Lockdowns all over the world have shown we live in the age of digital economy, with an ever-greater share of global trade and commerce being conducted digitally.
To cope up with the opportunities and challenges this brings, New Zealand and other countries are entering into new types of economic agreements.
The Digital Economy Partnership Agreement (DEPA) is a new initiative that was signed in an entirely online virtual signing ceremony by New Zealand, Chile and Singapore on 12 June 2020 and entered into force for New Zealand and Singapore on 7 January 2021.
The one thing we are constantly learning and are aware of in the wake of COVID-19 is the ever-growing importance of digital transformation.
But what do we mean by the digital economy?
The OECD’s A Roadmap toward a Common Framework on Measuring the Digital Economy report proposes the following definition:
“The Digital Economy incorporates all economic activity reliant on, or significantly enhanced by the use of digital inputs, including digital technologies, digital infrastructure, digital services and data. It refers to all producers and consumers, including government, that are utilising these digital inputs in their economic activities.”
Basically, all of us are participants of the digital economy, including the Boston Dynamics’ dancing robots! More people are connected than ever before. And, people and digital entities are connected than ever before.
Mobile phone apps, big data, industrial robots, automated factories, artificial intelligence (AI), cloud computing, and many more technological innovations are the drivers of the digital economy.
All these new technologies are constantly transforming the different sectors and business models all over the world. The amount of digital data produced every day is beyond our imagination.
A New Type of Partnership
The digitalisation of the global economy presents new opportunities and new challenges.
What are the institutional and regulatory settings for international data sharing, digital financial services, digital trade, and consumer protection? Can international agreements help nations?
A digital economy agreement is a treaty that establishes digital trade rules and digital economy collaborations between two or more economies, encouraging co-operation in digital identities and AI.
In 2019, the New Zealand Productivity Commission and Australia Productivity Commission published a joint report suggesting both countries should take an active part in international digital economy negotiations.
And they did.
The Australia-Singapore Digital Economy Agreement (DEA) entered into force on 8 December 2020, followed by the New Zealand-Singapore DEPA treaty.
How did DEPA come about?
In May 2019 Chile, New Zealand and Singapore launched trilateral talks “to deepen and strengthen cooperation in digital areas, establish new international approaches for digital trade issues, and explore new frontiers in the digital economy, such as digital identities, e-payments, cross-border data flows and artificial intelligence.”
Chile, New Zealand and Singapore trade ministers met in Singapore on 21 January 2020 to announce the substantial conclusion of the DEPA, and on 12 June 2020 NZ signed the first trade agreement to focus on issues solely to the digital economy.
Canada has also indicated an interest in joining the agreement.
What does DEPA bring?
DEPA commitments include further enhancing cooperation, supporting for small and medium enterprises in the digital economy, promoting online consumer protection, facilitating paperless trading, e-invoicing, e-payments, sharing best practices on digital identity policies and regulations. DEPA will help establish new rules and practices for digital trade.
The missing word in DEPA is productivity. How will DEPA help diffusion of digital technologies throughout the economy? Such digital trade and economic agreements should develop policies for efficient technology adoption by less productive firms.
Opportunities for APEC
In 2021, New Zealand will host the Asia-Pacific Economic Cooperation (APEC) virtually.
Prime Minister Jacinda Ardern has appointed Anna Curzon to the APEC Business Advisory Council (ABAC), saying, “Anna Curzon has extensive experience using digital technology to enable productivity for small and medium-sized enterprises”.
This is a very important sentence, because New Zealand is a nation of small businesses, with over 97 per cent of all firms employing 20 workers or fewer.
Covid-19 has presented a significant economic challenge to millions of small businesses across the world, and a global survey by Visa found that in response to the pandemic, more than two-thirds of small businesses had tried a new digital approach to keep their business on track.
BNZ economist Paul Conway also emphasises that digital technologies are “fundamental in lifting the performance of small New Zealand firms”.
Regional partnerships on digital trade and new digital economy agreements should be in the agenda for APEC 2021.
New Zealand is among the 15 founding members of the Global Partnership on AI (GPAI), an international effort launched in June 2020 to work on the themes of the responsible use of AI, data governance, the future of work, and innovation and commercialisation.
The GPAI brings together experts from academia, industry, government, civil society, and I believe APEC members should work together to introduce a similar initiative.
