gains, big challenges ........................................................................................................................7
Stimulus Measures .................................................................................................................................8
Impact on Income Inequality .................................................................................................................10
The External Sector ..............................................................................................................................11
Current WTO Challenges and APEC’s Role .........................................................................................13
The Covid Context for Regional Economic Integration .........................................................................15
International Travel ...............................................................................................................................16
Investment ............................................................................................................................................16
FDI Inflow Trends..................................................................................................................................17
Digital sector .........................................................................................................................................18
The Evolution of the Pandemic .....................................................................................................................20
Vaccine development ...........................................................................................................................22
Information Sharing and Minimizing Supply Chain Disruptions ............................................................24
Climate Change ............................................................................................................................................26
Finance for Sustainable Development ..................................................................................................29
Conclusions ...................................................................................................................................................29
Chapter 2:The New Generation of ‘Digital’ Trade Agreements: Fit for Purpose? .........................................31
The New ‘Digital’ Trade Agreements ............................................................................................................31
Table 1: Context and Key Provisions of Four Digital Trade Agreements ......................................................32
Similarities in ‘Digital’ Trade Language: A Path Forward? ............................................................................33
Table 2: Comparison of Key Digital Trade Provisions ..........................................................................33
Table 3: Key and Developing Language Across Digital Trade Agreements .........................................34
Differences in Digital Trade Language ..........................................................................................................36
New ‘Digital’ Trade Agreements: A Way Forward, A False Start, or A Dead End? ......................................39
Table 4: Definitional Gaps Across Digital Trade Agreements ...............................................................40
Appendix 1: Comparison of Language for Eleven Common Provisions Across the Four Agreements .........412

3

Message from the Co-Chairs
In response to the Covid-19 crisis, the Pacific Economic Cooperation Council issued a special State of theRegion report on the impact of the crisis earlier this year based on a survey of regional policy experts andstakeholders. This report updates the findings of that publication.
This year was supposed to mark a milestone for the region, when Asia-Pacific economies would assess
progress made towards the goals of free and open trade in the region and decide on a new vision to drive
cooperation and growth for the future. However, just as momentum was building in that process, the Covid19 pandemic struck and policy-makers rightly focused their attention on dealing with the pressing issue of
how to deal with the health, human, and economic crisis confronting our region.
Even now as some of our economies have been able to stem infection rates and are able to exit fromlockdowns, others are seeing second waves or even third waves of infections. While economic forecasts
are improving, unprecedented government support is holding up aggregate demand. A key concern that
arose from our May survey was weak growth expectations over the coming months and years and theimpact that would have on investment and consumer spending. We explore that theme in further depth in
this report and the actions that can be taken to address the scarring that has and continues to take place.
In our earlier report we argued that that as the region looks beyond the pandemic to an economic recovery,
the post-2020 vision, when endorsed by APEC leaders, can provide a long-term strategic framework forregional governments and stakeholders to plan for the future. Without such a framework there is a risk thatthe recovery will be much slower than need be, opportunities to sustain reform will not be taken, inefficient
policies adopted for short term goals will remain stuck in place, and investment plans put on hold.
A post-2020 vision needs to provide a strong signal to businesses and consumers of a commitment togrowth and stability. In this report we address what some of those signals might be. We address inparticular the challenges facing the WTO and the need for cooperation on the digital economy. We
underscore that the vision should address the issues that beset the region prior to the pandemic that were
outlined in our task force report on the post-2020 vision. The PECC vision for the region was a simple one:
“An Asia-Pacific community of open interconnected, and innovative economies cooperating todeliver opportunity, prosperity and a sustainable future to all their peoples.”
How it is achieved is more complex, but when we surveyed stakeholders on the future of regional
cooperation, out of a list of all of 11 topics that cover the major issues addressed by regional cooperation
ranging the multilateral trading system, a Free Trade Area of the Asia-Pacific, structural reform, the digital
economy, to sustainability and inclusion, the most important issue was “robust dialogue and effective
cooperation among member economies. This underscores the value of APEC’s non-binding approach andfocus on cooperation. The pandemic has only highlighted even more the need for policymakers, scientists,
doctors, and businesses – in short broad groups of stakeholders to work together cooperatively to solve
issues of mutual concern. Even now as vaccines are on the verge of entering the market, issues of distribution
and logistics need to be addressed.
We thank the Editorial Committee of the State of the Region project for their efforts in providing guidance
and advice for the project. And we especially express our appreciation to Mr Eduardo Pedrosa, Secretary
General of PECC and Coordinator of State of Region Report and Prof Christopher Findlay, Vice-Chair of
the Australian PECC Committee for writing this report and Ambassador Jonathan Fried and Dr Peter
Lovelock for their contributions.

Don Campbell
Co-Chair

Su Ge
Co-Chair4

5Chapter 1: Impact of the Covid-19 Crisis Update
Eduardo Pedrosa and Christopher Findlay

This year was supposed to be a milestone for the Asia-Pacific region when APEC members reached thetarget date of the Bogor Goals and agreed on a new vision to drive economic growth and integration
moving ahead. The Covid-19 pandemic came perhaps as a black swan event. Not because it was a newvirus per se, experts have been warning of the threat from viruses for some time, with SARS and MERS
serving as just two prior examples, but because it was so infectious and spread so quickly around theworld. We live in a world that is more connected than ever, this has brought tremendous benefits in termsof improved livelihoods, but the Covid-19 crisis has underscored the frailties of international systems ofcooperation to address pandemics and our responses to them. We need to learn from this experience.
This report updates PECC’s Special Report on the Impact of the Covid-19 Crisis. That report was largely
based on a survey of stakeholders and policy experts from May to June 2020. One finding from that survey
was the significantly greater levels of pessimism on the economic outlook among respondents compared to
official forecasts. While official forecasts have improved we highlight that growth remains supported byunprecedented government stimulus. That support remains crucial as does well-laid out exit strategy. The
policy recommendations we laid out in our earlier report remain relevant and in this report we thresh themout in more detail.
One central recommendation was the role that a post-2020 vision can play in providing a framework forrecovery. Without such a framework there is a risk that the recovery will be much slower than need be,opportunities to sustain reform will not be taken, inefficient policies adopted for short term goals will remain
stuck in place, and investment plans put on hold. While APEC remains a relatively informal organization
through which relationships of trust are built, it must allow for genuine dialogue at all levels.
A central role that APEC has traditionally played is building understanding on international trade andsupport for the multilateral trading system. Our survey results identified slowing trade growth and risingtrade protectionism as the highest risks to growth over the next 2 years after the immediate problems of thepandemic and jobs. We provide a special focus on challenges facing the World Trade Organization at the
moment.
The Covid-19 crisis is accelerating change, economies will be taking different approaches in response to it.
For example in Chapter 2 we address the different choices being taken to address the digital economy,
APEC provides an essential platform to exchange views on the motivations behind those policy choices
and the international implications that they often have.
Economic Outlook
The economic outlook for the Asia-Pacific1 has improved somewhat in recent months, but recovery will be
uneven and fragile as the global pandemic has deepened in some places. Asia-Pacific economies are
expected to shrink by about 3.1 percent in 2020 – less than the 4.7 percent contraction forecast in July’s
State of the Region Report: Impact of the Covid-19 Crisis. Growth of 5 percent is now expected next year
(see Figure 1). Growth in the Asia-Pacific is then expected to decline towards 3.5% in subsequent years.

1

The definition of Asia-Pacific in this report is broad, including the members of APEC, PECC and the East Asia Summit.

6

Figure 1: Asia-Pacific Growth Rates
5.1

4.0

3.7

3.3

3.3

4.1 4.0

3.9
2.7

2.4

5.0
3.6 3.8 3.6 3.7 3.8

3.4

1.9

2.0

4.4 4.2 4.3 4.4

3.4

2.6

3.0

4.4

4.0

3.9 3.9
3.3

3.1

3.7 3.5

3.4

2025

5.0

2023

6.0

2.0

1.6

1.0
0.0
‐1.0

‐0.6

‐2.0
‐3.0
2024

2022

2021

2020

2019

2018

2017

2016

2015

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

1993

1992

1991

‐3.1
1990

‐4.0

Asia‐Pacific GDP Growth

Source: Data from IMF October 2020 database
The reasons for the improved 2020 picture are China’s return to growth (it reported 4.9 percent expansion
for the third quarter) and the less severe-than-expected downturns in several advanced economies.2
However, achieving significant and sustainable gains is contingent on reduced global volatility and on
multilateral cooperation – which has been sorely lacking - to contain the global pandemic.
While the regional economy is coming out of the depths it fell to in the first half of 2020, the cost of thepandemic in terms of lives, sickness, livelihoods, and businesses is huge. Complicating matters, theCovid-19 crisis hit at a time the region was already facing an array of challenges. Among those spelled out
last year in PECC’s task force report on a post-2020 vision for the region were:3Urgent questions about the quality and sustainability of economic growth;
Growing concerns about increasing inequalities in income and wealth distribution;
Existential challenges of environmental sustainability and climate change; andRapid technological change with the potential to both contribute to an acceleration of the spread ofprosperity, but also to intensify social strains and tendencies toward fragmentation

These challenges have led to growing skepticism in some sections of Asia-Pacific societies toward thevalue of openness and interconnectedness. That undermines political support for regional economic
cooperation, which in turn has complicated joint efforts to tackle Covid-19. This update will address somerelated concerns in dealing with the crisis as well as medium to longer-term issues. This agenda forcooperation includes restoring a sense of confidence in the future, that involves responding to the issues
that had already beset the region before Covid-19 upended the world.
Big gains, big challenges
For a quarter of a century, regional economic integration and indeed growth have been driven by the vision
set by APEC leaders when they first met in Blake Island in 1993 and then in Bogor in 1994 and agreed topursue the goal of:“free and open trade and investment in the Asia-Pacific no later than the year 2020.”
Given the manifold challenges facing the region and world today, it is worth remembering that thecommitment to openness was not an ‘add on’ but was, at the time, central to APEC’s vision. Leaders also
pledged that:

2
3

The forecasts contained here are largely based on the International Monetary Fund’s October World Economic Outlook
https://www.pecc.org/resources/publications/regional-cooperation-1/2608-pecc-apec-2020-vision7

“our people share the benefits of economic growth, improve education and training, link our
economies through advances in telecommunications and transportation, and use our resources
sustainably.”
Such a vision is once again required against a background of fragile relationships and tenuous
commitments to multilateral principles. The gains that the region has made in the pursuit of this vision havebeen impressive, average incomes rose from USD 10,258 in 1990 to USD 22,000 in 2017. In 1990, thehighest per capita GDP in the region was more than 58 times the lowest; by 2017, this was down to 22
times.4
Even though the emerging economies now account for about 43 percent of regional GDP in current USD
terms, over the next 5 years, they are expected to account for as much as 73 percent of the region’s
growth. This process was recognized by APEC leaders in Bogor when they stated:“the narrowing gap in the stages of development among the Asia-Pacific economies will benefit all
members and promote the attainment of Asia-Pacific economic progress as a whole.”
The point is that the narrowing creates benefits for all members. Such a commitment to openness remains
critical to the region’s future and the delivery of shared benefits that is in APEC’s DNA. On this platform webuild other suggestion for cooperation. Over the period, annualized growth of consumption expenditure for
emerging economies has been growing at about twice the rate of that of the region’s advanced economies.
A shift towards a greater role of domestic demand in driving growth has been a long-term trend in theregion and an important part of rebalancing growth after the Global Financial Crisis. This is to do withlonger term demographic trends, for example in 2019, McKinsey estimated that there “soon” would be
about 3 billion Asian middle-class consumers.5 The impact of the Covid-19 crisis may slow that trend
temporarily but in the longer term, the trend remains important, based on solid demographics and it will be
an important changing structural feature of the Asia-Pacific economy.
The mutual benefits of this process is likely to change as the nature of flows change, from traditional goods
to GVC networks to greater trade in services. APEC has begun to address these issues through its work on
services and the digital economy. However, as with the earlier phase of the region’s liberalization, much of
the reform that took place was seen as mutually beneficial – these were individual action plans, rather thannegotiations. APEC provided a confidence building platform, and assurance that others were moving in thesame direction.
Stimulus Measures
To counteract the supply and demand shocks associated with COVID-19, governments across the region
have been implementing monetary and fiscal stimulus measures. These have prevented an economic
freefall, saved millions of jobs and forestalled the possibility of a financial crisis. As seen in Figure 4, thepercentage of stimulus has varied from economy to economy, from less than 1 percent to more than 20
percent of GDP.
In 2020, Asia-Pacific economies have implemented combined stimulus measures worth about US$6.0
trillion, or 11 percent of GDP and about half of all global stimulus.6 This does not include central bankfunding nor support from what the IMF calls ‘below the line’ measures - loans and equity injections. Other
examples have included easing insolvency requirements, arranging rent and bank loan reductions orrepayment deferrals.7 In spite of the massive stimulus, there remain deep concerns in financial markets
about the trajectory of growth and jobs.8
Overall government expenditure this year as a percentage of GDP is expected to increase from 33 percent
to a record high 40.6 percent, according to calculations based on IMF data. (Figure 5) This is significantly
larger than the increase following the GFC in 2009.

4https://www.apec.org/Publications/2019/05/APEC-Regional-Trends-Analysis---APEC-at-30
https://www.mckinsey.com/featured-insights/asia-pacific/asias-future-is-now
6
https://www.imf.org/en/News/Articles/2020/10/06/sp100620-the-long-ascent-overcoming-the-crisis-and-building-a-moreresilient-economy
7
Fiscal Monitor April 2020, “Policies to Support People During the COVID-19 Pandemic”, accessed on 7 July, 2020,
https://www.imf.org/en/Publications/FM/Issues/2020/04/06/fiscal-monitor-april-2020
8
Michelle Jamrisko and Gregor Stuart Hunter, “When $8 Trillion in Global Fiscal Stimulus Still Isn’t Enough”, Accessed on 1
May 2020, https://www.bloombergquint.com/china/when-8-trillion-in-global-fiscal-stimulus-still-isn-t-enough
5

8

Unwinding this year’s massive increase in government expenditure will involve difficult choices. The current
forecasts assume that regional government expenditure in 2021 will drop from 40.6 to 35.7 percent of
GDP. Expectations are that revenue will decline by 2 percentage points this year and barely increase as apercentage of GDP in 2021.
Figure 4: Fiscal Stimulus % GDP
0%

5%

10%

Asia‐Pacific

15%

16.4%
4.5%
4.3%
21.1%

20%

5.0%
1.2%

New Zealand

19.5%

Papua New Guinea

15%

6.9%

Peru

3.9%

Philippines

3.1%

Russian Federation

3.4%

10%

Singapore

19.7%

5%

5.4%

0%

9.6%

United States

14.0%
3.6%

2001
2003
2005
2007
2009
2011
2013
2015
2017
2019
2021
2023
2025

Thailand
Vietnam25%

3.8%

Malaysia

Chinese Taipei

30%

11.0%

Japan

Mexico35%

11.8%

Hong Kong, China

Korea

45%
40%

14.0%

Chile

Indonesia

25%

3.2%

Canada
China

20%

10.9%

Australia
Brunei Darussalam

Figure 5: Government Revenue andExpenditure

Revenue

Expenditure

Fiscal Stimulus % GDP

Source: IMF Policy Tracker and news sources

Source: IMF WEO October Database and analysis
by PECC Secretariat

As important as stimulus measures continue to be, economies cannot rely on them indefinitely. Growth is
the answer to this challenge, and a coherent framework for growth that provides a sense of direction will be
important to managing the transition.
PECC’s survey in May showed divisions on timing of a sustainable recovery: 46 percent of business
respondents still expected growth to be weaker 18 months on from the start of the crisis compared to 31
percent who expected stronger growth (Figure 6). This does not bode well for a sustainable recovery,
especially as stimulus measures are withdrawn.

