The world is racing to seize the initiative on digital trade standards

The U.S., China and the EU are competing against each other to promote its digital trade standard to the rest of the world

KITA stresses the importance of reflecting Korean companies’ interests by engaging in bilateral agreements and regional agreements

As the importance of service trade and movement of data are being stressed with accelerating shift toward digitalization, a research paper was released that highlights the need of Korean companies to be aware and be prepared for a competition among major economies to secure their set of rules governing digital trade as the global standard.

The Institute for International Trade (Head: Sang-hyeon Cho) under the Korea International Trade Association (KITA) released a paper titled “The competition among the U.S., China, the EU over digital trade rules and the situation in Korea” on July 20. According to the paper, data and services are increasingly becoming popular trade items rather than products, as more advanced means of electronic payment and the digitization of existing goods are becoming commonplace. The U.S., China and the EU are exercising influence to have their own set of data policies designated as the global standard governing digital trade.

The U.S., China and the EU differ in how their policies on digital economy is being implemented. In the U.S., digital companies play a key role, which means the country implements a market-centered approach. The country is supporting free movement of data through policies to open up the avenue for American companies, which have a technological competitive advantage to expand their business into new markets. On the other hand, in China, the state implements aggressive measures to control the overall digital economy, thereby regulating cross-border movement of data through an extensive set of rules. Meanwhile, the EU pursues its regulations on data based on protecting individual rights. Free movement of data is allowed between EU member states and non-EU countries that protect personal information to a level on par with EU member states, however, the process of transferring data is extremely restrictive when a country that does not protect personal information to a sufficient level is involved in the process.

The U.S., China and the EU are making attempts to spread their principle on digital economy to other nations in exchange for granting access to their market. The U.S. is including their U.S.-centered digital trade standard in regional trade agreements. China is promoting their standard to emerging nations by supporting their digital infrastructure projects through its Digital Silk Road project. The EU is requesting other nations to introduce schemes equivalent to the standard of the EU and is making effort to encourage other nations to adopt EU’s standard by utilizing a measure to expand the application of EU laws to other regions.

Korea is also in the process of introducing a digital trade standard through bilateral and multilateral trade agreements. Regulations on e-commerce was first included in the Korea-Singapore FTA that took effect in 2005, and regulations on e-commerce are included in FTAs with 12 regions to date.

Last year, Korea’s first digital trade agreement, Korea-Singapore Digital Partnership Agreement (DPA) was settled in December. Along with the standard governing matters on e-commerce that is included in the Korea-Singapore FTA, the bilateral DPA will introduce standards on matters related to new technologies, including fintech and artificial intelligence. The DPA is awaiting the procedure of official signing between Korea and Singapore. It is projected to serve as a tool for Korea to expand its standards on digital trade as the DPA stresses the importance of compatibility in implementing the Agreement and obligates a duty to take part in developing an international standard.

Hae-young Jung, a senior researcher at KITA said, “As the trend of accelerating digitalization not only affects the digital industry but also the manufacturing industry, the establishment of digital trade standards means both digital companies and all companies engaged in the export business that handle personal information will be affected” and advised, “It is imperative to take aggressive measures to reflect the interests of our companies from the stage of establishing a digital trade standard and secure opportunities to expand into new markets.”