Why global trade laws need to catch up with digital commerce

Vast technological advancements in recent decades, such as the internet and mobile devices, have revolutionised the execution of online transactions involving the transmission of products, services, and payments. This trend is particularly apparent in the Asia-Pacific region, which, in 2013, became the leader in e-commerce – surpassing Europe and North America.

However, the economic prospects do not coincide with the stability of the underlying legal framework. Apart from the recent conclusion of the revised Information Technology Agreement (ITA), the WTO legal framework is stuck at a standstill; WTO law in its current form does not seem fit to meet the realities of today’s online society. Although efforts to adapt WTO law to digital trade started in a very promising way with the Work Programme on E-Commerce of 1998, no substantive progress has been made since then. Consequently, the situation at the multilateral level is characterised by legal gaps. Governments, investors, traders as well as consumers, however, need solutions to the uncertainties more urgently than ever because e-commerce is steadily progressing.

This need is reflected in the most recent legal developments in the Asia-Pacific. The proliferation of bilateral and regional trade agreements can be seen as an innovation with respect to the cross-border promotion of e-commerce. A large number of newer Preferential Trade Agreements (PTAs) include specific e-commerce chapters. Nevertheless, this development is not steady but has followed certain waves.

2000-2002: Paperless trading

Whereas the Western world witnessed a veritable “boom” of PTAs in the 1990s, economic relationships in Asia were still overshadowed by historical and political tensions. However, this changed rapidly after the Asian financial crisis in 1997, and regionalism in the form of institutional cooperation and PTAs became increasingly popular.

However, in this initial phase, e-commerce was still in its infancy and thus not an issue for PTAs. Nevertheless, the first bilateral PTAs in Asia already recognised the importance of fostering electronic trade and thus started including chapters on “paperless trading.” The Agreement between New Zealand and Singapore on a Closer Economic Partnership, concluded in 2000 – encompasses a provision on “paperless trading” in Chapter 4. This provision makes a reference to the “APEC Blueprint for Action on Electronic Commerce” and calls upon the parties to implement an “electronic environment that supports electronic business applications between each Customs administration and its trading community.” Similarly, the 2002 Agreement between Japan and Singapore for a New-Age Economic Partnership contains a Chapter on “paperless trading” which calls upon the parties to mutually recognise electronic documents as well as e-certification and on a structural level and even establishes a “Joint Committee on Paperless Trading.”

2003: The birth of e-commerce chapters

The 2003 Singapore – Australia Free Trade Agreement (SAFTA) appears to be the first PTA containing a whole e-commerce chapter. This chapter refers to the general principles of WTO law and the UNICTRAL Model Law on Electronic Commerce; furthermore, it contains a catalogue with definitions, a commitment to transparency and to reduce trade barriers in e-commerce, as well as a duty-free moratorium for digital products. It also addressesissues of e-certification, paperless trading as well as consumer and data protection.

The SAFTA can be considered a pioneer agreement in many regards. It is not only the first Asia-Pacific PTA to introduce an e-commerce chapter, but it also covers a broad scope of (still nowadays) pressing issues in e-commerce and provides for a considerably more detailed regulation of these issues.

2004-2011: Ups and downs in e-commerce

Between 2004 and 2011 PTAs in the Asia-Pacific show a mixed picture with respect to digital trade regulations. The PTAs concluded by Thailand with Australia and with New Zealand (2004/2005) contain basic Chapters on e-commerce with similar structure and wording. To the contrary, the Japan – Philippines Economic Partnership Agreement, concluded in 2006, goes back in the liberalisation process and only contains a chapter on paperless trading, similar to the one concluded by Japan at the beginning of the millennium.

In the same year, the Korea – Singapore Free Trade Agreement (FTA) implemented a high level of bilateral liberalisation of digital trade: based on a negative list approach, chapter 14 on e-commerce defines the term “digital products,” grants a duty-free moratorium, and a full level on non-discriminatory treatment of digital products. The Singapore – India Comprehensive Economic Cooperation Agreement (2006) includes a similar e-commerce chapter with essentially the same wording of the general principles and definitions. However, its scope is more limited than the Korea – Singapore FTA since it does not grant most favoured nation (MFN) or National Treatment for digital products.

The PTAs concluded during the following years do not contain e-commerce chapters. This assessment applies with respect to the six Economic Partnership Agreements (EPA) entered into by Japan with ASEAN, Brunei, India,Indonesia, Malaysia, and Vietnam (2007-2011). China also does often not agree on the inclusion of extensive e-commerce chapters; for example, in its FTAs with Korea and Singapore. Exceptionally, the China – New Zealand FTA(2008) does touch upon issues of e-commerce, however, only in its chapters on technical barriers to trade (TBT) and on conformity assessments.

An interesting case is the 2009 ASEAN – Australia – New Zealand Tripartite PTA as it encompasses a relatively extensive Chapter on e-commerce, which addresses questions of cooperation, paperless trading, and data and consumer protection.

2014 and beyond: New generation of liberalised PTAs

The most recent PTAs show a return to e-commerce liberalisation. Even Japan, a country that has shown quite some reluctance to include issues of e-commerce in its PTAs, has accepted extensive e-commerce regulations in its two latest PTAs, namely the Agreement between Japan and Australia for an Economic Partnership (2014), similar to the provisions in the Korea – Singapore and in the Singapore – India PTA.

Japan’s most recent PTA, the Agreement between Japan and Mongolia for an Economic Partnership, signed in February 2015, contains a quite all-embracing chapter on e-commerce. As a novel issue, this PTA introduces the prohibition to require a local server as well as provisions on “unsolicited commercial e-mail” and “source code.”

Outlook

Although the bilateral or regional approach in the Asia-Pacific area can remedy the existing uncertainties to some degree, the chosen solutions naturally have their limits since their applicability is restricted to the involved parties. Furthermore, PTA rules are mostly characterised by a low degree of clarity with regard to implementation and lack enforceability. This kind of “noodle-bowl” situation causes legal fragmentation and endangers regulatory coherence which might have a negative impact on the effectiveness of e-commerce transactions. Considering the fact that the WTO’s core aim is a reduction of trade barriers, the topic of e-commerce, which will play an increasingly important role in world trade, should be taken up by the WTO organs based on the successful conclusion of the revised Asia-Pacific PTA.

Prof. Dr. Rolf H. Weber is a member of the E15 Expert Group on the Digital Economy. He is Professor for Civil, Commercial, and European Law at the University of Zurich Law School and a visiting professor at the University of Hong Kong.

This article is published in collaboration with ICTSD. Publication does not imply endorsement of views by the World Economic Forum.

To keep up with the Agenda subscribe to our weekly newsletter.

Author: Rolf H. Weber is a Professor for Civil, Commercial and European Law. 

Image: A ship is loaded with containers at Sydney’s Port Botany container terminal. REUTERS/David Gray.