9

Figure 6: Views on the Economic Outlook at 18 months from Start of Crisis
50%
40%

33%

37%
31%

31%

30%
20%
10%
0%
‐10%
‐20%
‐30%
‐40%
‐50%

‐38%
‐44%

‐46%

All

Business

‐47%

‐60%

WeakerGovernment

Non‐government

Stronger

Source: State of the Region Survey on Covid-19 Crisis. Question: Please give an assessment of the
impact the COVID-19 crisis will have on your economy over the following time periods compared to lastyear.
Impact on Income Inequality
Covid-19 is impoverishing many people. World Bank estimates suggest the number in extreme poverty(living on less than US$1.90 a day) will increase from 595 million – a number contingent on a relatively
swift recovery -- to between 684 million and 712 million.9 Should the worst-case scenario materialize, thepandemic will wipe out all poverty reduction achievements over the past 5 years. The Covid-19 crisis isalready having a clear impact on global ambitions to reduce poverty and efforts to make growth more
inclusive.
This exacerbates income inequality in both advanced and emerging economies. The United Nations
reports that “income and wealth are increasingly concentrated at the top. The share of income going to therichest 1 per cent of the population increased in 59 out of 100 [economies] with data from 1990 to 2015.”10
While the best way to increase incomes is through increased productivity, the pandemic has come after along broad-based slowdown in productivity growth following the Global Financial Crisis. A report by theWorld Bank argues that a pro-active policy approach is needed to boost productivity (and incomes) tofacilitate investment in human capital. 11
Amongst the Bank’s recommendations are on-the-job training; upgraded management capabilities;
increased exposure of firms to international trade and foreign investment; and enabling the reallocation of
resources toward more productive sectors. Of concern are mobility restrictions that slow the reallocation ofworkers from low-productivity firms and sectors to higher-productivity ones. Often these involved
geographic relocation from rural to urban areas – the pandemic may constrain this mechanism.
Deepening inequality also lowers overall growth rates, the OECD estimates that between 1990 and 2010,
rising levels of income inequality reduced growth rates for some advanced economies by as much as onefifth.12 Therefore, there is strong incentive for governments in this low growth environment to address theseissues.
9https://blogs.worldbank.org/opendata/updated-estimates-impact-covid-19-global-poverty. We also note that in some
economies in which social security systems have been deployed in stimulus packages then poverty rates could fall: see forexample the case of the United States in https://www.economist.com/united-states/2020/07/06/americas-huge-stimulus-ishaving-surprising-effects-on-the-poor
10
https://www.un.org/development/desa/dspd/wp-content/uploads/sites/22/2020/02/World-Social-Report2020-FullReport.pdf
11World Bank, Global Productivity: Trends, Drivers, and Policies, 2020:
https://www.worldbank.org/en/research/publication/global-productivity
12
Federico Cingano, Trends in Income Inequality and its Impact on Economic Growth, OECD, 2014.

10

The region’s governments have responded to the pandemic with unprecedented fiscal stimulus packages.
The World Bank’s report on East Asia and the Pacific Economic Update suggests that some:“systems of taxes and transfers do not worsen inequality, but they have had relatively little effecton mitigating it….(i)n parallel, there is of course need for expenditure reform, including of subsidies
that are not socially desirable.”
There needs to be a deeper discussion about fiscal and social reforms. Some of these issues are notnecessarily best suited to regional institutions such as APEC, but many are at least complementary to andsupportive of APEC’s goals.
As we argue below, responding to the crisis, and capturing the benefits of cooperation in doing so, is more
effective when there is a broad-based of support for an international orientation and recognition of the valueof integration. The rise in inequality makes this more difficult to achieve. It risks the creation ofdisillusionment with an open regime. It creates the apparent basis for an argument to move in the opposite
direction, providing an opening for protectionist policies and special interests. Anticipation of this response,
and the presentation of practical illustration of the value of openness will be important, not just for stability,
but also long-term growth as argued. Communities like those of the APEC leaders and officials with
common long-term shared interests have a key role to play in this.
The External Sector
Figure 7: Export Growth

Figure 8: Import Growth

17.1

20

20

15

17.2

15
9.2

7.8

10

10

5

5

0

0

‐5

‐5

‐10

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2002

2000

‐15

‐10

‐8.6

‐9.4

Export Growth

Source: Data from IMF October 2020 database,analysis by PECC International Secretariat

‐15

‐10.5

‐9.7

Import Growth

Source: Data from IMF October 2020 database,analysis by PECC International Secretariat

Asia-Pacific exports of goods and services are expected to fall 8.6 percent this year and rebound by 7.8
percent in 2021 (Figure 7). Imports are expected to drop 9.7 percent in 2020 and then grow by 9.2 percent(Figure 8). Notably, the rebound is markedly less sharp than the recovery following the Global Financial
Crisis. The IMF said
“Subdued trade volumes also reflect, in part, possible shifts in supply chains as firms reshore
production to reduce perceived vulnerabilities from reliance on foreign producers… foreign direct
investment flows as a share of global GDP are expected to remain well below their levels of the
pre-pandemic decade”.
Moreover, as we discussed in our previous report, protectionism and slowing trade growth have been
regarded as risks to growth in our annual survey for a number of years. Their relative importance has also
increased over time. As outlined in the sidebar, the multilateral trading system is faced with a number ofchallenges. Responding to these is a necessary part of the portfolio of policies to restore confidence andstability for a sustainable recovery.

11

12

Current WTO Challenges and APEC’s Role
Jonathan FriedThe Pacific Economic Cooperation Council’s survey on the impact of Covid-19 identified slowing trade
growth and rising trade protectionism as the highest risks to growth over the next 2 years after theimmediate problems of the pandemic and jobs. This section addresses the challenges facing the World
Trade Organization (WTO) and the role that regional cooperation can place in addressing thosechallenges.
The WTO, established in 1994, builds on the collective commitment first made in 1947 in the General
Agreement on Tariffs and Trade to pursue “the substantial reduction of tariffs and other barriers to trade
and to the elimination of discriminatory treatment in international commerce” with a view to raising
employment and standards of living throughout the world. Through a corpus of some 60 agreements,
members together established mechanisms for advancing this goal.
First, in successive rounds of multilateral trade negotiations, the WTO has been remarkably
successful in reducing tariffs, from around 22% in 1947 to around 5% by the end of the Uruguay Roundwhen the WTO was established, in expanding disciplines on non-tariff measures such as technicalbarriers to trade and sanitary and phytosanitary regulation, in circumscribing subsidies, including on
agriculture, that otherwise distort production and trade, and in adding rules on intellectual property, trade
in services, and trade-related investment measures.
Secondly, through its councils and committees and its Trade Policy Review Mechanism, the WTO hasmaintained vigorous surveillance and oversight of member compliance with the rules.
Thirdly, the dispute settlement body and its appellate mechanism have been widely used, with over
600 cases filed since 1994, and decisions largely respected and implemented.
The WTO has also played a key role in technical assistance and capacity building for developing
economies, often in cooperation with bilateral donors and other international organizations.
But on each of these fronts, stresses have grown, and many consider the multilateral rules-based trading
system to be at risk.
‐

Multilateral negotiations under the Doha Development Agenda have been stalled for someyears. Only one agreement, on Trade Facilitation, has been concluded since 1994. Further, it
is increasingly evident that current rules are inadequate to respond to business needs in the 21stCentury, as they do not address digital trade, subsidies through state-owned entities,
investment disciplines, or such social dimensions as environment, labor or traceability. And therules have little that promote broader participation in international trade by MSMEs. With thesegaps, unilateral measures and responses have become more prevalent, and preferential trade
agreements have proliferated.

‐

Monitoring is less effective or transparent than intended, as notifications are often years out-ofdate and members fail to heed advice given in oversight sessions.

‐

Given sharp differences of views on the role of the Appellate Body and of jurisprudence,
members are at an impasse regarding the dispute settlement system.

‐

Despite continuing technical assistance, differences over special and differential treatment fordeveloping economies remain.

‐

Government responses to the Covid crisis, including export restrictions on medical equipment
and supplies, pharmaceuticals, and agricultural products, have constrained the world’s ability to
get these goods to those who need it.

In this context, APEC can be a significant part of the solution.
Most importantly, APEC’s tradition of maintaining open and candid discussion at both the officials’ andministerial levels, and of meaningful engagement with relevant stakeholders through ABAC and PECC,
and ASEAN and PIF as sub-regional official observers, is indispensable to building consensus among
member economies and beyond. All members should undertake proactive efforts to ensure meetings ofSenior Officials, the Committee on Trade and Investment and the Market Access Group, Ministers
Responsible for Trade, and Leaders are structured in a manner to foster such discussion.

13

APEC’s track record in leading by example can move multilateral negotiations forward. Its
endorsement of efforts to develop a zero-tariff Information Technology Agreement in 1996, andfacilitating consensus including between the US and China in 2014 to expand its coverage, led toplurilateral agreement extended to all WTO members on a most-favored-nation basis on a range of
products. Similarly, APEC’s pursuit of free trade on environmental goods triggered multilateral
discussions at the WTO, still ongoing, and it maintains reporting on APEC’s list of such goods.
Looking forward, building on APEC’s non-binding investment principles and Investment Facilitation
Action Plan, APEC members can show the way to global agreement. In response to Covid, the APEC
Trade Ministers’ commitment “to ensure that emergency measures designed to tackle COVID-19 aretargeted, proportionate, transparent, temporary, do not create unnecessary barriers to trade or disruption
to global supply chains, and are consistent with WTO rules”, and its Declaration on facilitating the
movement of essential goods, is itself a basis for a WTO commitment. As early as 1998, when APEC
produced a blueprint on e-commerce, APEC has promoted broader agreement on multiple dimensionsof the digital economy. In each of these areas, work can be accelerated and taken to international
tables. And APEC members have always considered regional and multilateral trade agreements to becomplementary, not competitive. Its Roadmap for APEC’s Contribution to the Realization of the Free
Trade Area of Asia-Pacific (FTAAP) provides a strong foundation for pursuing further liberalization on
multiple fronts.
APEC’s monitoring and surveillance of members’ trade-related policies in a range of fields contributes
importantly to transparency and ultimately to compliance with the rules-based trade regime.
One specific value proposition that APEC adds is its dialogue on WTO-plus provisions in regional trade
agreements. These have covered such difficult issues as those on state-owned enterprises, SMEs andgender. These are issues where bridges and deeper understandings need to be built if progress is to bemade at the WTO. APEC’s non-binding nature and emphasis on stakeholder engagement make it an
ideal forum for developing that understanding without prejudice to negotiating positions.
More generally, APEC’s ongoing attention to MSMEs, accounting for 90 per cent of all businesses in theregion, can point the way to how best to modernize WTO rules to be more responsive to their needs.
Similarly, the work of the Committee on Trade and Investment and the Economic Committee provides
important evidence-based analysis of the relation between trade and investment, competition, andtaxation, and the importance of good economic governance at home, including structural adjustment.
On dispute settlement, APEC’s Expert’s Group on Dispute Mediation in its report to the Committee on
Trade and Investment in 1996 recommended a framework for alternative dispute resolution13, providing
the basis for APEC publishing a Guide to arbitration and dispute resolution in APEC economies in 1997,
updated in 1999.14 Many of the principles have been put into practice: today, with the impasse in
Geneva, several APEC members have joined an initiative that creates a Multi-Party Interim Arrangement
for appeals from WTO panels, and in at least two, one involving Korea and the US, and the other,between Indonesia and Vietnam, the disputing APEC members agreed to consider a panel reportbinding without appeal15. APEC members should reinvigorate discussion by reconvening an Experts’Group.
Finally, capacity-building and promoting inclusion remains a core APEC competence, further
to APEC’s Action Agenda on Advancing Economic, Financial and Social Inclusion, and should continue
to be supported by member economies. More broadly, some APEC members are leading by example inforegoing claims of special and differential treatment, better aligning their level of obligation with theirlevel of development, a practice worthy of being adopted by other advanced emerging economies.
Jonathan Fried served as coordinator for international economic relations at Global Affairs Canada until
August 2020. From 2017 to early 2020 he was Canada’s G20 Sherpa, from 2012-2017, he served as
Canada’s ambassador and permanent representative to the World Trade Organization (WTO), where heplayed a key role in multilateral trade negotiations, including as chair of the WTO’s General Council in
13

Dispute Mediation Experts’ Group Reports on a Voluntary Consultative Dispute Mediation Service, 35 I.L.M. 1102 (1996); seealso the 1998 Committee on Trade and Investment Annual Report to Ministers, APEC#98-CT-01.1
14
APEC#99-CT-03.2
15
https://www.wto.org/english/tratop_e/dispu_e/cases_e/ds488_e.htm; WTO, Indonesia – Safeguard on Iron or Steel Products,
Understanding Between Indonesia and Vietnam Regarding Procedures Under arts 21 and 22 of the DSU (27 March 2019)
WT/DS496/14, para 7; WTO, Indonesia – Safeguard on Iron or Steel Products, Understanding Between Indonesia and Chinese
Taipei Regarding Procedures Under arts 21 and 22 of the DSU (15 April 2019) WT/DS490/13, para 7, see also
https://tradebetablog.wordpress.com/2019/08/21/bother-at-wto-court/#noappeal

14

2014 and chair of the Dispute Settlement Body in 2013. He was Canada’s representative to the APEC
Vision Group. The views stated here are his own.

The Covid Context for Regional Economic Integration
Previous editions of this report have laid out the potential economic benefits of region-wide economic
integration, which were in the order of US$2 trillion annually.16 These gains would be shared more widely inthe region depending on the breadth of the membership and the quality of the agreement. Given the needfor growth boosting initiatives after the Covid-19 crisis, a fresh look at the role that trade integration canplay in boosting growth needs to be taken.
More recent estimates focus on more specific arrangements under negotiation. For example, work on theeconomic benefits of Regional Comprehensive Economic Partnership (RCEP) and the Comprehensive andProgressive Agreement for Trans-Pacific Partnership (CPTPP) estimates not only the potential economic
gains for member economies under normal ‘business as before’ circumstances but also should various
trade tensions continue.17 With business as before circumstances, the CPTPP and RCEP15 agreements
will raise annual global incomes in 2030 by US$147 billion and US$186 billion respectively. Should thetrade war continue, global incomes in 2030 will be reduced by US$301 billion, with the trade agreements
offsetting that loss by US$121 billion for the CPTPP and RCEP by US$209. Should India rejoin the RCEP
the benefits (or offsetting of losses) become larger.
In spite of the entry into force of the CPTPP in 2018 and the likely signing of the RCEP in November 2020,
progress towards more extensive integration in the region is challenging because of ongoing tradetensions between the region’s two largest economies, the United States and China, notwithstanding thePhase 1 Trade Deal between them. In the immediate term, the pathway might instead involve thestrengthening of the existing agreements, for example deepening commitments in RCEP and extending
membership of the CPTPP.
Since the entry into force of the CPTPP several APEC economies have indicated their interest in joining theagreement, notably but not limited to Thailand18. Interestingly, from outside of the region, the United
Kingdom has also initiated talks with CPTPP members.19 There is also further positive momentum on the
CPTPP with Chinese Premier Li Keiqiang stating that “China has a positive and open attitude towardjoining the CPTPP.”20 It is worth noting that at the annual China International Fair for Trade in Services
President Xi Jinping’s announced that China would “will continue to work on a negative list system for
managing cross-border services trade” which would be a big step towards being able to join an agreement
such as the CPTPP.
A major question for the next US administration, regardless of the winner of the November election, is the
US position with regards to the CPTPP? A paper by the Asia Society Policy Institute laid out four options:

Option 1: Returning to the Original TPP
Option 2: Acceding to the CPTPP
Option 3: Renegotiating the CPTPP
Option 4: Pursuing Interim Sectoral Deals

These options are of interest to all current CPTPP members, who are also part of APEC, which thereby has
an important role as a platform for engagement between them on issues of mutual concern and which
impede more extensive regional integration. This contribution in a non-binding forum has long been
APEC’s core, but often discounted, strength.
Returning to the question of the paths to region-wide integration, respondents in the PECC 2019 State of
the Region report preferred the option of convergence in terms of product coverage and level ofliberalization in various regional agreements. How to do so, and to how to maintain engagement withtrading partners in the rest of the word, is another topic that APEC might usefully examine in the coming
years.

