China applies to join digital trade pact with Singapore and NZ – Nikkei Asia

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HONG KONG — China’s unexpected move on Monday to apply to join a fledging global digital trade pact even as the country tightens up cross-border data flows has raised questions about its intentions.

Monday’s move followed Chinese President Xi Jinping’s announcement of Beijing’s intention to join the Digital Economy Partnership Agreement (DEPA) as part of his video address a day earlier to the Group of 20 leaders’ summit in Rome.

The application comes a few weeks after Beijing submitted its application to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership and as the U.S. seeks to drum up interest in a regional digital trade agreement that would exclude China.

Singapore, New Zealand and Chile together launched both DEPA and the CPTPP. DEPA, signed last year, has since attracted interest from South Korea and Canada though neither has yet formally applied to join.

The Chinese Ministry of Commerce said Beijing’s accession would “strengthen cooperation with members of the digital economy.”

Shi Yinhong, an adviser to China’s State Council and a professor of international relations at Renmin University in Beijing, said it is “too early to say” how serious the country is about joining DEPA.

“Free information flow is needed if China wants to join the bloc, but countries like New Zealand may have quite strict access requirements for China, and the negotiation process is set to be tough,” Shi said.

“China’s attitude will be tested in the later process,” he added. “If China fails to be admitted as a member, that would mean China’s application is not that serious.”

As part of a series of recent measures tightening controls over the use and transfer of data, Beijing last week published proposed rules that would require government approval for any transfer of “important” data overseas.

“Just like CPTPP, China’s good faith compliance with DEPA will require some decent regulatory and policy reform, particularly in regards to data transparency and the free flow of data,” said Nick Marro, lead for global trade research at the Economist Intelligence Unit.

“But this may be difficult, given that the ICT (information and communication technology sector) has become increasingly off-limits to foreign investors over the past five years,” he added.

Beijing’s stance on data has been seen as a potential obstacle to its admission to CPTPP, but DEPA may pose fewer challenges. The agreement lacks many binding rules, instead focusing more on cooperation in areas such as data transfer, e-commerce, privacy protection and artificial intelligence.

“Many of the commitments in DEPA are simply to affirm existing obligations, share best practices, begin discussions and establish frameworks for future cooperation,” said Stephen Olson, a senior research fellow at the Hinrich Foundation, a Hong Kong-based group focused on trade issues.

“Given the complexities of the digital issues covered, these are probably necessary and useful steps, but it means that the agreement should not pose any major implementation challenges for China,” he said. “For many provisions, parties can be in compliance by simply ‘endeavoring’ to comply.”

By joining DEPA, he said, China will gain a seat at the table in a forum which could help shape global digital economy rules.

Deborah Elms, founder and executive director of Singapore-based advocacy group Asian Trade Centre, agreed that is likely Beijing’s main motivation for applying to DEPA.

“Is it [applying] because China is prepared to make significant digital changes or is it just another way for China to block good digital policymaking?” she said. “From my perspective, both of the arguments are at least plausible and make sense.”