Comparing Digital Rules in Trade Agreements

Parties signing free trade agreements (FTAs) have begun adding new rules to regulate and harmonize provisions of importance to companies trying to operate across multiple jurisdictions. The latest Issue Paper, from the Asia Business Trade Association, highlights the similarities and differences between this set of cutting-edge agreements in some of the keys areas of interest to digital trade. Table 1 identifies sixteen key digital provisions across seven FTAs. All seven FTAs, described more fully below, have only two provisions in common. All contain provisions to include the elimination of customs duties on digital products or electronic transactions, and cooperation elements. The remaining 14 elements, however, show variation across the FTAs under examination. The United States/Canada/Mexico (USMCA) and Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), show the most advanced provisions under review in this paper. Both agreements, as an example, include safeguards to protect developers’ rights over their software source code against the demands of disclosure. In addition, the USMCA incorporates source code-related algorithms into the subject of protection, which makes this FTA distinct from previous agreements. This amendment should facilitate implementation by providing greater clarification on source code.

Under RCEP, with 16 member countries involved, making a chicken pie should be quite easy with content inside members. The ROO threshold could be quite high without unduly hampering the ability of firms to comply with the rules. Of course, not every product is a chicken pie. This is why RCEP negotiators are working off what are called product-specific ROOs to ensure that the ROOs make sense for different types of products. The rules for chemicals should be different than the rules for textiles which should be different than the rules for pies. But all should ultimately be crafted to allow firms to source across the 16 member states without too much hassle. The point of the agreement is to facilitate trade in the region. It should help unlock new opportunities for companies to make pies or juice or plastics. These rules should work for large and small firms by avoiding cumulation rules that add unnecessary complexity by asking companies to calculate value addition by stops in the supply chain. The ROOs are an important element in getting the final RCEP agreement to do what it is meant to do—facilitate trade better across the 16 members.