16
These benefits refer to modelling of a scenario of the Free Trade Area of the Asia-Pacific (FTAAP). See
https://www.pecc.org/state-of-the-region-report-201417https://www.piie.com/system/files/documents/wp20-9.pdf
18
https://www.reuters.com/article/us-cptpp-thailand-idUSKBN23I1PM
19
https://www.gov.uk/government/news/uk-takes-major-step-towards-membership-of-trans-pacific-free-trade-area20
http://english.www.gov.cn/premier/news/202005/29/content_WS5ed058d2c6d0b3f0e9498f21.html

15

International Travel
As this update is getting prepared, the resumption of some flights in the region through travel “bubbles” and“green lanes” was underway, a very welcome development. But the overall picture for international travel
remained dire. An October update by the International Civil Aviation Organization saw a fall in air
passengers (both international and domestic) of between 59% to 62% in 2020, and a 61% drop inrevenue.21 The loss in tourism revenue globally this year is estimated at between US$910 billion and
US$1.17 trillion, and tens of millions of jobs on the industry had been lost.
In our previous report, we suggested that a critical part of the transition to the post-crisis period is rebuilding
confidence in international travel. Progress in making arrangements for reopening travel, like between
Singapore and Hong Kong as well as Singapore and Jakarta, shows increased cooperation by
governments and provides confidence more travel routes will reopen. However, as the pandemic has notbeen contained, there is a need to consider more ways of rebooting international travel. The International
Chamber of Commerce (ICC), representing 45 million companies, has issued a roadmap to restore travel,
which includes:
1)
2)
3)

Recognized standards for testing.
Accredited testing facilities.
A standard platform for holding test certificates.22

An important underlying feature of this roadmap is systems that facilitate mutual recognition and trust. As
more economies greatly reduce Covid-19 infection rates, the creation of more travel “bubbles” is possible.23
The development of protocols that encourage travel is a worthwhile agenda for regional cooperation.
Investment
Last year’s State of the Region report focused on the ‘troubling characteristic’ of the post-GFC period of an‘inability to move out of the stimulus stance’, noting that capital expenditure had remained disappointing.
Even prior to the Covid-19 crisis, expectations had been for an overall contraction in capital expenditure
over 2020 and 2021.24
Significant cuts to corporate capital expenditure in reaction to Covid-19 range are likely, and as much as 80
percent according to a McKinsey survey. 25 Doing so frees up cash to deal with the very uncertain businessenvironment. After the primary problem of determining expenditure cuts, the second most cited challenge
cited by McKinsey was the “Limited fact base to make decisions to defer or cut”. 26 A framework to help
businesses and consumers make forward-looking decisions has value in this context.
The IMF argues that“the recovery of private sector activity is being constrained by weakened private sector balance
sheets, losses in human capital because of unemployment, and skill mismatches as demand shifts
from high-contact sectors to those that permit social distancing. Public investment can encourage
investment from businesses that might otherwise postpone their hiring and investment plans.”27
Further, the IMF contends that the pandemic“creates an urgent need for smaller, shorter-duration projects, not only in the health care sector,
but also to facilitate social distancing in work and school activities, on transportation, and in public
spaces. Such projects include both physical adaptation (for example, greater spacing andtransparent barriers) and greater access to digital technologies’
However, the IMF also asserts that public investment will be lower in 2020 than in 2019 in 72 out of 109
emerging markets and low-income developing economies. There is thus an urgent need for governments towork with the business community in rolling out these projects.
21

https://www.icao.int/sustainability/Documents/COVID-19/ICAO_Coronavirus_Econ_Impact.pdf
https://iccwbo.org/content/uploads/sites/3/2020/10/tourism-ministers-letter-061020.pdf
23
https://www.mot.gov.sg/News-Centre/news/detail/singapore-and-hong-kong-reach-in-principle-agreement-to-establishbilateral-air-travel-bubble
24
https://www.pecc.org/state-of-the-region-reports/282-2019-2020/847-chapter-1-asia-pacific-economic-outlook
25
https://www.mckinsey.com/industries/capital-projects-and-infrastructure/our-insights/resetting-capital-spending-in-the-wakeof-covid-19
26
Ibid
27
IMF Fiscal Monitor October 2020, Chapter 2 - Public Investment for the Recovery,
https://www.imf.org/en/Publications/FM/Issues/2020/09/30/october-2020-fiscal-monitor
22

16

FDI Inflow Trends
UNCTAD’s World Investment Report forecast a 40 percent drop in foreign direct investment (FDI) flows in
2020. This would bring global FDI inflows below US$1 trillion for the first time since 2009 (Figure 9). The
drastic drop in FDI in 2020 can be traced to the pandemic, though UNCTAD argues that FDI has also been
reduced due to trade and investment restrictions.
Figure 9: Global FDI Inflows
2500

80%
60%

2000
40%
1500

20%
0%

1000

‐20%
500
‐40%
‐60%
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020

0

US$ (billions)y‐o‐y (RHS)

Source: UNCTAD: FDI Statistics Database and World Investment Report
For 2020, UNCTAD forecasts a 30 percent drop in greenfield investment and a 21 percent fall in crossborder mergers and acquisitions. These corporate activities are already badly affected by the significant
demand shock and lockdowns, but adding policy uncertainty to this, as a result of concerns over risingprotectionism, is likely to leave more money on the sidelines. Regimes applying to FDI have also tightened,
as economies seek to constrain foreign takeovers of domestic enterprises affected by the crisis.
International law firm Ashurst reports that:‘since the outbreak of the COVID-19 pandemic, certain jurisdictions have tightened their foreign
investment regimes... More generally, whether or not specific changes have been introduced, weare likely to see a stricter application of foreign investment regimes for the duration of the current
crisis, and potentially over the longer term.” 28
A prolonged shutdown of economic activities will discourage new investment, slows FDI from existing
investors and possibly result in divestments. This could affect emerging economies that are highly
dependent on foreign investors both for export-oriented industrial activity and in public-private partnershipprojects in infrastructure development (such as power generation plants and industrial parks).
Looking beyond the crisis, UNCTAD foresees twin pressures on the investment policy environment, as
there could be greater use of restrictive policies but at the same time there is also likely to be competition
for investment as part of economies’ recovery plans. Platforms for multilateral cooperation for discussing
investment policy then assume greater importance; in 2016, for example, G20 Leaders agreed to the
Guiding Principles for Global Investment Policymaking, while APEC has longstanding Non-Binding
Principles for Investment. These set a minimum benchmark for dialogue practice that could be taken
further.

28

https://www.ashurst.com/en/news-and-insights/legal-updates/global-foreign-investment-control-regimes---changes-in-light-ofcovid-19/17Digital sector
The picture for growth of the region’s digital sector is mixed. World Intellectual Property Organization’sWorld Innovation Index 2020 Report argues that compared to the period after the Global Financial Crisis“…the good news is that the financial system is sound so far. The bad news is that money to fundinnovative ventures is drying up. Rather than financing novel, small, and diverse start-ups, venture
capitalists began focusing on so-called “mega-deals”—boosting a select number of large firms
rather than giving fresh money to a broader base of start-ups.”
The WIPO report point about venture capital targeting mega-deals is of concern for three reasons: small
firms have been most damaged by the crisis; there are risks of growing concentration in the sector; and thepipeline for innovation can be damaged.
Figure 10 shows selected scores for WIPO’s Global Innovation Index. There is significant heterogeneity
across the region in and across the different sub-pillars that should indicate areas where each economy
could progress.

72.4

73.3

30

43.0

46.8

47.7

40.7

25.0

28.0

42.2

44.9

53.7

61.8

66.6

64.5
34.5

44.9

43.0
33.5

31.3

50
40

67.5
56.4
47.1

60

48.5

70

64.6

80

67.8

Figure 10: Asia-Pacific Economies Scores in Global Innovation Index

20
10
0

Institutions

Human CapitalMarket Sophistication

Business Sophistication

Total

Source: WIPO Global Innovation Index 2020
Over the years, China, Vietnam, India, and the Philippines have gained the most in the index ranking andare now in the top 50. Given innovative growth is one of the pillars of APEC’s growth strategy, initiatives
that focus on improving performance in various dimensions of the index would be one way to improve theregion’s overall performance. However, understanding the reasons why the market prefers to invest inlarger firms would be a key to channeling funding towards the MSME sector. This points to a need forregional economies to make improvements to the environment for innovation.

18

Figure 11: Global Monthly Downloads of Apps
(ioS and Google Play)

Figure 12: Global Monthly Spend on Apps US$(ioS and Google Play)
3

2.1

2.2

2.2

2.1

2.2

2.4

2.6

2.6

Nov‐19Dec‐19Jan‐20Feb‐20Mar‐20Apr‐20May‐20Jun‐20Jun‐20May‐20Apr‐20Mar‐20Jan‐20Feb‐20Dec‐19Oct‐19Nov‐19Sep‐19Jul‐190
Aug‐19

0

2.1

0.5

6.4

6.7

7.1

5.8

5.4

5.4

5.4

5.3

5.5

5.8

6.4

6.6

1

2.2

2

1

Oct‐193

1.5

Sep‐19

4

2

2.1

5

2.3

6

2.5

Jul‐19monthly spend (US$ billions)monthly downloads (billions)7

Aug‐198

Downloads

Source: App Annie: How COVID-19 Has Changed
Consumer Behavior on Mobile ForeverSpend (US$)

Source: App Annie: How COVID-19 Has Changed
Consumer Behavior on Mobile Forever

The Covid-19 crisis has intensified attention to returns to investment in telecoms infrastructure. GSMA, an
industry grouping of more 400 companies reports that the mobile industry delivered a 7% improvement indownload speeds during the pandemic, thanks to increased investment in mobile networks, which totaled
US$180 billion in 2019. A further US$1.1 trillion is expected to be invested between 2020 and 2025.
However, for these investments to materialize to close the coverage gap between those with high speed
and reliable Internet and those without, the mobile industry argues that“governments and regulators need to provide the best possible enabling environment by ensuring
pro-investment and pro-innovation policies that reduce costs and uncertainty around spectrum
allocation and assignments, remove obstacles to network deployment, and adopt international bestpractices on tax policy.”29
Some of these enabling policies for the digital economy are identified in WIPO’s Global Innovation Index,
others more specific to the telecoms sector are available elsewhere.
There are several reasons for the changed dynamic in investment in telecoms infrastructure. One is theonset of 5G technology, but a related cause is the acceleration of the use of digital technology caused by
the Covid-19 crisis. Downloads of mobile applications exceeded 7.1 billion in April when global lockdowns
were at a peak, and global expenditure on applications was over US$2.6 billion.30 (Figures 11 and 12).
Importantly, these trends are likely to be sustained after the pandemic has gone, for example, 83% of those
shopping online say they are likely to continue spending that way after social distancing restrictions arelifted, according to a study by Bain.31
Expectations that the tech sector will keep growing rapidly are drawing in more funds for investment. US
private equity firm KKR recently raised over US$13 billion for an Asia-focused fund, exceeding its US$12.5
billion target. Likely investments will include the tech sector as well as consumer and manufacturing firms.32

29

2020 Mobile Industry Impact Report: Sustainable Development Goals:
https://www.gsma.com/betterfuture/2020sdgimpactreport/wp-content/uploads/2020/09/2020-Mobile-Industry-Impact-ReportSDGs.pdf
30
https://www.appannie.com/en/insights/market-data/covid19-consumer-behavior-mobile/
31
https://www.bain.com/insights/how-covid-19-is-changing-southeast-asias-consumers/
32
https://www.reuters.com/article/us-kkr-asia-fundraising-idUSKBN1XH1RF

19

The allocation of resources towards more productive sectors faces specific policy challenges. As noted, thedigital economy has been critical to enabling effective responses to the pandemic and will be an area ofgrowth for the foreseeable future. However, a lack of regulatory coherence, continued constraints due tothe pandemic, rising protectionism and uncertainty about the future of the WTO moratorium on electronictransmissions add up to an environment in which businesses may be unwilling to invest even if interest
rates stay near zero.
Even before the Covid-19 crisis and the ramped-up demand for digital services, there were deep concerns
about the increasing fragmentation of the digital economy. PECC’s survey on the post-2020 vision for theregion found extremely broad support across stakeholder groups and sub-regions for APEC to tackle thatissue (Figure 13). Understanding why this is important for businesses and consumers alike is critical aswell as the drivers of policies behind the fragmentation or the splinternet as it has become popularly known.
Given the increased role of the digital economy in light of the Covid-19 crisis resolving those tensions takes
on an even higher degree of importance. As discussed in detail in the next chapter, trade agreements aretrying to grapple with this issue, but are they fit for purpose?
Figure 13: APEC should take a lead to avoid fragmentation of the digital economy
100%
80%

79.4%

75.2%

82.5%

80.7%

73.8%

84.6%

80.8%

80.5%

69.2%

60%
40%
20%
0%
‐20%

‐3.7%

‐5.1%

‐4.2%

‐2.8%

‐2.9%
‐10.8%Disagree

‐3.8%

‐3.3%

‐1.9%

Agree

Source: PECC State of the Region Survey 2019
Question: Please indicate your level of agreement with the following statements regarding the digital
economy.

The Evolution of the Pandemic
One key point in our earlier report was that assumptions for a global economic recovery were based on abelief the pandemic would ebb and containment measures would be loosened in the second half of 2020.
Still, there were warnings a second or even third wave was possible. That risk has indeed materialized,
though the prognosis for economic growth is largely better than earlier this year.

20Figure 14: Asia-Pacific Covid-19 Cases per
Million Population
35

32.6

Figure 15: Covid-19 Cases per Million
Population
200
180

7 day moving average

30

160
140

25

120
100

20

80
60

15

40
20

10

09‐Jan28‐Jan16‐Feb
06‐Mar25‐Mar13‐Apr02‐May21‐May09‐Jun28‐Jun17‐Jul05‐Aug
24‐Aug
12‐Sep01‐Oct0509‐Jan29‐Jan18‐Feb09‐Mar29‐Mar18‐Apr08‐May28‐May17‐Jun07‐Jul
27‐Jul16‐Aug05‐Sep25‐Sep0Asia‐Pacific Moving Average

Source: World Health Organization

OceaniaSoutheast Asia
North America
Pacific South America
Northeast Asia

Source: World Health Organization

Looking at Asia-Pacific as a whole, the pandemic seemed to have reached a peak of 32.6 infections per
million of the population in July before dropping dramatically through August and began to rise again in late
September (Figure 14). However, a more detailed look at specific sub-regions and economies shows that
infection rates for Oceania, Southeast Asia, and Northeast Asia are at a fraction of North America andPacific South America levels (Figure 15), and within a sub-region like Southeast Asia, specific economies
are faring much better than others
Analysts have been at pains to try to understand the differing performances battling the pandemic. WorldBank analysis points out that East Asia and the Pacific sub-regions have, on average, employed more
stringent mobility restrictions and done more testing. 33 Their analysis points out that a more stringent
lockdown policy has immediate effects in containing the virus while a “smart-containment” policy such as
open testing is observed with a lag. Of equal importance but perhaps less well understood is an integrated
policy approach:Containment
Testing
Economic support for lost pay
Information Campaigns

Without this package, it becomes difficult to gain the political support for policies over a sustained period.34
These approaches have been developed through previous experience with pandemics. One of thevariables that seems to distinguish more successful handling of a pandemic is a clear and strong
information campaign. A deeper analysis of all of the policies – including how successfully they were
implemented - will help future planners learn from the region’s experience with Covid-19.
While there are naturally hopes that vaccines can be deployed quickly, the responses to PECC’s survey
show the ending of the lockdown was not seen as contingent on that one variable; indeed what wasconsidered as most important was the medical capacity to deal with cases. A vaccine came third in the list,
indicating a common view it cannot be available very rapidly.
33

From Containment to Recovery: Economic Update for East Asia and the Pacific, October 2020,
https://www.worldbank.org/en/region/eap/publication/east-asia-pacific-economic-update
34
Ibid

21

The Wall Street Journal in October, in an article on how life was largely back to normal in much of Asia,
quoted Ashish Jha, dean of the Brown University School of Public Health, as saying:“If you can control the virus, you can get 95% of your life back … In the U.S. and Europe, we
wanted to get our lives back, so we acted as if the virus was under control. In Asia, they were notin denial. They understood they can have their lives back if they follow certain precautions.”
To contain the spread of the pandemic, governments across the region and the world have implemented
stringent lockdown policies that have curtailed economic activity, ranging from closing borders, closing
schools, stay at home policies and reducing the size of public gatherings.
Figure 16: Comparison of Policy Stringency: Asia-Pacific vs Europe
90
80
70
60
50
40
30
20
10
01jan2020
10jan2020
19jan2020
28jan2020
06feb2020
15feb202024feb2020
04mar2020
13mar2020
22mar2020
31mar202009apr202018apr202027apr202006may2020
15may2020
24may2020
02jun2020
11jun2020
20jun2020
29jun2020
08jul2020
17jul2020
26jul2020
04aug2020
13aug2020
22aug2020
31aug202009sep2020
18sep202027sep202006oct2020
15oct2020
24oct2020

0

Asia‐Pacific

EuropeSource: Oxford COVID-19 Government Response Tracker
Figure 16 traces the average restrictiveness of those policies since the beginning of the year. The index
tracks the level of government policies on school closures; workplace closing; cancelling public events;
limits on private gatherings; closing of public transport; stay at home requirements; restrictions on internal
movement between cities/regions and restrictions on international travel. As shown in Figure 16, theaverage level of ‘stringency’ for the Asia-Pacific and Europe since the beginning of the year. As seen in thechart, the level of policy stringency for both peaked in April but declined much faster for Europe. There is
no guarantee that the stringency level will not rise again if infection rates increase, for example, parts ofEurope have heightened lockdown measures such as imposing curfews and limiting gatherings due torising infection rates. As seen in the chart the levels of policy stringency for Europe began to climb again at
the end of October.
Vaccine development
In May, we asked the regional policy community to evaluate factors to consider for exiting lockdown
conditions. The most important were related to medical factors the top 3 being: the ability of the medical
system to cope with the number of infections; evidence that the number of infections was going down; anddevelopment of a vaccine (Figure 17).
The next step to resolution involves the distribution of vaccines but building the supply chains acrossmultiple modes of transport is a challenge, with respect to the scale of the task and also the policy
processes involved.

