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COMMENT: Digital Partnerships in Asia -Pacific: EU needs to be more than non-committal

Is this the European Union’s approach to ‘digital partnerships’ in the Indo-Pacific just fluff? At the very least one can say it is much too timid.

The EU’s very first digital partnership announced with Japan today is non-committal. This is the reflection Brussels’ currently cautious approach to negotiated international rule-making for the cross-border dimension of digital business.

Yet it starts to be high time that global rule-making in the digital field make some headway.

Given today’s geopolitical realities, advanced economies committed to the rule of law, market economies and democratic standards need to up their game in establishing common standards and minimally harmonised rules for digital whilst keeping their markets open to enable continued innovation – and hence cost-savings – at a time of inflation.

“The EU will seek (…) Digital Partnership Agreements to be negotiated with like-minded partners in the Indo-Pacific,” wrote the EU in its very first Indo-Pacific strategy last September. The three partners targeted were Korea, Japan and Singapore.

Brussels’ move was remarkable in many ways. The EU innovated in its external policy by finally taking an Asia-Pacific approach that looked beyond its traditional mercantile approach to China and encompassed the world’s most populous and dynamic region.

Preparations towards EU digital partnership agreements, launched last December with Singapore, are advancing slowly as the EU seeks to avoid any form of formal legally binding entanglement – and as it prioritised Japan.

Talks with Seoul have not made much headway – but this is mainly due to recent elections having been held in the country.

The aim of these partnerships is to “expand the bilateral trade and investment relationship by enhancing cooperation on and interoperability of standards for emerging technologies”, the EU Indo-Pacific strategy paper said.

These partnerships are seen as a “complement” to ongoing negotiations on e-commerce at the WTO among 85 countries

Non-committal partnership with Japan

So what does this first EU-Japan partnership entail?

To be taken seriously, such a partnership would need at least one of the following ingredients: legally binding commitments to do something or to refrain from doing something, concrete objectives, some institutional set-up or dispute mechanism – and/or money.

But it is not the intention of the parties to go down that path. The digital partnership’s joint document is very explicit: “The Partnership is not intended to create any rights or obligations under international or domestic law. It does not have any financial implications on either side.”

There is an institutional setup, however in the form of “an annual meeting at ministerial level”, dubbed the “JapanEU Digital Partnership Council”.

But we are far from any further commitment.

This is what the EU and Japan announced: “We launch the EU-Japan Digital Partnership in order to advance cooperation on a wide range of digital issues to foster economic growth and achieve a sustainable society through an inclusive, sustainable, human-centric digital transformation based on our common values.”

The aim is to “reinforce the existing dialogue on these issues with a view to delivering concrete results,  notably on secure 5G, “Beyond 5G” / 6G technologies, safe and ethical applications of artificial intelligence and the resilience of global supply chains in the semiconductor industry, while encouraging an open and innovative environment.”

“The Digital Partnership will also allow us to work together in areas such as EU-Japan secure international connectivity and green data infrastructures, privacy, data innovation, digital regulation, the development of digital skills for workers, and the digital transformation of businesses, including small and medium enterprises (SMEs), and of public services.”

If the EU and Japan are going to engage in industrial policies involving subsidies to improve their ‘supply chain resilience’ – not least in semiconductors – they must go beyond mere talk shops and set rules of the game. They have to be ready to share sensitive information on their subsidies to avoid any competitive distortions created by such policies.

EU-US TTC style cooperation?

There are signs the EU and the US might come up with a few novel ideas in this field as part of their Trade and Technology Council with potentially a permanent joint standard-setting information-sharing and a cooperation mechanism, and a concrete rapid alert system to manage supply chain disruptions.

These are worth exploring precisely with countries such as Japan, South Korea and Singapore. But the outcomes achieved with these countries should also be at least as meaningful than whatever Washington and Brussels manage to achieve in their TTC.

It is also high time the EU and US include these countries – and perhaps a few others – in their conversations.

At the very least the EU and Japan seem to be acknowledging that this conversation needs to be broader. Their digital partnership joint statement says that  “both sides intend to work towards achieving joint monitoring, exchange of information in anticipation of disruptions in the supply chain, effective early warning mechanisms, crisis preparedness, exchange of information on long-term investment strategies and coordination of export controls among the relevant authorities.”

Also: “Both sides should strive to extend this joint exercise within a multilateral initiative.”

Afraid of bilateral rule-setting

Has the EU implicitly decided to take a back-seat in global rule-setting?

The EU’s approach to international rule-making in digital, prioritising the WTO whilst doing nothing bilaterally, is lofty, but also impractical and at odds with its usual way of operating in matters related to trade policy.

The Geneva e-commerce negotiations are not going to go anywhere anytime soon. These comparatively dynamic negotiations were expected to take a lot of time. And they recently have been thrown into disarray by the war in Ukraine.

Brussels has not hesitated to develop new rules on trade policy in its bilateral FTAs with a range of countries, not least with the hope that some of these rules – for example on subsidies or sustainability – can eventually make it into the WTO rule-book one day.

What is the rationale for acting differently for digital?

Afraid of asking for Council negotiating mandates

There is a deeper issue: the European Commission is afraid of asking for new negotiating mandates from the Council.

The EU and Japan will soon need to launch negotiations towards a digital chapter in their bilateral free trade agreement, which came into force in early 2020. The negotiators left a place-holder and introduced a ‘rendez-vous’ clause so that the chapter can be negotiated three years after the agreement’s entry into force.

The EU and Singapore are also due to revise the services chapter in their own trade agreement, which is almost three years old too: this involves e-commerce and digital.

None of that FTA updating activity is really moving ahead in the Brussels machinery. At the very least the EU Japan joint communiqué acknowledged that work on this revision should start.

The problem with the EU’s dithering and hesitations is that it is becoming irrelevant in contributing to set the rules for cross-border digital exchanges in the Asia-Pacific region.

It is currently US-inspired rules in the 11-country CPTPP, the same rules included in the region-wide RCEP trade agreement that also include China that set the tone in the region.

New rules or cooperative mechanisms in other issues on digital trade are being set by Singapore with Chile and New Zealand – and with other players in the region in its own ‘digital economy’ agreements.

Politically and geographically, Brussels is seen as far away in this region – although its businesses are highly active there. If the EU believes that the ‘Brussels effect’ of its new regulations – as with its GDPR for data privacy – will work here ‘just by magic’, it really needs a serious reality check.

The world has moved on since GDPR. And if the EU wants to promote its basic regulatory principles for artificial intelligence, platforms and other areas – whilst also being seen as a cooperative actor open to cross-border exchanges via digital channels, then it needs to get its hand dirty and do deals.

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