That The digital economy adds trillions of dollars to the United States’ gross domestic product annually, but its continued success will depend on collaboration with global partners. The US push into the Indo-Pacific region to cement these ties represents a significant opportunity to do just that.
On May 23, US President Joe Biden announced the launch of the Indo-Pacific Economic Framework (IPEF). The initiative brings the United States together with thirteen countries (and counting) Building a partnership to strengthen economic growth and national security. The framework includes four pillars targeting trade policy alignment, supply chain resilience, clean energy and infrastructure, and taxation and anti-corruption. Countries will decide which of the four pillars they want to join as the details of commitments and provisions are solidified between the parties over several weeks.
On the trade pillar, the IPEF will facilitate discussions to seek “quality traffic rules in the digital economy, including standards for cross-border data flow and data localization,” according to a data sheet released by the White House. Other trade-specific goals include pursuing e-commerce collaborations to stimulate small and medium-sized business activity, while also tackling issues related to “online privacy and discriminatory and unethical use of artificial intelligence.” Illustrative of the focus on digital economy issues in US government talking points is US Trade Representative Katherine Tai labeled Provisions in the field of digital as those that “particularly best [represent] an area where we need to work with our IPEF partners, given the prominent role it plays in today’s global marketplace,” and further committing to “tackle issues in the digital economy that will help build connectivity and trust.” to build between key markets, including overarching standards -boundary data flows and data localizations.”
The digital economy is a powerhouse in the US and should be strengthened by the framework
The initial signals from the White House and IPEF partner countries are promising for the future of digital commerce and the far-reaching economic and societal benefits it will bring.
However, strong commitments are needed for IPEF to deliver on its stated promises and foster economic growth across the region. The digital sector represents a thriving export market for the United States, a major source of the country’s economic power, and a central pillar of the country’s soft and hard power globally.
The Indo-Pacific region represents an important market for the US economy both in the future and today. The twelve founding countries of the IPEF were responsible for raising US$68.7 billion in 2020 for the export of US information and communication technologies (ICT) and potentially ICT-enabled services. This number is likely higher both because Fiji, a country for which the Bureau for Economic Analysis does not provide country-level data, is not included, and because the BEA did not release export and import figures for specific countries to “constrain disclosure.” to avoid data from individual companies.”
The Asia and Pacific region accounted for 30.4 percent of all ICT services exports and 23.5 percent of all potentially ICT-enabled services exports to the United States in 2020. Overall, the Asia and Pacific region brought in around US$144.7 billion in exports of ICT services and potentially ICT-enabled services in 2020 (excluding China from the total as the country is unlikely to join IPEF).
The United States is also a key market for the Indo-Pacific countries, as imports of ICT services and potentially ICT-enabled services into the US from the 12 founding member countries amounted to at least US$62 billion in 2020. About 35 percent of all ICT service imports and 25.7 percent of all potentially ICT-enabled service imports came from all Asian and Pacific countries in 2020.
This is only likely to grow with an expanded Indo-Pacific digital market in the years to come, by some estimates predict The number of internet users in the region is expected to increase to 3.1 billion by 2023.
In short, both the economies of the Indo-Pacific region and the United States should be given strong incentives to ensure they operate to the same playbook in terms of the rules, standards, and obligations that govern the digital economy. Fragmentation of internet governance, censorship and restrictions on content, and privacy all pose existential threats to this global trading system that benefits both US economic growth and the global economy.
Past successes should guide the United States in the development of IPEF
As the United States negotiates trade terms in the Indo-Pacific economic framework, officials should seek to integrate approaches from past negotiation successes to advance its economic ties with those in the Indo-Pacific region. agreements such as Digital trade chapter of the Agreement between the United States, Mexico and Canada (USMCA), the Digital Trade Agreement between the US and Japanas well as who finally gave up transpacific partnership (TPP), which eventually became the Comprehensive and progressive agreement for a transpacific partnership (CPTPP) should all serve as a guide.
The United States should also take advantage of the fact that many IPEF partners have already joined the CPTPP and Miscellaneous regional digital trade pacts to ensure strong protection for the digital economy. Although some of the commitments such as banning data localization and ensuring cross-border data movement are more robust in the USMCA and US-Japan compacts, the Indo-Pacific governments have a clear shared recognition of the provisions for digital trade and cooperation in the digital economy signals necessary to stimulate the economy of all parties.
Aligning standards, cultivating an open digital economy with free flow of data, and collaborating on internet standards and oversight with governments in the Indo-Pacific region are all key factors for the United States to advance its interests and fully realize the potential available in these markets IPEF. With that in mind, the following are just some of the issues affecting the United States should address in the digital trading column of the IPEF:
- Broadly enforceable and binding commitments to ensure maximum effectiveness of IPEF;
- Mechanisms that enable cross-border data flows and eliminate data location mandates;
- Provisions to combat government censorship and rising digital authoritarianism;
- Commitments to good regulatory practices that promote transparency and accountability in the development and implementation of regulations;
- Commitment not to pursue discriminatory tax regulations targeting specific companies or industries or deviating from international standards;
- Initiatives to strengthen digital HR development;
- Obligations to maintain strong encryption and other digital security measures;
- Agreeing to track risk-based cybersecurity practices and ensure certification approaches are non-discriminatory in nature;
- protecting the interoperability and connectivity of the internet and respecting the principles of non-discrimination and market access for networks;
- enabling the success of small and medium-sized businesses in the digital economy in the region; and
- Longstanding copyright commitments that reflect US law and will encourage innovation in new technologies where intellectual property is included in the scope.
Additional priorities critical to continued economic growth and security, such as: B. the resilience of the supply chain, are dealt with in separate columns. Several of these goals, such as cross-border data traffic, tax rules and small and medium-sized businesses, are mentioned in the White House announcement. However, the details of the wording of the commitments will be paramount to their eventual success or failure. Due to the unique nature of IPEF, which allows countries to sign up or opt-out of certain aspects of the agreement, the United States must also work closely with partners to ensure that as many countries as possible choose to join the digital commerce pillar.
The Biden administration should build on recent work in bilateral and multilateral fora to build a strong IPEF
The formation of the Indo-Pacific economic framework so far has followed the Biden administration’s trade and economic promotion strategy – forging better ties with allies to facilitate cooperation through collaboration, including but beyond the realm of trade. The basis of the idea is to strengthen links with partners, while identifying and pursuing mutually beneficial policies to which all parties have an incentive.
The EU-US Trade & Technology Council is an excellent example of this method in practice. The effort, launched in 2021 between the two parties, recently met for the second time and released a set of shared commitments – mainly related to export controls and supply chain issues related to the Russian invasion of Ukraine – and the conclusions of several working groups addressing a wide range of issues central to the digital economy.
The details that eventually make up the IPEF will have far-reaching implications beyond the region. The Biden administration is allegedly is also trying to use the initiative as a template for its strategy in Latin America, where the White House is trying to restart several trade deals of the last few decades to accommodate technological changes.
Creating forums to discuss political agreements and disagreements such as IPEF and TTC is crucial, but it will be crucial that these initiatives lead to concrete results, including joint commitments that will facilitate trade. This collaboration is needed now more than ever. New concerns remain about a friendly environment for data flows and the export of digital services to the Indo-Pacific, and a rise in digital authoritarianism threatens the future of a free and open internet.
As the countries at the heart of IPEF canvass other nations to join and finalize the details of their charter and commitments, provisions tailored to support the digital economy are vital to the competitiveness of the United States and the resilience of the internet ecosystem worldwide be of utmost importance.
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