22

The WHO estimates that as much as half of vaccines are wasted globally every year because of
temperature control, logistics and shipment-related issues.
The International Air Transport Association (IATA) estimates that providing a single dose to 7.8 billion
people would fill 8,000 Boeing 747 cargo aircrafts. Dealing with these issues might get shipments to theborders of economies, but distributing vaccines to the billions who require them will be an enormous
logistical and infrastructure challenge.35 DHL estimates that ensuring global coverage for 2 years would
require 15 million deliveries in cooling boxes. Warehouses not designed for medical projects are now being
used for medical products, which has led to damage due to inappropriate storage conditions. Different
vaccines also require different storage protocols, one of the important factors being storage attemperatures ranging between minus 18°C to minus 80°C. Moving the “last mile” in places where
infrastructure is lacking and it is the hardest to meet requirements for special equipment and training36. It isestimated that supply chains account for nearly 25 percent of pharmaceutical costs and more than 40
percent of medical-device costs37.
On top of these physical issues, customs clearance matters, such as supplier certification, have become aproblem. Lessons to be learnt here include the need for greater emphasis on reaching agreement on theequivalence of certification processes. Doing so is a longer-term project to build trust among regulators.
APEC’s Alliance for Supply Chain Connectivity, which engages the private sector, could be a usefulplatform for identifying chokepoints in the delivery of vaccines around the region. Before the pandemic, theAPEC alliance already had discussed some potential technological solutions to the temperature storage
issues that vaccination transportation will pose and the customs-clearance issues that technology will face.
In summary, the development of a vaccine needs to be accompanied by rollout plans that identify potential
bottlenecks in distribution and how to address them.
Figure 17: Factors for Consideration for Exiting from Lockdown
Sufficient medical capacity to deal with expected number of cases (including hospitalbeds, doctors and nurses, personal protective equipment, and medical supplies)

4.6

Evidence that the number of new cases is reducing

4.4

The development of a vaccine

4.4

The availability of medical treatments for those found positive with COVID‐19

4.4

The capacity to quarantine and support those who test positive

4.4

The ability to prevent infection in people who are more at risk, eg the elderly andthose with pre‐existing conditions

4.4
4.3

The economic cost of the lockdown

4.3

International cooperation
The ability for businesses, schools, and child care facilities to implement effective
social and physical distancing

4.2

Effective contact tracing

4.2
4.1

The ability to undertake mass testing

3.9

Mental health and individual wellbeing

3.8

The ability to maintain lockdown procedures effectively beyond a certain time‐length

3.6

Zero new cases

3.5

What neighboring economies are doing

3.0

3.2

3.4

3.6

3.8

4.0

4.2

4.4

4.6

4.8

Score

PECC State of the Region Survey on the Impact of Covid-19
Question: How important do you think each of the following should be to the consideration in youreconomy of exiting from lockdown

3535
https://www.theguardian.com/world/2020/sep/10/we-have-too-few-planes-to-deliver-any-covid-19-vaccine-warns-aviationgroup36
https://www.dhl.com/global-en/home/insights-and-innovation/thought-leadership/white-papers/delivering-pandemicresilience.html
37
http://mddb.apec.org/Documents/2020/CTI/A2C2/20_cti_a2c2_009.pdf

23

Information Sharing and Minimizing Supply Chain Disruptions
One of the recommendations in PECC’s earlier report was that APEC members should hold a PublicPrivate Dialogue to explore the creation of a Medical Equipment Market Information System using the G20
Agricultural Market Information System (AMIS). Meanwhile, APEC Trade Ministers agreed to the
Declaration on Facilitating the Movement of Essential Goods, in which their economies committed toworking together to facilitate the flow of essential goods.
AMIS was a response to the food price crises in 2008 and 2010. It was designed to improve market
information about existing stocks. Based on existing structures and resources to avoid increasing costs andduplication of efforts, it consists of three organs:The Global Food Market Information GroupThe Rapid Response Forum; andThe Secretariat

The underlying premise of AMIS is that fluctuations in output at the global level are far smaller than those at
the regional or single-economy level. Changes in one region are offset in another. When the global trading
system is working, the impact on prices and on volumes is distributed across the world. This is illustrated in
Figures 18 and 19 where the variation of the world production of wheat and rice is far less than that in a
major producer of each (the United States and Thailand, respectively). Its purpose is therefore to share
information across regions, and to avoid inefficient responses to shocks in any one region that might in turnworsen the global situation. An illustration might be the imposition of export quotas following a drought in alarge producing economy.
Figure 18: Production of Wheat: World vsUnited States

Figure 19: Production of Rice: World vsThailand

50%

40%

40%
30%
30%
20%

y‐o‐y change

y‐o‐y change

20%
10%
0%
‐10%

10%
0%

‐20%
‐10%
‐30%

United States of America

Source: FAO Stat

1962
1967
1972
1977
1982
1987
1992
1997
2002
2007
2012
2017

‐20%
1962
1967
1972
1977
1982
1987
1992
1997
2002
2007
2012
2017

‐40%

World

ThailandWorld

Source: FAO Stat

As an evaluation of the funding for AMIS provided by the World Bank points out:“[t]he turnaround time to design and put together an initiative in response to the food crisis of
2007–2008 was limited - a few months. This led to a situation where the organizations that agreed
to form the AMIS Secretariat did not consider who would use AMIS’ outputs and what were theneeds of participating countries, in particular the non-G20 ones and more broadly, the entirety of
its users.”38

38

http://www.amis-outlook.org/fileadmin/user_upload/amis/docs/resources/WB%20evaluation.pdf

24

Can this model be translated to medical products, where we also saw the imposition of export controls in
anticipation of local shortages? Production of medical equipment is not as vulnerable as crops to thevicissitudes of weather, and as in the Covid-19 case, the changes are more likely to come on the demandside. Even so, the value of an information system remains, at least in principle.
To illustrate this point, Figures 20 and 21 are based on data gathered by the Global Trade Alert, theEuropean University Institute and the World Bank to track trade policy measures taken in response to the
Covid-19 pandemic. They show the changes in policy for exports and imports of medical and foodproducts during 2020.39
The problem, evident in Figure 20, is that the lack of information or at least opacity in medical goods supply
markets can potentially (and indeed did) lead to poor decision-making. The closure of borders as well asfactories constrained international production and trade in medical supplies, while the pandemic led to a
massive surge in demand. Fear of no access to products led to stockpiling, which exacerbated the issue.
This spurred different policy measures that restricted trade because of a lack of confidence in international
markets to supply. At the same time economies were also liberalizing trade – as shown in Figure 21, theseinclude trade facilitation measures to expedite the processing of essential products through customs.
However, as “Evenett and Winters (2020) have recently observed, “the benefits derived from lowering
import barriers on medical products and medicines during this pandemic are reduced if there is little
available to buy at affordable prices as a result of the export bans imposed by trading partners.40”
Figure 20: Trade Restrictive Measures
Implemented by Asia-Pacific Economies

Figure 21: Liberalizing Measures Implemented
by Asia-Pacific Economies

12

80

10

70

12

80

10

70

8

8
60

6

60

6
50

4

50

4

2

40

2

40

0

30

0

30

‐2

‐2

20

‐4
‐6

10

‐6

‐8

0

‐8

Restrictions Imposed

Removals

20

‐4
10
0

Liberalisation Imposed

Culmulative

Culmulative

Source: Global Trade Alert

Source: Global Trade Alert

Removals

The original G20 mandate emphasized the key role the private sector plays. Compared to food products,
the medical products value chain is populated by a smaller number of large producers. Data from the WTO
suggests that, at least for finished products, the top 10 exporters of medical products account for 74 percent ofworld exports. The model, however, involves the sharing of information along the value chain, which may
be constrained by private sector views on the commercial value of that data.
Managing a system like AMIS in this sector means addressing the technical difficulties of dealing with aneven more heterogenous set of products. A further challenge for medical products is the complex nature of
the value chain. According to Harvard Business Review, for those products, managing a system such asthat proposed involves an effort to:39
The problem identified by this initiative is that ‘governments often announce to the media changes in their trade policies
before publishing official decrees and implementing regulations and in advance of notifying the World Trade Organization.’
Moreover, the total of trade restrictions picked up by this initiative are significantly higher than those reported to the WTO.
40
Cited in Richard E. Baldwin and Simon J. Evenett, COVID-19 and Trade Policy: Why Turning Inward Won’t Workhttps://www.globaltradealert.org/reports/download/53

25

“lay the groundwork by doing advanced planning, analyzing markets to assess the global availability of
PPE and ventilator components, and creating sourcing plans for every key need that might arise. To
do this kind of planning, it must have abundant, dependable, real-time information from a broad arrayof sectors on the status of supplies, pandemics, terrorist events, and other unexpected disruptions.
And it must be able to validate and integrate this information.”41
Doing so may involve going down into second to third tier suppliers. The world now has a better understandingof what happens during a demand surge, and we need to develop the same visibility on the supply side.
Recognizing the differences between food and medicine, the PECC recommendation was to start with apublic-private dialogue on the practical question of making this idea work. This is generally a well-tried andutilized Asia-Pacific approach to addressing problems.
There is support for this effort. In PECC’s survey, information on stockpiles of medical supplies was ranked
8th among priorities for regional cooperation. Topping the list were the sharing of pandemic preparedness
practices, development of a vaccine, trade facilitation on essential products and the removal of export
restrictions on essential products, which survey participants most often rated “very important”. Of activities
considered of the second order and “important”, cooperation on medical supply stockpiles was the top
priority.
We have made the case for consideration of an information system for medical products, the design ofwhich could be guided by a public-private dialogue. Even if such an initiative proceeded, somegovernments may still choose, or be unable, to resist domestic pressure to subsidize production, orotherwise tailor procurement that would favor domestic producers. There are, however, constraints onthese responses, since in either case, these actions would run into criticism from trading partners andpossible disputes that could be taken to the WTO. The defense may be to argue that a special situation
exists under Article XX of the GATT, necessary to protect human life or even Article XXI, a security
exemption. In this situation, there is also value in a dialogue on the application of these articles.
In summary, there are better solutions than subsidies or distorted procurement regimes that favor domestic
suppliers, and information sharing across economies may be a valuable option. The purpose of exploring
this option is to:
a)
b)
c)
d)

Provide the same if not equal levels of security
Reduce costs for consumers
Require less government subsidization
Do less damage to international markets, if not improve them

Climate ChangePart of PECC’s recommendation for achieving the post-2020 vision for APEC was “(c)ommitted long term
policy initiatives that promote sustainability.” The PECC survey in 2019 found strong support for a numberof measures, which was extraordinary, making it difficult to set a priority on which actions might be mostuseful for a group like APEC to pursue (Figure 22). There was solid support for the general proposition of athreat to humanity, followed by the need for APEC to ensure that sustainability is built into its program
areas. There was less support for the idea that APEC economies should review each other’s individually
determined commitments but more support for focusing on more practical issues such as environmentally
harmful subsidies.
Given the region’s high and rising share of total global CO2 emissions (Figure 23), a solution to climatechange without Asia-Pacific ‘on board’ is impossible. Addressing these issues is not new to the APEC
agenda, indeed the first APE'C Leaders’ Summit in 1993 envisaged a“community in which our environment is improved as we protect the quality of our air, water andgreen spaces and manage our energy sources and renewable resources to ensure sustainablegrowth and provide a more secure future for our people.”41

https://hbr.org/2020/09/why-the-u-s-still-has-a-severe-shortage-of-medical-supplies

26

Figure 22: Views from the Regional Policy Community on Sustainability Issues

50%
41.1%
40%

32.5%

32.9%

31.9%

30%

29.2%

28.8%

‐1.7%

‐2.2%

21.3%
20%
10%
0%
‐10%

‐1.3%

‐0.7%

‐1.7%

‐1.8%

Sustainability is the APEC must ensure that APEC should provide
greatest existential
a sustainability
leadership for global
challenge facing
framework is built into climate change andhumanity today.
its programme areas
environmental
initiatives‐2.4%

APEC should ensure APEC members should APEC should have athat its sustainability
commit to mutualgroup dedicated toinitiatives contribute review by its members
addressing
effectively to theof their individuallysustainability issues
Sustainable
determined climate
Development Goals change commitments
agreed by the United
Nations in 2015

Strongly Disagree

Strongly Agree

APEC’s value add onthese issues should be
to promote policies
responses that improvesustainability amongst
its member economies
in such area asenvironmentally
harmful, fossil fuel andfisheries subsidies

Source: PECC State of the Region Survey 2019
Question: Please indicate the level of agreement or disagreement that you have with the following
statements on sustainability. Note: chart only the data for ‘strong agreement’ and ‘strong disagreement’.
Since 1993, a number of targets have been set. As part of the APEC Growth Strategy adopted in 2010,
APEC economies agreed to“seek growth compatible with global efforts for protection of the environment and transition togreen economies.”
Part of that work included the assessment of the potential for reducing the energy intensity of economic
output in APEC economies between 2005 and 2030, beyond the 25 percent aspirational goal agreed to by
APEC Leaders in 2007. In 2011, they agreed to further reduce APEC’s aggregate energy intensity by 45
percent by 2035, and in 2014 agreed to double the share of renewables in the APEC energy mix by 2030.
The estimated share of renewables in primary energy consumption has already doubled (Figure 24) since2014. However, the ambitions of APEC members have also increased. At present, 7 out of APEC’s 21
economies have committed to achieving net-zero carbon emissions, with 5 out of the 7 committing to thattarget by 2050 (see table below). Others may choose to join that list. Various forms of regional
cooperation can support the effort to reach those goals.

