Priorities for EU digital trade in a new world order
As the global landscape shifts, the EU faces a window of opportunity to lead in digital trade. To seize this moment, the EU must adopt digital regulatory and trade policy fit for the age of AI.
Hannes Berggren, Trade Policy Adviser
World trade is increasingly digital. The OECD estimates that digital trade accounts for up to a quarter of global trade. However, trade policy frameworks continue to lag behind. The plurilateral e-commerce deal in the WTO has not yet entered into force, despite the fact that negotiations were concluded over a year ago. In the absence of global rules, unilateral and bilateral actions shape the digital economy, sometimes supporting digital trade and sometimes creating new barriers.
Unilaterally, the EU has taken measures to advance several digital regulations aimed at protecting fundamental rights and improving the single market. However, some of these rules have also hampered the growth of the digital economy by imposing burdensome and restrictive requirements on companies. In response, the European Commission’s ongoing work with regulatory simplification focuses in part on digital regulations, especially through a ‘digital package’ that will be launched this autumn. This is a welcome development. We have proposed that the EU use this opportunity to revise the GDPR, which we find has had a number of negative effects on EU trade and competitiveness.
We have proposed that the EU revises the GDPR.
Bilaterally, the EU has recently taken measures to strengthen its digital trade agenda through digital trade agreements, digital partnerships and trade and technology councils (TTCs). Given the challenges presented by US tariff threats and an increasingly assertive China, these initiatives help secure better market access and more predictable data flow regimes for European companies. Binding digital commitments, in line with what we at the National Board of Trade call “trade policy for the age of AI”, have been developed with countries such as Japan, Korea, Singapore and New Zealand while negotiations are ongoing with key trading partners such as Canada. These agreements are great achievements in EU trade policy and build on multilateral progress.
A remaining challenge for EU digital trade policy is the “hub-and-spoke” arrangement of digital FTAs. This system is more preventive to digital trade flows than a broader digital free trade area with common rules. The EU’s recent International Digital Strategy, which proposes improved coordination of digital trade agreements, digital partnerships and TTCs, is therefore an important step in the right direction.
One concrete opportunity for the EU to advance this agenda lies in the recently announced EU-CPTPP discussions.
One concrete opportunity for the EU to advance this agenda lies in the recently announced EU-CPTPP discussions. The EU already has modern digital trade commitments with several CPTPP countries, which also host several inspiring initiatives such as the CPTPP digital trade chapter that creates an integrated data flow area. Perhaps even more important is the Digital Economy Partnership Agreement (DEPA), signed by Singapore, New Zealand and Chile in 2020, which has since been expanded to include new members.
The EU could benefit from closer alignment with such initiatives, for example by adopting a more flexible approach to digital negotiations. The digital package and a review of EU digital regulations, could support a more standardised approach in cooperation with trade partners. Moreover, the OECD’s discussions on Data Free Flow with Trust (DFFT) could help resolve sensitivities that limit digital trade with like-minded countries. So could initiating further discussions on digital trade and regulatory principles in the OECD.
In conclusion, there is a window of opportunity for EU digital trade policy. In a trade policy landscape increasingly defined by digital trade – and where China and the US have become less attractive as trading partners – the EU has the opportunity to strengthen its position as a trusted and engaged partner that seeks mutual benefits. An ambitious review of our own policies, a more flexible approach in negotiations, and constructive engagement in the development of international principles for digital regulation are key actions needed to seize this opportunity and create a trade policy fit for the age of AI.
Hannes Berggren
Trade Policy Adviser
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