Published 10 September 2024
ASEAN’s DEFA is expected to be the world’s first regional digital economy agreement. It can add unique value to the region’s trade architecture by locking in gold-standard digital rules for data flows, electronic transmissions, and future-proofing cooperation on payments interoperability, AI standards, and monitoring mechanism. Here’s what it needs to do.
Talks for the ASEAN Digital Economy Framework Agreement (DEFA) were launched in November 2023 amid a period of rapid growth in Southeast Asia’s digital trade. Propelled by increased connectivity, greater digital payments capabilities, and digitization of small businesses especially during Covid-19, e-commerce in goods soared five-fold from 2017 to 2023, reaching US$163 billion – almost 5% of the region’s gross domestic product – and is predicted to hit US$217 billion by the end of 2024.
The DEFA is expected to be the world’s first regional digital economy agreement. It is being formed on top of multiple ASEAN efforts to promote the region’s digital transformation and in the midst of over 220 bilateral and regional trade agreements in the Asia-Pacific. These include the ASEAN Economic Community Blueprint 2025, the e-commerce chapter of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), and the Digital Economy Partnership Agreement (DEPA) between New Zealand, Chile and Singapore. All ASEAN members are also part of the Regional Comprehensive Economic Partnership (RCEP) that has similar digital trade rules as the CPTPP, though the RCEP’s e-commerce chapter is non-binding.
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How, then, could the DEFA bolster existing digital trade cooperation in the ASEAN and Asia-Pacific digital trade landscape? In this paper, Kati Suominen of the Hinrich Foundation and Nextrade Group discusses the unique value DEFA offers to promoting digital trade in the region. The agreement can lock in good digital trade regulations across ASEAN, aligning them with global best practices by including gold-standard provisions on free cross-border flow of data, a moratorium on duties on electronic transmissions, and non-discriminatory treatment of digital products and foreign source code.
The DEFA also offers a unique opportunity to craft new regional rules to future-proof the region’s use of artificial intelligence (AI) and cross-border interoperability of digital payments. By promoting common AI standards and policies, the DEFA could position ASEAN as a leader in AI-driven trade and innovation. Similarly, addressing frictions in cross-border digital payments could unlock significant trade potential for small and medium-sized enterprises (SMEs), further integrating the region’s digital economy.
Implementation has been an afterthought in many digital trade agreements. The DEFA can change this too by ensuring that good policies are effectively implemented through monitoring, consultations, and technical assistance. This would enhance the DEFA’s credibility and inspire confidence in the region’s growing number of firms and consumers that transact across borders.
Download this paper by Kati Suominen to see what DEFA needs to do to achieve these goals.
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Author
Kati Suominen
Kati Suominen is a Research Fellow at the Hinrich Foundation. She is the Founder and CEO of Nextrade Group that helps governments, multilateral development banks, and Fortune 500 technology companies enable trade through technology.
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