27

Figure 23: Asia-Pacific CO2 Emissions %Global Total

Figure 24: Source of Asia-Pacific Primary
Energy Consumption

74%

100%

72%

90%

70%

80%

68%

70%

66%

60%

64%

50%
40%

62%

1.9%
6.1%
3.8%

3.7%

4.4%

6.3%
4.1%

6.0%
4.0%

38.0%

34.3%

34.2%

20.5%

20.4%

20.8%

29.6%

31.2%

30.7%

2014

2018

2019

30%

60%

20%

2019

2016

2013

2010

2007

2004

2001

1998

0%

1995

56%
1992

10%

1989

58%

Oil

Natural Gas

Coal

Nuclear energy

Hydro electric

Renewables

Asia‐PacificSource: BP Statistical Review 2002

Source: BP Statistical Review various years

Economy2050

The earliest possible
time in the latter halfof this century

Canada
Chile
China
Japan
Korea
New ZealandSingapore

X
X
X
X
X
X
X

One example of a field of cooperation is the design of infrastructure investment strategies. Economist
Nicholas Stern argues that spurring low-carbon growth requires“the redirection of financial flows and investment in the supporting infrastructure that will form the
backbone of economic development, mitigation and adaptation.” 42
Estimates suggest that over the next 20 years, the required investment in infrastructure will be in the regionof US$ 100 trillion or more, an average of US$ 5 trillion – US$ 6 trillion per year 43 In short, the argument isthat planning would not have us investing in the same models we have been that led us to the current
situation. The Covid-19 crisis likely will lead to an even deeper re-examination of the desirability of thosetrends. As stated elsewhere, people have grown accustomed during the crisis to a working from homemodel, which changes the dynamics of urban development.44 As earlier discussed, the IMF argues thatpublic investment at this time can also crowd in private sector investment, and this provides a unique
opportunity for addressing climate change issues and spurring growth at a critical juncture.
Another area of discussion and cooperation comes at the intersection of sustainability policies and trade
policies. For example, the EU Green Deal includes measures to address carbon leakage – a carbon borderadjustment mechanism. 45 The language in the European Green Deal specifies that the measure would bedesigned to “comply with World Trade Organization rules and other international obligations of the EU”.
However, WTO rules have not caught up with commercial realities and the WTO itself now lacks afunctioning dispute settlement mechanism.
42

http://pubdocs.worldbank.org/en/728181464700790149/Nick-Stern-PAPER.pdf
https://www.brookings.edu/research/driving-sustainable-development-through-better-infrastructure-key-elements-of-atransformation-program/
44
http://pubdocs.worldbank.org/en/728181464700790149/Nick-Stern-PAPER.pdf
45https://eur-lex.europa.eu/legal-content/EN/TXT/?qid=1576150542719&uri=COM%3A2019%3A640%3AFIN
43

28

APEC, working in a crowded field, needs to address some key issues raised in 2009 by the late long time
PECC contributor Dr Hadi Soesastro. The first is the need to avoid ‘green protectionism’. The second is thesystemic importance of APEC members building confidence between advanced and emerging economies
on an often-divisive issue. The recommendation back then was to view the reduction of risk andvulnerability as a key development issue, and to develop cost-effective ways to foster adaptation. It has notchanged since 2009.
Efforts in these and other areas are likely to resonate with the business sector. In a survey undertaken in2018 by the Carbon Disclosure Project of the world’s 500 biggest companies about climate-related risks
and opportunities, 225 estimated that the opportunities represented a potential market of over US$2.1
trillion – mostly in demand for low emission products and services, as well as the potential for a better
competitive position against shifting consumer preferences coming over the short- to medium-term. In
addition, companies expressed the concern that
“Not only does a company need to speak to the efforts they’re making, they also need to show
through their actions that they are making improvements or taking mitigation measures. Not
addressing climate change risks and impacts head on could result in a reduced demand for ourgoods and services because of negative reputation impact,” said Alphabet [the parent of
Google].46
In other words, companies not only need to respond to shifting consumer preferences, but they also haveto take into account possible reputational damage by inaction.
Finance for Sustainable Development
Attention to issues of sustainability is more evident in financial markets. A report issued to APEC Finance
Ministers this year by the OECD notes that Environmental, Social, and Governance (“ESG”) investing has
increased dramatically, such that assets under management of institutional investors committing to ESG
practices has risen to US$30 trillion globally. However, there is very little clarity of what ESG investing is inpractice, and the range of objectives, approaches and metrics that all loosely associated with the term ESG
raises attention about the integrity of the investment process.
In a survey of 18 APEC economies that produce guides for listed companies, three main disclosure
standards were seen: The Global Reporting Initiative (GRI), the Sustainable Accounting Standard Board(SASB) and the Task Force on Climate-Related Financial Disclosures (TCFD).
ESG ratings are at an early stage of development in the region. This represents an opportunity for dialogue
and learning from each other’s experience. This work would be valuable in a post-crisis recovery and help
provide basic information and metrics that would promote financing for sustainable development.
Conclusions
While recent forecasts for the region’s economic performance in 2020 are less gloomy than earlier ones,
growth remains largely contingent on massive government support. Furthermore, the pandemic has notbeen contained in some places where high infection rates require at least partial lockdowns, blocking any
quick economic rebound. The lessons learnt globally for dealing with the pandemic need to be taken on
board for a semblance of normality to be restored as the medical community works on a viable vaccine.
However, that is only Phase 1 of dealing with the health crisis. Phase 2 -- the rollout and distribution of thevaccine -- needs much more attention.
While it is likely that there will be multiple vaccines on the market, the problems of distribution require thesame amount of international attention. A multi-stakeholder approach that identifies chokepoints todistribution is one step in this process. APEC has a long history in identifying chokepoints in supply chainsand has a successful track record in working with the business community on these issues.
Our emphasis has been to promote a framework that provides the restoration of confidence. Unfortunately,
the current environment does not lend itself to international policy coordination – even though this is a time
when that is absolutely crucial. Uncertainty fueled by the pandemic and protectionism is making manybusinesses cut spending and jobs. The region needs investments that help tackle the digital divide, climatechange and inequality. Such investments can nurture sustainable growth – as well as generate both short46

https://www.cdp.net/en/research/global-reports/global-climate-change-report-2018/climate-report-risks-and-opportunities

29and long-term dividends.This is important not only for the recovery but for addressing the weaknesses that
had characterized growth before the pandemic struck.
One element of this framework is strong support for the multilateral trading system based on agreed values
and norms reflected in updated rules and the more effective settlement of disputes. Chapter 2 of this reportdiscusses how the next generation of trade agreements are attempting to create rules for digital trade andwhether they are fit for purpose. We addressed the challenges currently facing the WTO. None of theseissues are easy to address but importance of addressing them cannot be understated, nor are they
insurmountable. The history of Asia-Pacific cooperation is valuable and instructive. At the time of APEC’s
formation the world was divided and seemingly facing increasing trade disputes but economies of thisregion nonetheless did come together in pursuit of a common vision.
International cooperation must play a critical role in the later-pandemic and post-pandemic periods. The
current economic environment is one of great uncertainty, and uncertainty is one of most important
inhibitors of robust growth.

30

Chapter 2:The New Generation of ‘Digital’ Trade Agreements: Fit for Purpose?
Peter Lovelock47
The digitalization of the economy necessitates governments align their domestic laws and policies andliberalize their markets to achieve greater connectivity and exchange of information across borders. A key
driver among economies working towards such alignment is the goal of improving economic and social
growth by exploiting the enormous opportunities enabled by digital trade. The growth of digital trade isdependent upon greater interconnectivity and interoperability across jurisdictions.
Digital trade integration, however, is a complex, multidimensional process that integrates regulatory
structures and policy designs, digital technologies and business processes along the entire global digitalvalue chain. It requires free cross-border movement of not only digital services, products and technologies
but also other manufactured goods (e.g. internet platform-driven trade), data, capital, ideas, talent as wellas the availability of integrated physical and virtual infrastructure. Thus, digital trade integration is not only
dependent on the removal of digital trade barriers but also requires extensive technology, legal and policy
coordination. Economies thus strive to achieve such interconnectivity and integration in digital tradethrough international trade agreements.
Recent trade agreements have begun including or focusing upon provisions to reduce regulatory barriers indigital trade and facilitate cross-border trade-in-data. However, at a time when digital demand and use areseen to be growing exponentially, and governments are focusing on accelerating their domestic digital
economy growth, often accompanied with programs of digital transformation or digital government,
regulatory restrictions on international digital trade are growing equally, if not more, rapidly. If the growth ofdomestic digital economies is to at least some extent dependent upon and underpinned by digital trade (theflow of cross-border data and the trade-in-data), then how to resolve this apparent contradiction?
Are these emerging FTAs, like their in-existence forerunners, deficient in supporting digital development
and inclusion as well as fostering widespread international regulatory cooperation? It is obviously too early
to judge what are very worthwhile approaches too harshly. However, as the proliferation of digital
regulatory innovation and restriction illustrates they are very open to both negative and positive
interpretation and, thus far, appear unable to facilitate a holistic digital trade regulatory framework given theconflicting domestic privacy and cybersecurity laws among trading partners.
Seizing the opportunity presented by digital trade, and realizing its potential for economic growth, will
however depend on the development of harmonized trade rules. Trade rules will help remove a host of
barriers impeding trade such as cross-border data flow restrictions, localization requirements, tariffs andquotas on ICT equipment, domestic and local standards that deviate from international standards, and lackof access to effective dispute resolution mechanisms.
Recognizing the above, this brief review of the current slate of digital trade agreements, began from thequestion of how similar are each of the agreements in their digital provisions, and the digital language
being used? Is the language truly similar, or are there gaps and differences across these agreements –which may begin to explain some of the constraints we see in fostering digital trade. If so, what are thesegaps? This led to a further question as to whether the approach being adopted – adapting and amending
FTAs to incorporate a digital chapter or digital provisions is the appropriate means for developing a digitaltrade environment? And if so, what language was emerging that deserves to be “baked in” to suchagreements going forward?
The New ‘Digital’ Trade Agreements
The past two years has seen the emergence of five key ‘digital’ trade agreements: the Comprehensive andProgressive Agreement for the Trans-Pacific Partnership (CPTPP), and the US-Mexico-Canada Agreement(USMCA) are existing FTAs updated and modified to include chapters on e-commerce and digital trade
respectively. The remaining three – the US-Japan Digital Trade Agreement (Digital Trade Agreement); theSingapore-Chile-New Zealand Digital Economy Partnership Agreement (DEPA); and the SingaporeAustralia Digital Economy Agreement (SADEA) – are positioned as ‘digital-only’ trade agreements.
These plurilateral agreements seek to develop international frameworks that harmonize digital trade rules,
enhance cooperation on international standards, and create interoperable systems. In reality, they sharemuch in common with traditional trade agreements in both format and language. A key question has

47

Dr. Peter Lovelock is the Director of the Technology Research Project Corporate (TRPC).

31become: does the current language being deployed in ‘digital’ trade agreements reflect and enable
the achievement of these objectives? Or is it a limiting constraint – a repacking of new into old boxes?
Here we focus on four of the five agreements: the CPTPP, USMCA, the SADEA, and DEPA. A brief
description of the four agreements is provided below with a summary of key approaches and objectives inTable 1.
Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP): The CPTPP is afree trade agreement between Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand,
Peru, Singapore, and Vietnam. It first entered into force among six economies – Australia, Canada, Japan,
Mexico, New Zealand and Singapore on 30 December 2018, and Vietnam on 14 January 2019. The four
remaining members will enter after they complete their ratification processes. The e-commerce chapter of
the agreement sets rules to facilitate digital trade, allowing participating members preferential access toeach other’s markets, and includes measures that will promote the flow of data, protection of privacy andconsumer rights, and intellectual property.48
US-Mexico-Canada Agreement (USMCA): USMCA is a free trade agreement between the United States,
Mexico and Canada. It replaced the North American Free Trade Agreement (NAFTA) and entered into
force in all members on 1 July 2020. The agreement includes a chapter on digital trade which builds on
the provisions of the Trans-Pacific Partnership (TPP) and includes rules to prohibit customs on digitalproducts, protect the flow of data, privacy, and intellectual property, and promotes collaboration on
cybersecurity.49
US-Japan Digital Trade Agreement (US-Japan Agreement): The US and Japan implemented two
separate trade deals, the Trade Agreement and Digital Trade Agreement in 2019. The Digital Trade
Agreement went into effect on 1 January 2020 and provides guidelines on priority areas of digitaltrade.50 It parallels the USMCA, and includes key provisions on prohibition of customs duties or otherprotectionist measures on digital products.
Singapore-Chile-New Zealand Digital Economy Partnership Agreement (DEPA): The DEPA wassigned on 12 June 2020, between Chile, New Zealand and Singapore. It aims to strengthen cooperation indigital trade, and promote interoperability.51 It is divided into 12 modules that include treatment of digitalproducts, data issues, emerging technologies, digital inclusion, and small and medium enterprisecooperation. It will enter into force once at least two parties have completed relevant domestic processes.
Singapore-Australia Digital Economy Agreement (SADEA): Singapore and Australia signed the SADEA
on 6 August 2020.52 Building on existing agreements under the CPTPP and the Singapore-Australia Free
Trade Agreement, it sets a range of trade rules to capitalize on the digital economy. As part of the
SADEA, the two economies have signed a series a MoUs on areas including e-invoicing, e-certification,
personal data protection and digital identity.
Table 1: Context and Key Provisions of Four Digital Trade Agreements
CPTPP
Chapter 14 covers
Electronic Commerce
Trade Agreement has a
Framework for Digital
Economy53

USMCA
As part of the revised
NAFTA, the USMCA
includes Chapter 19(Digital Trade),54 which

DEPA
DEPA contains twelve
modules including
Business and Trade
Facilitation, Digital
Identities, Emerging
Trends and

SADEA
Forms part ofexisting SingaporeAustralia Free
Trade Agreement

48

Government of Canada, CPTPP, https://www.international.gc.ca/trade-commerce/trade-agreements-accordscommerciaux/agr-acc/tpp-ptp/text-texte/toc-tdm.aspx?lang=eng
49
USTR, USMCA, https://ustr.gov/trade-agreements/free-trade-agreements/united-states-mexico-canadaagreement/agreement-between
50
USTR, U.S.-Japan Digital Trade Agreement, https://ustr.gov/sites/default/files/files/agreements/japan/Agreement_between_the_United_States_and_Japan_concerning_Digital_Trade.pdf
51
MTI, Digital Economy Partnership Agreement, https://www.mti.gov.sg/Improving-Trade/Digital-Economy-Agreements/TheDigital-Economy-Partnership-Agreement
52
DFAT, Australia-Singapore Digital Trade Agreement, https://www.dfat.gov.au/trade/services-and-digitaltrade/Pages/australia-and-singapore-digital-economy-agreement53
https://www.mti.gov.sg/-/media/MTI/Newsroom/Press-Releases/2018/11/Press-release---The-CPTPP-Enters-Into-Force-inDecember.pdf
54
https://ustr.gov/trade-agreements/free-trade-agreements/united-states-mexico-canada-agreement/fact-sheets/modernizing

32

CPTPP Parties agree to adopt
and maintain consumer
protection laws related to
fraudulent and deceptivecommercial activities
online.
 Promotes a free andopen internet thatenables the creation andgrowth of new Internet
services.
 Establishes requirementsthat ensures continued
cross-border data flows,
and discourages forced
technology transfers
 Innovative companies
are able to utilise thetechnology that works
best and suits theirneeds.

USMCA
 Prohibits customs duties
from being applied todigital products
 Ensures any data
localization requirements
are minimized
 Recognizes the use ofelectronic authentication topromote digitaltransactions
 Guarantees enforceable
consumer protections
apply to the digitalmarketplace Promotes open access togovernment-generated
public data Limits platform
intermediate liability
outside of IP enforcement

DEPA
Technologies, andInnovation and theDigital Economy.
Each individual module
acts as a detachable
component that could
be used elsewhere.55
Economies can join theagreement in its entirety
or can incorporate
specific modules indifferent tradenegotiations.

