By Dr Rahul Nath Choudhury *
Addressing the first session of the 16th Group of 20 (G20) Leaders’ Summit, Chinese President Xi Jinping announced his intention to join the Digital Economy Partnership Agreement (DEPA). President Xi said, “China attaches great importance to international cooperation on the digital economy and is ready to work for the healthy and orderly development of the digital economy.” Joining this group would open up a series of opportunities for China in the digital economy. As China strives to harness the global digital economy, joining this group would bring it closer to that goal. However, on the way to DEPA, China would face a handful of problems, especially in its domestic policies and regulations. Let’s take stock of some of the critical issues that could create obstacles for China in its ascent to DEPA.
DEPA is an agreement implemented by Singapore, New Zealand and Chile in June 2020 with the aim of facilitating economic engagement and trade through digital modes. This one-of-a-kind agreement establishes new approaches and collaborations on digital trade issues, promotes interoperability between different regimes and addresses new issues brought about by digitization. DEPA includes several features that allow participants with cross-border data flows to develop mechanisms to protect personal data from cross-border transfer, as well as expand access to government data, among others.
China’s bid for the deal is the second big announcement after its bid for the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). The move reflects a sudden and structural shift in China’s approach to its engagement in the global digital economy. Chinese membership can greatly strengthen the group. The current signatories undoubtedly practice an open and free digital economy but are not among the major global players. In front of them, China is the secondthe biggest digital economy in the world. Chinese digital economy reached 35.8 trillion yuan ($ 5.5 trillion) in 2019, or 36.2 percent of GDP, with a growth rate three times that of the traditional manufacturing economy. China is home to 11 of the 20 biggest digital giants in the world. Membership in DEPA will go a long way to helping China gain better access to these economies. It will penetrate further into the niches of the digital economy. Thanks to this pact, China can get even closer to these economies while deepening its domination. But for this, China must make a series of amendments to its domestic and foreign policy to comply with DEPA.
Currently, China is ranked as the most data restrictive country in the world by the Information Technology & Innovation Foundation. China restricts any flow of personal information abroad if it threatens national and public security interest. China’s recently enforced Personal Information Protection Law (PIPL) strictly regulates the storage, transfer, and processing of personal data. information. It potentially limits the cross-border transfer of information that could pose a potential threat to national security. In contrast, other DEPA members such as Singapore practice an excessively liberal policy on data storage and cross-border transfers. Amendments to this law are necessary to bring synergy with DEPA.
China’s cybersecurity concerns and the recent impact of the crackdown on Didi Chuxing may negatively impact business perceptions of DEPA economies. China suddenly pulled rideshare company Didi Chuxing’s app from all app stores in China after encountering issues with Chinese data regulators. Didi Chuxing is the largest ridesharing company in China, with more than 377 million active users and providing services in 16 countries. This incident will certainly have a ripple effect on foreign investors. China may be required to amend its cybersecurity law and implement a more modest version in order to comply with DEPA principles, which strongly advocate cybersecurity cooperation to ensure the global prosperity of their businesses.
Current DEPA members are committed to duty-free electronic transmissions of goods and services between a person of one Party and a person of another Party. China supports this practice at the WTO and has voted in favor of establishing a permanent moratorium on the electronic transmission of goods and services. However, China is also aware that it risks losing a huge volume of revenue if it accepts this law. UNCTAD estimates that, despite being a net exporter of digitized goods, China will potentially suffer a loss of income of around US $ 493 million.
DEPA requires its participants to accord non-discriminatory treatment to digital products created, produced or published in the territory of another Party. But China’s biased treatment of foreign companies is well documented, evident in the absence of global tech giants like Facebook, YouTube, and many more. China also grants preferential treatment to its state-owned enterprises. Thus, a correction of course is necessary for China in its conduct towards foreign companies.
DEPA affirms public access to government information and its use to promote economic and social development, competitiveness and innovation. China must also work on this aspect in order to comply with the DFPA principles.
DEPA’s economies closely protect intellectual property rights (IPRs) which are currently in dire straits in China. In fact, China has been referred to as copycat as he devoted himself prodigiously to the production of innovations from other countries. Reforms are required to adapt to DEPA regulations.
China’s application for DEPA membership comes at a time when global trade is increasingly digitized and a rules-based order is the urgent requirement for this sector at the moment. A unified set of rules would be followed by countries and would boost the global digital economy. China’s accession to the deal would not only help its companies tap foreign markets, but could also inspire others to join the club. However, the journey to this group is a bumpy road and China has to travel it carefully to reach its destination.
* Dr. Rahul Nath Choudhury is a research fellow at the Indian Council of World Affairs, New Delhi. The opinions expressed here are his.
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