Deborah Elms is founder and executive director of Asian Trade Centre, Singapore.
Asia is increasingly facing growing tensions in effectively managing the digital economy.
On the one hand, the region is home to some of the largest and most competitive digital companies on the planet that have flourished, developing a wide range of innovative offerings such as e-commerce goods or food delivery to seamlessly managing online payments to interactive games and unique social media platforms. The digital economy in Southeast Asia alone is set to top $300 billion by 2025 with more than 40 million new internet users over the past year.
On the other hand, Asian governments are increasingly rolling out a range of policy and regulatory actions that could upend the growth and dramatically alter the development of the digital economy. Many decisions are taking place inside specific ministries or agencies inside different countries in the region with limited internal coordination.
Given the lack of coherence in some markets for managing digital trade locally, it is also not surprising that international cooperation is equally limited. Domestic policy decisions for the digital economy come with international consequences. Two newly released documents highlight a range of challenges to digital trade.
The first is the 2021 update to the National Trade Estimates (NTE) from the U.S. This document, updated annually, is a stocktake of a range of trade obstacles identified by U.S. government agencies and stakeholders in various countries around the world and compiled by the U.S. Trade Representative (USTR). The second is the release of a new database intended to track digital trade policies called the Digital Policy Alert collected by the Global Trade Alert team based in Europe.
Together, these two reports provide important information about changing policies that will affect large and small companies as well as consumers around the world.
This year's NTE noted challenges to digital trade in Asian countries that included restrictions related to national security and other potential cybersecurity threats; changed online content, broadcast or advertising rules; new or forthcoming application of taxes to digital services; increasing data restrictions; cloud computing location requirements; a range of new regulations for internet services; updates to privacy regimes and rules on the transfer of information across borders; adjustments to competition policies; and issues with cross-border payments.
To be clear, having rules, laws or regulations to manage national or cybersecurity threats should not be viewed as an automatic problem. Governments clearly have the right, as well as a duty, to protect their citizens from harm. No one wants classified information about nuclear weapons floating freely on the internet.
Having regulations to manage cybersecurity threats should not be viewed as an automatic problem. © GDA/AP However, some governments have created laws, rules and regulations that are poorly defined, overly broad, unduly restrictive, or simply unworkable. Many have implications that range far beyond their intended purpose. These are the challenging digital issues that are highlighted in the NTE and are increasingly being cataloged in the Digital Policy Alert database.
Sometimes governments create such rules or restrictions unintentionally. In a fast-moving space like the digital economy, agencies and ministries are working quickly to develop adequate rules and regulations. Often, coordination between government departments ends up missing with one agency crafting a regulation that directly contradicts, or makes it technically impossible to comply, with rules drafted by another entity.
These internal contradictions are especially pronounced when agencies create rules for specific sectors, such as health policy, that end up running in different directions to national or horizontal policies. The Digital Trade Alert sorts policies into nearly 80 different categories ranging from copyright protection to data residency obligations to quality of service requirements.
Not all agencies have the same levels of technical and legal capacity. This often leads to situations where existing rules or draft regulations end up too broad or unduly restrictive. It could be that the provisions fail to accomplish the stated objectives because the processes actually employed on the ground inside companies do not match up to what government officials believe to be happening. Regulations can end up being irrelevant or actually counterproductive in short order.
Sometimes, however, restrictions are aimed specifically at blocking the activities of foreign companies. Many of these new digital rules are meant to prevent greater market access for overseas companies or to encourage the growth of domestic digital providers. The net result, however, can be quite damaging to local companies and especially harmful to domestic smaller companies that suddenly cannot access outside digital services and products for their own use or can only do so at much higher costs than previously.
COVID-19 and the subsequent stampede into digital or online ways of working, delivering and consuming, highlights the increasing importance of getting effective trade rules in place for managing the digital economy. The NTE and Digital Policy Alert help show many of the challenges ahead.