SADEA
The original
provisions for
Chapter 14 (ECommerce) havebeen replaced by
the provisions forthe new Chapter
14 (Digital
Economy)56

Similarities in ‘Digital’ Trade Language: A Path Forward?
Much of the commentary around these new ‘digital’ trade agreements has lauded what is seen as an
adoption of common principles, and an emerging commonality of language that can be “baked in” to future
trade agreements as digital becomes ever more ubiquitous and integral to trade. To the extent that there isa difference in these agreements, it is broadly seen to be one of approach: i.e., either they are amending
language within an existing trade agreement (as is the case with the CPTPP and USMCA), or they are
distinctly new digital-only agreements (as is the case with DEPA).
This is often summarized down into a ‘shopping list’ approach – as illustrated in Table 2 – suggesting that
there is a common set of digital clauses that are gaining currency and, once recognized, can be input into
agreements to ensure protections will be recognized and enforced.
Table 2: Comparison of Key Digital Trade Provisions
Key Provisions
Elimination of customs duties on digital products and/or
electronic transmissions

CPTPP

USMCA

DEPA

SADEA

Yes

Yes

Yes

Yes

Non-discriminatory treatment of digital products

Yes

Yes

Yes

Yes

Electronic authentication and signatures

Yes

Yes

Yes

Yes

Paperless trading

Yes

Yes

Yes

Yes

Domestic e-transactions framework

Yes

Yes

Yes

Yes

Online consumer protection

Yes

Yes

Yes

Yes

Personal information protection

Yes

Yes

Yes

Yes

Measures against unsolicited commercial electronic
communications

Yes

Yes

Yes

Yes

Cybersecurity

Yes

Yes

Yes

Yes

Cross-border transfer of information

Yes

Yes

Yes

Yes

Prohibition of data localization

Yes

Yes

Yes

Yes

55

https://www.eastasiaforum.org/2020/07/10/building-on-the-modular-design-of-depa/
https://www.dfat.gov.au/trade/agreements/in-force/safta/official-documents/Pages/default

56

33

Cross-border transfer of information by electronicmeans and prohibition of data localisation for financial
services

No

Yes

NA

Yes

Liability of intermediary service providers

No

Yes

NA

NA

Partial

Yes

NA

Yes

NA

Yes

Yes

Yes

Non-disclosure of software source code and related
algorithms
Open government data

Source: Adapted from http://asiantradecentre.org/talkingtrade/comparing-digital-rules-in-trade-agreements
Yes: the provision is included in a separate article and is fully addressed;
No: the provision is included in a separate article, but is not addressed;
Partial: the provision is not fully addressed;
NA: the provision is not mentioned throughout the agreement.
In this telling, the key provisions relating to digital trade are “roughly the same and occur in all agreements”.
The “key provisions” captured are indeed key and important issues: customs duties on digital products,
non-discriminatory treatment of digital products, cross-border information flows and localization
requirements, non-disclosure of source code, e-transactions frameworks, online consumer protection,
personal information protection, and cybersecurity. It is recognized that agreements differ “in theirtreatment of some provisions and the exemptions they offer to members”, which is standard and to be
expected for trade agreements.
However, what this shopping list approach fails to capture is potentially as important as the good news
story that this apparent recognition of digital suggests. The gaps include the differences in interpretationand language of many of the of these key provisions, the provisions that are not common across theagreements, and the reasons for that, and the continued use of traditional jurisdictional considerations in
the interpretation and application of the new digital provisions – most notably through carve outs for“legitimate public policy outcomes” (LPPOs), and domestically strategic sectors (such as finance,
healthcare, education, communications and national security).
A more detailed rendering of the language being developed in these agreements provides a far more
complex picture in terms of the commonality of digital trade language and protections being offered (Table3).The summary table shows that the three most significant areas where the language has beendeveloped, particularly when the DEPA and SADEA are compared to the earlier CPTPP and USMC, relate
to paperless trading, personal information protection and location of computing facilities, with small
developments in domestic electronic transaction frameworks, online consumer protection, andcybersecurity.
Table 3: Key and Developing Language Across Digital Trade Agreements
Provisions
CPTPP
USMCA
DEPA
Digital Trade
Facilitation

Customsduties on
digitalproducts

Agree to maintainlegal framework
governing
electronictransactions
consistent with
UNCITRAL Model
Law or UN
Conventions on Useof Electronic
Communications.
Encourage use ofinteroperable
electronic
authentication.
Not impose customs
duties onelectronicallytransmitted content.

SADEA

Ensure that suppliers
are not restricted intheir use ofelectronic
authentication orelectronic signatures,
thereby facilitating
digital transactions.

Mutual recognition ofsafe, secure digital
identities; Standardsbased e-invoicing;
Promotion andrecognition of fintech
solutions forbusinesses.

compatible einvoicing/ epayment/ etransactions
frameworks;
recognition of eauthenticationand signatures, &single window for
paperless trade.

Prohibits customs on
digital products, butparties may continue
to impose internal

Customs duties will
not be imposed on etransmissions,
including content.
Parties can impose

Will not impose
customs duties on
e-transmissions.

34

Provisions

Nondiscriminatory
treatment ofdigitalproducts
Cross-borderdata transfers

Data
localization

Onlineconsumerprotection

Personal
information
protection

Disclosure ofsource code

Intellectual
property

CPTPP

USMCA

DEPA

SADEA

taxes or charges
internal taxes or
charges.
(HST).
Will not discriminate against each other’s digital products

Promotes free flowof data acrossborders andminimizes data local
requirements.
However, members
retain ability tomaintain and amend
regulations related
to data flows.
Parties will not
impose localizationthat would force
businesses to use
local facilities.
Members will not
impede companies
delivering cloudcomputing and data
storage services
Commitments toprotect privacy,
enforce consumer
protections andcombat 'spam'messages.
Parties agree toadopt or maintainframeworks thatprovide protection of
personal data,
based on relevantinternational guides.
Parties will notdemand access toproprietary software
source code whenseeking to import or
distribute software.

Parties will accord
national treatment
with regard to IPR
protection.

Ensure that data canbe transferred crossborder, and that limits
on where data can be
stored and processed
are minimized.

Information should betransferred acrossborders sobusinesses can serve
their customers,
regardless of where
they are located.

Allows for thetransfer of data forbusiness
purposes,
including in thefinancial sector.

Prohibits parties from requiring the use or location of computing
facilities in their jurisdictions as a condition of business.

Enforceable
consumer protections,incl for privacy andspam, apply to thedigital marketplace.

Adopt or maintainregulations against
fraudulent, misleadingor deceptive conduct
causing harm toonline consumers.

Limit governments’ability to require
disclosure of
proprietary computersource code andalgorithms.

NA

Requires full national
treatment for
copyright and IPR

NA

A new
commitment tocooperate increating andpromoting a safe
onlineenvironment.
Includes reference to APEC CBPR Privacy Framework and OECD
Guidelines.

Access to or
disclosure ofsoftware sourcecode not required
to be transferred
as a condition forimport, distribution,
sale or use ofsoftware. Rulecovers massmarket andcustom software.
Extends protection
to SMEs
NA

35

Provisions

CPTPP

Interactive
computerservicesNAOpengovernment
data

NA

Cybersecurity

Parties recognise
the importance ofcooperation on
cyber security
through the work ofnational computer
emergency
response teams.

Cooperation
Areas

Assisting SMEs in
use of e-commerce;sharing informationand experiences on
e-commerce
regulations;

USMCA
Internet platforms that
simply host or
process third-party
content may beprotected from liability
for resulting harms.
Promote open accessto governmentgenerated publicdata, to enhanceinnovation andcommercial
applications.
Build capacity ofcybersecurity
authorities,
strengthen
collaboration
mechanisms, andagree to focus on
risk-based
approaches instead ofprescriptive regulation
Cybersecurity, spam
prevention, consumer
protection, andpersonal information.

DEPA

SADEA

NA

NA

Expand access to,and use of,government data to
generate newopportunities,
especially for SMEs.

Improve
accessibility of
publicly available,
anonymised
government data

Parties agree to build capabilities ofnational entities responsible forcybersecurity, collaborate to identify andmitigate threats, and develop talent.

Cybersecurity,
fintech, government
procurement,competition policy,
open government
data, and SMEs.

Digital tradestandards,
FinTech and
RegTechenterprises,
submarine cable
protections.

Differences in Digital Trade Language
So, what differences emerge from a textual analysis of the four agreements across key provisions affecting
digital trade?
Cross-border Information Transfers and Localization
With minor variations, all four agreements encourage the cross-border flow of information and prohibit
localization requirements. On cross-border flows, CPTPP and USMCA replicate language obligating
members to allow transfers, but add the exception of allowing the adoption or maintenance ofregulatory measures to achieve ‘legitimate public policy objectives’. The CPTPP also first explicitly
recognizes respective regulatory requirements of members. DEPA and SADEA follow the same languageas the CPTPP.
On localization, the USMCA (like the US-Japan Agreement) clearly prohibits the use or location ofcomputing facilities as a condition for conducting business. The CPTPP prohibits it, but again adds the
exception allowing regulatory measures to achieve legitimate public policy objectives. SADEA and
DEPA again follow the language of the CPTPP. While these exceptions can be seen to preserve member
rights in protecting privacy and security concerns, the vague LPPO language has already been used tocreate legal uncertainty, being interpreted subjectively, and used for more overtly protectionist purposes.
Future agreements could perhaps instead or in addition include an illustrative list of public policy
objectives that provide guidance to all members, allowing sufficient flexibility but also preventing
protectionist measures.
Information Transfers in Financial Services
In the trade agreements examined here, there are specific commitments that are intended to protect andpromote the flow of information, and prohibit data localization requirements. But these do not always
extend to the financial services sector. In this regard, the USMCA stands out distinctively as the high water
benchmark, providing detailed provisions on data localization prohibitions in the financial services

36

chapter.57 These provisions state that no member shall make use or location of computing facilities in its
territory as the condition for conducting business, so long as financial regulatory authorities have“immediate, direct, complete, and ongoing access to information processed or stored on computing
facilities”. This explicit recognition is useful as economies have often justified localization to ensure
government access to financial data. The SADEA subsequently replicated the USMCA language.
Having said that, all agreements have still left exemptions and room for domestic regulation in this area.
Regarding data flows in financial services, CPTPP’s language is particularly vague.58 DEPA too upholds
the economy’s existing commitments under CPTPP to allow data to flow freely and prohibit rules requiring
localization but does not extend these to financial services. The agreements also differ on national
treatment and market access to digital payment services. While commitments in this regard, under WTO
are optional, USMCA applies explicit national treatment to payments and market access to firms from othermembers. The CPTPP on the other hand has made national treatment optional, thus not guaranteeing nondiscriminatory treatment, and allowing members to give favourable treatment to local e-payment services, if
foreign services are also allowed to operate. Additionally, the definition of e-payment services in the
CPTPP focuses on credit card networks and business-to-business transactions59 – whereas it is in retailpayments (B2C transactions, e-commerce, and disruptive new payments channels) that much of theinnovation and action has taken place.
Promotion of Interoperability
Amongst the four agreements reviewed, DEPA contains the most discussion on encouraging
interoperability. As part of the agreement, members explicitly recognize the role of international standards
in facilitating interoperability between digital systems and enhancing value-added products and services.
While DEPA excludes financial services from many provisions, it has a dedicated chapter on electronic
payments. Here the parties have ‘agreed to support the development of efficient, safe and secure crossborder electronic payments by fostering the adoption and use of international accepted standards,
promoting interoperability and interlinking of payment infrastructure’. SADEA contains similar language,
even more specifically calling for both parties to adopt international standards such as ISO2002260, so as toenable greater interoperability between e-payment systems.
DEPA members also agree to promote the use of APIs, by making them available to third party players.
This additional commitment rounds out DEPA’s holistic approach to reducing cross-border payment friction,by considering the full value chain of interconnected payment networks.61 SADEA too uses similar
language on facilitating APIs for interoperability, innovation and competition in e-payments.
In DEPA, commitments to interoperability are also included in personal information protection and dataexchange systems, as well as digital identities where members will aim for the ‘establishment ormaintenance of appropriate frameworks to foster technical interoperability or common standards’. Similarly,
there is a lot of emphasis on adoption of interoperable e-invoicing systems. Each member has agreed to‘base its measures related to e-invoicing on international standards, guidelines or recommendations, where
they exist’. Similarly, SADEA’s commitments to facilitate interoperability most prominently in eauthentication, e-invoicing, and data exchange systems. In other agreements, interoperability features inpersonal information protection in the US-Japan agreement and e-authentication in the CPTPP.
DEPA and SADEA’s approach to encouraging interoperability could serve as a template for broader
WTO discussions on e-commerce and digital trade.
Personal Information Protection
All four agreements focus on protection of personal information. CPTPP puts an obligation on members to
adopt or maintain a legal framework that provides for the protection of the personal information. However,
CPTPP recognizes different legal approaches to protecting personal information and encourages members
to develop mechanisms to promote compatibility among different regimes. Like CPTPP, USMCA obligates
members to adopt or maintain legal frameworks for protecting personal information, but incorporates
additional provisions that make for a more robust framework, based on principles and international
57

USTR, USMCA, https://ustr.gov/sites/default/files/files/agreements/FTA/USMCA/Text/17-Financial-Services.pdf
The financial services chapter includes a section on transfer of information, stating that a financial institution can ‘transfer
information in electronic or other form, into and out of its territory, for data processing if such processing is required’. However,its application is left vague, without determining who is a financial institution, nor any mention of regulatory access.
59
WEF (2020) Connecting Digital Economies: Policy Recommendations for Cross-Border Payments
http://www3.weforum.org/docs/WEF_Connecting_Digital_Economies_2020.pdf
60
Universal Financial Industry Message Scheme
61
WEF (2020) Connecting Digital Economies: Policy Recommendations for Cross-Border Payments
http://www3.weforum.org/docs/WEF_Connecting_Digital_Economies_2020.pdf
58

37

guidelines (specifically referencing the APEC Privacy Framework and the 2013 OECD Guidelines
Governing the Protection of Privacy and Transborder Flows of Personal Data). USMCA also obligates
members to ensure that any restriction on cross-border flows of personal information are “necessary andproportionate to the risks presented”.
SADEA contains similar provisions to USMCA. But, in this case, in addition to recognizing APEC CBPR,
members agree to “promote it, and encourage participation in the CBPR System, including by industry”.
This type of language – which is a significant departure from the more neutral traditional trade
language – is likely to be crucial in fostering the success of such initiatives. DEPA contains
provisions similar to USMCA and SADEA, but goes one step further with members agreeing to encourage
the adoption of data protection trustmarks by businesses, in order to verify conformance to personal dataprotection standards and best practices. Members also mutually recognize the other members’ trustmarks
as a mechanism to facilitate cross-border information transfers. Again, this innovative formalization of
emerging transfer mechanisms is a break from past practice and demonstrates a potential way forward thatshould be embraced.
Provisions that reference international guidelines and recommendations from OECD and APEC as abasis for framing domestic data protection laws will ensure that there is consistency in digital trade
frameworks across economies. Similarly, recognising possible data transfer mechanisms such as
the CBPR and data protection trustmarks will ease barriers for businesses, increase digital trustand facilitate digital trade integration.
Liability of Intermediary Service Providers
Intermediary service providers are suppliers of interactive computer services. Provisions on this refer to a
specific distinction between service providers and their users. They seek to prevent service providers frombeing legally liable for harms related to information stored, processed, transmitted, distributed or madeavailable by service users. It allows service providers to moderate online content by restricting any harmful
or objectionable material.
USMCA specifically highlights liability of intermediary service providers. In exactly the same language theynote that that members will ‘not adopt or maintain measures that treat a supplier or user of an interactive
computer service as an information content provider in determining liability for harms related to information
stored, processed, transmitted, distributed, or made available by the service’.
After the exit of the US, CPTPP members took out this provision around intermediary liability. SADEA and
DEPA also do not address intermediary liability.
Source Code
Source code of software, or an algorithm expressed in the source code, is a trade secret and provides
competitive advantage to its owner. Provisions that prohibit the requirement of access to the source codeor related algorithms are meant to provide security to businesses, and remove trade barriers.
Language in the USMCA specifies that members will not ‘require the transfer of, or access to, code ofsoftware owned by a person of the other Party, or the transfer of, or access to, an algorithm expressed inthat source code as a condition for the import, distribution, sale, or use of that software, or of products
containing that software, in its territory’. At the same time, it is noted that this provision will not preventa regulatory body or judicial authority of a party from requiring the source code of software or analgorithm expressed in the source code to be made available. SADEA contains the same provisions
and language.
CPTPP Article 14.17 also prohibits the transfer of, or access to source code of software, as a condition for
the import, distribution, sale or use of such software, or of products containing such software, in its territory.
In addition, both CPTPP and SADEA include provisions stating that nothing in the agreement should
prevent the inclusion or implementation of terms and conditions related to provision of source code in‘commercially negotiated contracts’, or an economy from requiring modifications of source code to makethe software compliant with existing laws or regulations. The CPTPP and SADEA, therefore, leave it tobusinesses to negotiate source code provisions on a contract by contract basis, but prevent governmentsfrom mandating access to source code.
CPTPP, however, includes an additional provision, limiting the prohibition on source code to only massmarket software or products containing such software and does not include software used for ‘criticalinfrastructure’. Annex 8-B on technical barriers to trade also states that, with respect to ICT products thatuse cryptography and are designed for commercial applications, “no Party shall impose or maintain a38technical regulation or conformity assessment procedure that requires a manufacturer or supplier of the
product, as a condition of the manufacture, sale, distribution, import or use of the product” to provide a
private key or other encryption backdoor. This however, does not prevent a party’s law enforcement
authorities from requiring service providers that use encryption they control to provide unencrypted
communications “pursuant to that Party’s legal procedures”).62
Regarding mass-market software, it is also questionable how much of such software would not run on
computers involved in critical infrastructure. For instance, commercial software could end up being used bygovernment employees. This may inadvertently lead to domestic development of software for criticalinfrastructure, or that might be used in government systems.63
DEPA makes no mention of requiring source code or algorithm expressed in the source code. However, inModule 3, treatment of digital products and related issues, it incorporates CPTPP’s provision for protecting
encryption.
What about provisions unique to a particular trade agreement?
 DEA is the only agreement that includes Submarine Telecommunications Cable Systems,
Location of Computing Facilities for Financial Services, and RegTech Cooperation.
oDEPA is the only agreement that includes logistics and digital financial inclusion.
oThis reflects an issue of particular importance to the US.

CPTPP excludes Open Government Data whereas all three of the other agreements have theseprovisions – this is an area that has come more rapidly into view since the early discussions
around the TPP.
o

It is also the only agreement that excludes Electronic Authentication and Electronic
Signatures and Source CodeUSMCA is the only agreement with an Interactive Computer Services provision.
oIt also has a separate provision dedicated to standards64

Notably, none of the agreements give suitable recognition to the next logical development
already taking place in this space: data sharing architectures and arrangements.

Both DEA and CPTPP include Internet Interconnection Charge Sharing but DEPA and USMSC
do not.

New ‘Digital’ Trade Agreements: A Way Forward, A False Start, or A Dead End?
There are three key challenges that are not yet addressed appropriately in any of these digital trade
agreements:
1. Jurisdictional application of provisions that are definitionally cross-border, requiring transnational
coordination for effective enforcement This includes issues of national security and sensitivity, culturally sensitive interpretations
and application, and issue of domestic registration and categorization
2. Coordination across domestic agencies of cross-cutting issues
 This one, however, is not unique or new to digital agreements, just broader and more
complex3. Consistent definitions of what ‘digital trade’ actually is, along with definitions of many key digitaltrade provisions
It remains an open question as to whether the lack of appropriate mechanisms for dealing with theseissues are merely early teething problems (similar to those which challenged the initial emergency ofservices-based trade agreements) or whether they will prove to be the achilles heel of the approach.
As regards, the gaps relating to the definitions being used – or not used as the case may be:

62

HBLR (2019) Cybersecurity and Trade Agreements: The State of the Art, https://www.hblr.org/wpcontent/uploads/sites/18/2019/11/Cybersecurity-Provisions-in-Trade-Agreements_FINAL.pdf
63
HBLR (2019) Cybersecurity and Trade Agreements: The State of the Art, https://www.hblr.org/wpcontent/uploads/sites/18/2019/11/Cybersecurity-Provisions-in-Trade-Agreements_FINAL.pdf
64
DEPA makes reference to open standards in other provisions

39



Digital trade: There is no definition of what ‘digital trade’ is, and each agreement uses and refers
to different aspects. DEA and DEPA refer to a digital economy agreement; CPTPP refers toElectronic Commerce; while USMC refers to digital trade.
There needs to be needs to be a common understanding and definition of digital trade if it
is to become commonly understood and applied.

Digital services: There is no definition of digital services (only digital goods). Provisions makereference (and recommendation) to “non-discriminatory treatment of digital goods”. But what
about digital services?
The definition of digital services is highly relevant for imposing digital taxes, an area wherea harmonized approach stands to deliver significant benefits and minimize already existing– and growing – trade frictions.



Digital identity: There is no definition of digital identities. Even though it is called out for special
focus in both DEPA and SADEA.
o

Nor of Artificial Intelligence. For effective recognition, promotion and enforcement ofprotections – let alone consistency with and across future arrangements – this is a very
problematic oversight.

There needs to be definitions of umbrella digital technology terms such as AI, 5G, IoT, etc,
or these will render themselves moot in relevance and applicability for regulatory
coordination.


Data classification and Platform typologies: There is no recognition of the different types ofdata, despite recognition of ‘legitimate public policy objectives’ for certain types of data to require
special consideration, protection and regulation, including for the purposes of localization. Equally,
there is no recognition of the different types of digital platforms even as there are key provisions
protecting intermediate liability.



Limited reference to online platforms, yet a lot of the trade happens via online platforms. The only
reference made in SADEA and DEPA “encourage participation by the Parties’ SMEs in platforms
that could help SMEs link with international suppliers, buyers and other potential business
partners”65

Table 4: Definitional Gaps Across Digital Trade Agreements
Definitions
CPTPP
USMSC
Definition ofNo.
No. Although
Digital Trade
Chapter is
Chapter 19 istitledcalled “Digital“Electronic
Trade”
Commerce”
Algorithm
Yes
ComputingYes
Yes
Facility
Digital Products
Yes
Yes
Electronic
Yes
Yes
Authentication
Electronic
Yes
Signature
Government
Yes
information
Yes
Information
content provider
Interactive
Yes
computerservices
Personal
Yes
Yes
Information

65

DEPA
No. Titled “Digital
Economy”

SADEA
No. Chapter is titled“Digital Economy

Yes

Yes

Yes
Yes

Yes
Yes

Yes

Yes

Article 10.2 of DEPA and Article 36 of DEA

40

Definitions
Trade
Administration
documents
Unsolicited
Commercial
Electronic
Message
Electronic
Transmission

CPTPP
Yes

USMSC
Yes

DEPA
Yes

SADEA
Yes

Yes

Yes

Yes

Yes

Yes

Yes
transmission madeusing anyelectromagnetic
means, including by
photonic means

Yes

Yes

Yes

Yes

Yes

Electronic
invoicingElectronic
payments
Electronic
records

Yes
means record
generated,
communicated,
received or stored
by electronicmeans in an
information system
or for transmission
from one
information system
to another;

Electronic
versionYes
Document in anelectronic format
prescribed by a
Party, including a
document sent byfacsimiletransmission;

Open standards
Single Window
Open data
FinTechRegTechICT
Cryptogoraphy

Yes
Yes
Yes
Yes
Yes
Yes

Appendix 1: Comparison of Language for Eleven Common Provisions Across the Four Agreements
Provision
Paperless
Trading

CPTPP
Article 14.9
Each Party shallendeavour to:(a) make tradeadministration
documents
available to the
public inelectronic form;
and(b) accept tradeadministration

USMSC
Article 19.9
Each Party shall endeavor toaccept a trade administration
document submitted
electronically as the legal
equivalent of the paper versionof that document.

SADEA
Article 12
1. Each Party shall makepublicly available, which may
include through a process
prescribed by that Party,
electronic versions of all of its
trade administration documents
in English.
2. Each Party shall accept
completed electronic versions of
its trade administration
documents as the legal

41

Provision

CPTPP
documents
submitted
electronically as
the legal
equivalent of thepaper version of
those documents.

USMSC

SADEA
equivalent of paper documents
except where:(a) there is a domestic orinternational legal requirement
to the contrary; or(b) doing so would reduce theeffectiveness of the tradeadministration process.
3. Each Party shall endeavour toestablish or maintain a single
window enablingtraders to submit tradeadministration documents anddata requirements forimportation, exportation ortransit of goods through a single
entry point to the participating
authorities
or agencies.
4. Each Party shall endeavour toestablish or maintain aseamless, trusted and secureinterface with the other Party’s
Single Window to facilitate theexchange of data related to
trade administration documents,
which may include:(a) sanitary and phytosanitarycertificates;(b) customs declaration data;
and(c) any other documents, as
jointly determined by the Parties.
5. Each Party recognises theimportance of facilitating theexchange of electronic
records used in commercial
trading activities between
enterprises within its territory.
6. The Parties shall endeavour
to develop data exchangesystems to support theexchange of:(a)data relating to the tradeadministration documents
referred to in paragraph 4
between the competentauthorities of each Party; and(b) electronic records used incommercial trading activities
between enterprises
Within each Party’s territory.
7. The Parties shall cooperateand collaborate on new
initiatives which promote,encourage, support and facilitate
the use and adoption of the dataexchange systems referred to inparagraph 6, including through:(a) the sharing of informationand experiences, including theexchange of best practices, in42

Provision

CPTPP

USMSC

Customs
Duties(Samelanguage)

Article 14.3
1. No Party shall
impose customs
duties onelectronictransmissions,
including content
transmitted
electronically,
between a personof one Party and aperson of anotherParty.
2. For greatercertainty,
paragraph 1 shallnot preclude a
Party from
imposing
internal taxes, feesor other charges
on content
transmitted
electronically,
provided that suchtaxes, fees or
charges are
imposed in a

Article 19.3
1. No Party shall impose
customs duties, fees, or othercharges on or in connection
with the importation orexportation of digital products
transmitted electronically,
between a person of one Party
and a person of another Party.
2. For greater certainty,
paragraph 1 does not preclude
a Party from imposing internal
taxes, fees, or other charges
on a digital product transmitted
electronically, provided thatthose taxes, fees, or charges
are imposed in a mannerconsistent with thisAgreement.

SADEA
the area of development andgovernance of data exchangesystems; and(b) collaboration on pilot
projects that relate to thedevelopment and governanceof data exchange systems.
8. The Parties recognise that thedata exchange systems referred
to in paragraph 6 should, as far
as possible, be compatible andinteroperable with each other.
To this end, the Parties shallendeavour to work towards thedevelopment and adoption ofinternationally-recognised
standards in the development
and governance of the dataexchange systems.
9. The Parties shall cooperatebilaterally and in internationalfora, where appropriate, topromote acceptance ofelectronic versions of tradeadministration documents andelectronic records used incommercial trading activities
between enterprises.
10. In developing initiatives thatprovide for the use of paperlesstrading, each Party
shall endeavour to take into
account the methods agreed byinternational organisations.
Article 5
1. Neither Party shall impose
customs duties on electronictransmissions, including content
transmitted electronically,
between a person of a Party anda person of the otherParty.
2. For greater certainty,
paragraph 1 shall not preclude a
Party from imposinginternal taxes, fees or othercharges on content transmitted
electronically, provided that suchtaxes, fees or charges are
imposed in a manner consistent
with this Agreement.

43

Provision

Nondiscriminatory
Treatment of
Digital goods(Samelanguage,although
USMC makes
no reference tobroadcastingand noreference to IP)

Domestic
Electronic
Transaction
Framework(Language has
beendeveloped)

CPTPP
manner consistent
withthis Agreement.
Article 14.4
1. No Party shallaccord lessfavourable
treatment to digitalproducts created,
produced,published,
contracted for,commissioned or
first madeavailable oncommercial terms
in the territory of
another Party, or todigital products ofwhich the author,
performer,
producer,
developer or owner
is a person ofanother Party, thanit accords to otherlike digitalproducts.
2. Paragraph 1
shall not apply tothe extent of any
inconsistency withtherights andobligations in
Chapter 18(Intellectual
Property).
3. The Parties
understand that
this Article does
not apply to
subsidies or
grants provided bya Party, including
governmentsupported loans,guarantees andinsurance.
4. This Article shallnot apply tobroadcasting.
Article 14.5
1. Each Party shallmaintain a legal
framework
governing
electronictransactions
consistent with theprinciples of the

USMSC

SADEA

Article 19.4
1. No Party shall accord lessfavorable treatment to a digitalproduct created, produced,
published, contracted for,commissioned, or first madeavailable on commercial terms
in theterritory of another Party, or toa digital product of which theauthor, performer, producer,
developer, or owner is aperson of another Party, than it
accords to other like digitalproducts.
2. This Article does not apply
to a subsidy or grant provided
by a Party, including agovernment-supported loan,
guarantee, or insurance.

Article 6
1. Neither Party shall accord
less favourable treatment to adigital product created,
produced, published, contracted
for, commissioned or first madeavailable on commercial terms
in the territory of the other Party,
or to a digital product of which
the author, performer, producer,
developer or owner is a personof the other Party, than it
accords toother like digital products.
2. Paragraph 1 shall not apply tothe extent of any inconsistency
with the rights andobligations in the TRIPS
Agreement or with Chapter 13(Intellectual Property).
3. The Parties understand that
this Article does not apply to
subsidies or grants
provided by a Party including
government-supported loans,guarantees and insurance.
4. This Article shall not apply tobroadcasting.

Article 19.5
1. Each Party shall maintain alegal framework governing
electronic transactions
consistent
with the principles of the
UNCITRAL Model Law on
Electronic Commerce 1996.
2. Each Party shall endeavor
to:Article 8
1. For the purposes of this
Article:(a) an electronic record thatsatisfies
the requirements set out in
Article 10 of the UNCITRAL
Model Law on

44

Provision

CPTPP
UNCITRAL Model
Law onElectronic
Commerce 1996 or
the United Nations
Convention on the
Use ofElectronic
Communications inInternational
Contracts, done at
New York,
2. Each Party shallendeavour to:(a) avoid any
unnecessary
regulatory burden
on electronictransactions; and(b) facilitate input
by interested
persons in thedevelopment of its
legal framework forelectronictransactions.

USMSC(a) avoid unnecessary
regulatory burden on
electronic transactions; and(b) facilitate input by interested
persons in the development of
its legal framework forelectronic transactions.

OnlineConsumerProtection(Language
developed in
DEPA and
DEA)

Article 14.7
1. The Parties
recognise theimportance ofadopting andmaintaining
transparent andeffective measures
to protect
consumers fromfraudulent anddeceptivecommercial
activities asreferred to in

Article 19.7
1.The Parties recognize theimportance of adopting andmaintaining transparent andeffective measures to protect
consumers from fraudulent or
deceptive commercial activities
as referred to in Article 21.4.2(Consumer Protection) when
they engage in digital trade.
2. Each Party shall adopt ormaintain consumer protection
laws to proscribe fraudulent
and deceptive commercial
activities that cause harm or

SADEA
Electronic Transferable Records(2017), and may include anelectronic bill of lading; and(b) international bodies" meansinternational bodies to which
both Parties are participants ormembers.
2. Each Party shall maintain alegal framework governing
electronic transactions
consistent with the principles of
the UNCITRAL Model Law on
Electronic
Commerce (1996) or the United
Nations Convention on the Useof Electronic
Communications in International
Contracts, done at New York on
November 23,
2005.
3. Each Party shall endeavour
to:(a) avoid any unnecessary
regulatory burden on electronictransactions; and(b) facilitate input by interested
persons in the development of
its legalframework for electronictransactions, including in relation
to tradedocumentation.
4. The Parties recognise theimportance of developing
mechanisms to facilitate theuse of electronic transferrable
records. To this end, indeveloping such mechanisms,
the Parties shall endeavour totake into account, as
appropriate, relevant model
legislative texts developed andadopted by international bodies,such as the UNCITRAL Model
Law on Electronic Transferable
Records (2017).
Article 15
1. The Parties recognise theimportance of adopting andmaintaining transparent andeffective measures to protect
consumers from misleading anddeceptive commercial
activities, unfair contract terms
and unconscionable conduct
when they engage in electroniccommerce.
2. For the purposes of this
Article, misleading anddeceptive commercial activities
refer to those commercial
practices that are misleading or

45

Provision

CPTPP
Article 16.6.2(Consumer
Protection) when
they engage inelectroniccommerce.
2. Each Party shalladopt or maintainconsumerprotection laws toproscribe
fraudulent anddeceptivecommercial
activities thatcause harm or
potential harm toconsumers
engaged in online
commercial
activities.
3. The Parties
recognise theimportance ofcooperation
between theirrespective national
consumerprotection
agencies or otherrelevant bodies on
activities related tocross-borderelectroniccommerce in orderto enhance
consumer welfare.
To this end, theParties affirm thatthe cooperation
soughtunder Article
16.6.5 and Article
16.6.6 (Consumer
Protection)
includescooperation withrespect to online
commercial
activities.

USMSC
potential harm to consumers
engaged in online
commercial activities.
3. The Parties recognize theimportance of, and public
interest in, cooperation
between their respective
national consumer protection
agencies or other relevantbodies on activities related tocross-border digital trade inorder to enhance consumer
welfare. To this end, theParties affirm that cooperation
under paragraphs 21.4.3
through 21.4.5 (Consumer
Protection) includes
cooperation with respect toonline commercial activities.

Unsolicited
Commercial
Electronic
Messages(similarlanguage)

Article 14.4
1. Each Party shalladopt or maintainmeasuresregardingunsolicited

Article 19.3
1. Each Party shall adopt ormaintain measures providing
for the limitation of unsolicitedcommercial electronic
communications.

SADEA
deceptive and cause actual
harm to consumers, or that posea potential threat of such harm if
not prevented. For example:(a) making a misrepresentationof material fact, including animplied factual
misrepresentation, that may
cause significant detriment to
the economic
interests of a misled consumer;(b) failing to deliver products orprovide services to a consumer
after theconsumer is charged; or(c) charging or debiting a
consumer’s financial, internet orother accounts withoutauthorisation.
3. Each Party shall adopt ormaintain consumer protection
laws to proscribe
misleading and deceptivecommercial activities that cause
harm or potential harm toconsumers engaged in online
commercial activities.
4. The Parties recognise theimportance of cooperation
between their respective
national consumer protection
agencies or other relevantbodies on activities related tocross-border electroniccommerce in order to enhance
consumer welfare.
5. To this end, the Parties shallpromote, as appropriate andsubject to the laws andregulations of each Party,
cooperation on matters ofmutual interest related tomisleading and deceptivecommercial activities, includingin the enforcement of theirconsumer protection laws, withrespect to online commercial
activities.
6. The Parties recognise thebenefits of mechanisms,
including alternative dispute
resolution, to facilitate theresolution of disputes regarding
electronic commercetransactions
Article 19
1. Each Party shall adopt ormaintain measures regarding
unsolicited commercial
electronic messages sent to anelectronic mail address that:46

Provision

Personal
Information
Protection(significant
change inlanguage)

CPTPP
commercial
electronic
messages that:a) require suppliersof unsolicitedcommercial
electronic
messages tofacilitate the abilityof recipients toprevent ongoing
reception of
those messages;(b) require theconsent, as
specified according
to the laws andregulations of eachParty, of recipientsto receive
commercial
electronic
messages; or(c) otherwise
provide for theminimisation of
unsolicitedcommercial
electronic
messages.
2. Each Party shallprovide recourse
against suppliersof unsolicitedcommercial
electronic
messages that do
not comply with themeasures adoptedormaintained
pursuant toparagraph 1.
3. The Parties shallendeavour tocooperate inappropriate casesof mutual
concern regarding
the regulation of
unsolicitedcommercial
electronic
messages.
Article 14.8
1. The Parties
recognise theeconomic andsocial benefits ofprotecting thepersonal
information of

USMSC
2. Each Party shall adopt ormaintain measures regarding
unsolicited commercial
electronic
communications sent to anelectronic mail address that(a) require suppliers of
unsolicited commercial
electronic messages tofacilitate theability of recipients to prevent
ongoing reception of thosemessages; or(b) require the consent, as
specified in the laws andregulations of each Party, ofrecipients to receive
commercial electronic
messages.
3. Each Party shall endeavor
to adopt or maintain measuresthat enable consumers to
reduce or prevent unsolicitedcommercial electronic
communications sent otherthan to an electronic mailaddress.
4. Each Party shall provide
recourse in its law against
suppliers of unsolicitedcommercial electronic
communications that do notcomply with a measure
adopted or maintained
pursuant toparagraph 2 or 3.
5. The Parties shall endeavor
to cooperate in appropriate
cases of mutual concern
regarding the regulation of
unsolicited commercial
electronic communications.

SADEA(a) require a supplier of
unsolicited commercial
electronic messages tofacilitate the ability of a recipient
to prevent ongoing reception of
thosemessages; or(b) require the consent, as
specified in the laws andregulations of each Party,of recipients to receive
commercial electronic
messages.
2. Each Party shall endeavour toadopt or maintain measures thatenable consumers
to reduce or prevent unsolicitedcommercial electronic messages
sent other than to an electronic
mail address, or otherwise
provide for the minimisation ofthese messages.
3. Each Party shall provide
recourse against a supplier of
unsolicited commercial
electronic messages that does
not comply with a measure
adopted or maintained inaccordance with paragraphs 1
or 2.
4. The Parties shall endeavour
to cooperate in appropriate
cases of mutual concern
regarding the regulation of
unsolicited commercial
electronic messages.

Article 19.8
1. The Parties recognize theeconomic and social benefitsof protecting the personal
information of users of digitaltrade and the contribution that
this makes to enhancing

Article 17
1. The Parties recognise theeconomic and social benefits ofprotecting the personal
information of persons who
conduct or engage in electronictransactions and the47

Provision

CPTPP
users of electroniccommerce and thecontribution that
this makes toenhancingconsumerconfidence inelectroniccommerce.
2. To this end,
each Party shalladopt or maintain alegal framework
that
provides for theprotection of thepersonal
information of theusers of electroniccommerce. In thedevelopment of its
legal framework forthe protection of
personal
information, eachParty should take
into accountprinciples andguidelines of
relevant
international
bodies.
3. Each Party shallendeavour toadopt nondiscriminatory
practices inprotecting users ofelectroniccommerce frompersonal
information
protection
violations occurring
within its
jurisdiction.
4. Each Party
should publish
information on the
personal
information
protections it
provides to usersof electroniccommerce,
including how:(a) individuals canpursue remedies;and(b) business cancomply with any
legal requirements.

USMSC
consumer confidence in digitaltrade.
2. To this end, each Party shalladopt or maintain a legal
framework that provides for theprotection of the personal
information of the users ofdigital trade. In thedevelopment of this legal
framework, each Party shouldtake into account principles
and guidelines of relevantinternational bodies,such as the APEC Privacy
Framework and the OECD
Recommendation of theCouncil concerning Guidelines
governing the Protection ofPrivacy and Transborder
Flows of Personal
Data (2013).
3. The Parties recognize that
pursuant to paragraph 2, key
principles include: limitation oncollection; choice; data quality;
purpose specification; uselimitation; security safeguards;
transparency; individual
participation; andaccountability. The Parties
also recognize the importanceof ensuring compliance withmeasures to protect personal
information and ensuring thatany restrictions on crossborder flows of personal
information are necessary andproportionate to the riskspresented.
4. Each Party shall endeavor
to adopt non-discriminatory
practices in protecting users ofdigital trade from personal
information protection
violations occurring within its
jurisdiction.
5. Each Party shall publish
information on the personal
information protections it
provides to users of digitaltrade, including how:(a) a natural person canpursue a remedy; and(b) an enterprise can comply
with legal requirements.
6. Recognizing that the Parties
may take different legal
approaches to protecting
personal information, eachParty should encourage thedevelopment of mechanisms
to promote

SADEA
contribution that this makes toenhancing consumer confidence
in electronic commerce.
2. To this end, each Party shalladopt or maintain a legal
framework that provides
for the protection of the personal
information of persons who
conduct or engage in electronictransactions. In the developmentof its legal framework for theprotection of personal
information, each Party shalltake into account the principles
and guidelines of relevantinternational bodies, such as the
APEC Cross-Border Privacy
Rules System and the OECD
Guidelines Governing theProtection of Privacy and Transborder Flows of Personal Data.
3. To this end, the key principles
each Party shall take into
account when developing
its legal framework include
limitation on collection, data
quality, purpose specification,
use limitation, security
safeguards, transparency,
individual participation andaccountability.
4. Each Party shall adopt nondiscriminatory practices inprotecting persons who conduct
or engage in electronictransactions from personal
information protection violations
occurring within its jurisdiction.
5. Each Party shall publish
information on the personal
information protections it
provides to persons who
conduct or engage in electronictransactions, including how:(a) a natural person can pursue
remedies; and(b) business can comply withany legal requirements.
6. Each Party shall encourage
enterprises in its territory to
publish, including on theInternet, their policies andprocedures related to protectionof personal information.
7. Recognising that the Parties
may take different legal
approaches to protecting
personal information, each Party
shall encourage thedevelopment of mechanisms topromote compatibility between
these different regimes. These48

ProvisionPrinciples on
Access anduse of Internet
for Electronic
Commerce(same
language)

CPTPP
5. Recognising that
the Parties may
take different legal
approaches toprotecting personal
information, eachParty should
encourage thedevelopment of
mechanisms topromotecompatibility
between thesedifferent regimes.
These
mechanisms may
include therecognition ofregulatory
outcomes, whether
accordedautonomously or
by mutualarrangement, or
broaderinternationalframeworks. To
this end, theParties shallendeavour toexchange
information on
any suchmechanisms
applied in theirjurisdictions andexplore ways toextendthese or othersuitablearrangements topromotecompatibility
between them.
Article 14.10
Subject toapplicable policies,
laws andregulations, theParties recognise
the benefits ofconsumers in theirterritories having
the ability to:(a) access and use
services andapplications of aconsumer’s choice
available on theInternet, subject toreasonablenetwork

USMSC
compatibility between thesedifferent regimes. The Parties
shall endeavor to exchange
information on themechanisms applied in theirjurisdictions and explore ways
to extend these or othersuitablearrangements to promotecompatibility between them.
The Parties recognize that the
APEC CrossBorder Privacy
Rules system is a validmechanism to facilitate crossborder information transfers
while protecting personal
information.

SADEA
mechanisms may include therecognition of regulatory
outcomes, whether accorded
autonomously or by mutual
arrangement, or broader
international frameworks. To thisend, the Parties shallendeavour to exchange
information and shareexperiences on any suchmechanisms
applied in their jurisdictions andexplore ways to promotecompatibility between them.
8. The Parties recognise that the
CBPR System is a validmechanism to facilitatecross-border informationtransfers while protecting
personal information
9. The Parties shall endeavour
to jointly promote the CBPR
System, with the aim to
improving awareness of, andparticipation in, the CBPR
System, including by industry

Article 19.10
The Parties recognize that it isbeneficial for consumers intheir territories to be able to:(a) access and use services
and applications of aconsumer’s choice available
on the Internet, subject toreasonable network
management;(b) connect the end-user
devices of a consumer’s
choice to the Internet, provided
that such devices do not harm
the network; and(c) access information on the
network management
practices of a consumer’s

Article 20
Subject to their respective
applicable policies, laws andregulations, the Parties
recognise the benefits ofconsumers in their territories
having the ability to:(a) access and use services andapplications of a consumer’s
choice available
on the Internet, subject toreasonable network
management(b) connect the end users
devices of a consumer’s choice
to the Internet provided thatsuch devices do not harm the
network; and49

Provision

Cross-border
Transfer ofInformation by
Electronic
Means (samelanguage)

CPTPP
management;(b) connect theend-user devicesof a consumer’s
choice to theInternet, provided
that such devices
do not harm the
network; and(c) accessinformation on the
networkmanagement
practices of aconsumer’s
Internet accessservice supplier.
Article 14.11
1. The Parties
recognise thateach Party may
have its own
regulatory
requirements
concerning thetransfer of
information byelectronic means.
2. Each Party shallallow the crossborder transfer of
information byelectronic means,including personal
information, when
this activity is fortheconduct of thebusiness of acovered person.
3. Nothing in this
Article shallprevent a Party
from adopting ormaintaining
measuresinconsistent withparagraph 2 toachieve a
legitimate public
policyobjective, provided
that the measure:(a) is not applied ina manner which
would constitute ameans ofarbitrary or
unjustifiable
discrimination or a
disguised

USMSC
Internet access service
supplier.

SADEA(c) access information on the
network management practicesof a consumer’s
Internet access service supplier.

Article 19.11
1. No Party shall prohibit or
restrict the cross-bordertransfer of information,
including personal information,by electronic means if thisactivity is for the conduct of thebusiness of acovered person.
2. This Article does notprevent a Party from adopting
or maintaining a measureinconsistent with paragraph 1that is necessary to achieve a
legitimate public policy
objective, provided thatthe measure:(a) is not applied in a manner
which would constitute ameans of arbitrary or
unjustifiable discrimination or a
disguised restriction on trade;and(b) does not impose
restrictions on transfers of
information greater than arenecessary to achieve theobjective.

Article 23
1. The Parties recognise thateach Party may have its own
regulatory requirements
concerning the transfer of
information by electronic means.
2. Neither Party shall prohibit or
restrict the cross-border transfer
of information byelectronic means, including
personal information, if thisactivity is for the conduct ofbusiness of a covered person.
3. Nothing in this Article shallprevent a Party from adopting ormaintaining
measures inconsistent withparagraph 2 to achieve a
legitimate public policy objective,
provided that the measure:(a) is not applied in a manner
which would constitute a meansof arbitrary or
unjustifiable discrimination or a
disguised restriction on trade;and(b) does not impose restrictions
on transfers of information
greater than are
required to achieve theobjective.

50

Provision

Location ofComputing
Facilities(language has
beendeveloped)

CPTPP
restriction on trade;and(b) does not
impose restrictions
on transfers of
information greaterthan are required
to achieve theobjective.
Article 14.13
1. The Parties
recognise thateach Party may
have its own
regulatory
requirements
regarding the useof computing
facilities, including
requirements that
seek to ensure thesecurity andconfidentiality ofcommunications.
2. No Party shallrequire a covered
person to use or
locate computing
facilities in that
Party’s territory as
a condition for
conducting
business in that
territory.
3. Nothing in this
Article shallprevent a Party
from adopting ormaintaining
measuresinconsistent withparagraph 2 toachieve a
legitimate public
policyobjective, provided
that the measure:(a) is not applied ina manner which
would constitute ameans of arbitraryor unjustifiable
discrimination or a
disguised
restriction on trade;and(b) does not
impose restrictions
on the use or
location ofcomputing

USMSC

SADEA

Article 19.12
No Party shall require acovered person to use or
locate computing facilities inthat Party’s territory as acondition for conducting
business in that territory.

Article 24
1. The Parties recognise thateach Party may have its own
regulatory requirements
regarding the use of computing
facilities, including requirementsthat seek to ensure the security
and confidentiality ofcommunications.
2. Neither Party shall require acovered person to use or locatecomputing facilities
territory as a condition for
conducting business in that
territory.
3. Nothing in this Article shallprevent a Party from adopting ormaintaining
measures inconsistent withparagraph 2 to achieve a
legitimate public policy objective,
provided that the measure:(a) is not applied in a manner
which would constitute a meansof arbitrary or
unjustifiable discrimination or a
disguised restriction on trade;and(b) does not impose restrictions
on the use or location ofcomputing facilities
greater than are required toachieve the objective.
4.This Article shall not apply withrespect to “financial institution”
or a “financial service supplier ofa Party” as defined in the Article
1 (e) and (h) (Definitions)
respectivelyof Chapter 9 (Financial
Services).

51

Provision

Cybersecurity

CPTPP
facilities greaterthan are required
to achieve theobjective.
Article 14.16
The Parties
recognise theimportance of:(a) building thecapabilities of theirnational entities
responsible forcomputer security
incident response;and(b) using existing
collaboration
mechanisms tocooperate to
identify
and mitigate
malicious
intrusions or
dissemination ofmalicious code that
affect theelectronic networksof the Parties.

USMSC

SADEA

Article 19.15
1. The Parties recognize thatthreats to cybersecurity
undermine confidence indigital trade. Accordingly, theParties shall endeavor to:(a) build the capabilities of
their respective national
entities responsible forcybersecurity incident
response; and(b) strengthen existing
collaboration mechanisms forcooperating to identify andmitigate malicious intrusions or
dissemination of malicious
code that affect electronic
networks, and use thosemechanisms to swiftly address
cybersecurity incidents, as well
as for the sharing of
information for awareness andbest practices.
2. Given the evolving nature ofcybersecurity threats, theParties recognize that riskbased approaches may be
more effective thanprescriptive regulation in
addressing those threats.
Accordingly, each Party shallendeavor to employ, andencourage enterprises within
its jurisdiction to use, riskbased approaches that rely on
consensus-based standards
and risk management bestpractices to identify andprotect against cybersecurity
risks and to detect, respond to,
and recover from cybersecurity
events.

Article 34
1. The Parties have a sharedvision to promote secure digitaltrade to achieve global
prosperity and recognise thatcybersecurity underpins thedigital economy.
2. The Parties recognise theimportance of:(a) building the capabilities of
their government agencies
responsible forcomputer security incident
response;(b) using existing collaboration
mechanisms to cooperate to
identify andmitigate malicious intrusions or
dissemination of malicious codethat affectthe electronic networks of theParties; and(c) workforce development in thearea of cybersecurity, including
possible
initiatives relating to mutual
recognition of qualifications,diversity andequality52