China applies to join DEPA
At a regular press conference held by the Ministry of Commerce on November 11, spokesperson Shu Jueting introduced that recently, China has formally filed an application to join the Digital Economy Partnership Agreement (DEPA). At present, China has carried out a lot of work for applying to join DEPA, comprehensively and in-depth review of DEPA terms, and conducted various levels of communication with DEPA contracting parties Singapore, New Zealand and Chile.
01. What is DEPA?
DEPA, the full name is the Digital Economy Partnership Agreement, and the Chinese name is the "Digital Economy Partnership Agreement" (hereinafter collectively referred to as "DEPA").
DEPA was signed by Singapore, New Zealand, and Chile on June 12, 2020 through an online virtual signature, and came into effect on January 7, 2021.
This agreement is the first of its kind and represents a new form of economic participation in the digital age. DEPA is committed to facilitating seamless end-to-end digital trade ("Facilitate seamless end-to-end digital trade"), allowing trusted data flows ("Enable trusted data flows"), and building trust in digital systems ("Build trust in digital systems").
02. What does DEPA include?
DEPA is composed of 16 theme modules, the specific content is as shown in the figure below.
The main content of DEPA includes business and trade facilitation, digital products and related issues, data issues, and a broader trust environment.
Covers all aspects of supporting the digital economy and trade in the digital age, such as supporting paperless trade in the industrial and commercial sector, strengthening network security, protecting digital identities, strengthening cooperation in the field of financial technology, as well as personal information privacy, consumer protection, Data management, transparency and openness are issues of social concern.
Shu Jueting said that China is willing to work with all parties to explore the best path for a cross-border digital governance framework, actively carry out bilateral and multilateral digital governance cooperation, and make positive contributions to the development of the global digital economy, trade and investment growth, and economic recovery. Shu Jueting introduced that China's digital economy is at the forefront of the world. Joining DEPA is consistent with China's efforts to strengthen cooperation in the global digital economy and promote innovation and sustainable development. It is also an important action for China to further deepen reforms and expand high-level opening up. China's accession to DEPA will not only provide members with a broad market, tighten the bonds of mutual digital economy cooperation, and bring greater benefits to member companies and people, but also help promote the open integration and long-term prosperity of the Asia-Pacific region and the global digital economy.
Applying to join DEPA is one of my country's actions to firmly safeguard the multilateral trading system and actively participate in global economic governance. "Bai Ming, deputy director of the Institute of International Market Research of the Ministry of Commerce, said that China's application to join DEPA is to sign the "Regional Comprehensive Economic Partnership Agreement" (RCEP), apply to join the "Comprehensive and Progressive Trans-Pacific Partnership Agreement" (CPTPP), etc." Part of the “combined action”. China’s application to join DEPA can not only help the growth of the agreement with its comparative advantage in volume, but also help it strengthen its competitiveness in the digital economy.
Joining DEPA will further catalyze the evolution of the international trade pattern and help my country take the initiative in digital trade rules and standards. In the short term, joining DEPA is conducive to enhancing my country's ability to compete in trade frictions with the United States; in the long term, it will further strengthen my country's right to speak and initiative in the global digital economy rules.
According to OES, DEPA contains a total of sixteen rule modules, covering business and trade facilitation, digital product processing and related issues, data issues, business and consumer trust, emerging trends and technologies, innovation and digital economy, small and medium-sized Topics such as corporate cooperation and digital inclusion. Relevant member states do not have to agree to all the contents of DEPA, they can choose modules that meet their own interests to opt-in.
“A major feature of DEPA is the modular agreement.” Zhou Nianli, a researcher at the Beijing Institute of Opening to the Outside World University of International Business and Economics, and China’s WTO Research Institute, said that DEPA’s e-commerce facilitation rules module requires relevant member states to build upon recognized international rules and standards. A complete e-commerce system will further improve the level of the three major e-commerce systems (trade management documents, electronic payments, and electronic invoices), and enhance interoperability among members, thereby improving trade efficiency. Therefore, joining DEPA will contribute to the development of my country's digital economy, digital trade, and cross-border e-commerce.
"DEPA also emphasizes the need to protect the interests of small and medium-sized enterprises in the digital economy, trade and investment, and pay attention to the inclusiveness of the development of the digital economy." Zhou Nianli believes that my country's small and medium-sized enterprises have great potential in the development of digital economy and digital trade, and they are expected to pass DEPA. Get opportunities to exchange practices and experiences in digital trade.
"The digital economy itself has two aspects, digital industrialization and industrial digitization." Bai Ming believes that in terms of digital industrialization, my country's digital economy has ample reserves of talents and equipment, and there is a lot of room for development. It is now ready to go; In terms of industrial digitization, digital technology empowers the industrial chain, helps break up the ecchymosis and makes the communication between upstream and downstream smoother, thereby promoting the development of the entire industrial chain. Under the trend of digital industrialization and industrial digitization, China, as a major trading country, needs to use DEPA as a platform to put forward its own reasonable propositions, and at the same time promote the "Chinese template" of digital trade rules to the world.
There are two important driving factors for the development of digital trade:
First, the rise of cross-border e-commerce platforms has greatly promoted the digital level of the international trade industry. Take my country as an example. Since 2010, the transaction scale of my country's cross-border e-commerce industry has basically maintained an annual growth rate of more than 20%. In 2019, the scale of cross-border e-commerce transactions reached 1.05 billion yuan. Relying on the development of e-commerce technology, Chinese cross-border e-commerce companies are deeply integrating into the global market. Amazon, Alibaba International Station, AliExpress, etc. have become important positions for Chinese cross-border e-commerce companies. In addition, platforms that face the Southeast Asian market, such as Shopee and Lazada, are also rapidly emerging.
Second, under the pressure of Internet technology companies, the digital upgrade of traditional trading giants is accelerating, and it is also profoundly changing the profit pattern of the global trade network, showing three trends. The first trend is that traditional multinational retail companies are upgrading their digital infrastructure to realize the online and offline collaborative integration of the supply chain. For example, the US retail giant Wal-Mart has established a digital food traceability ecosystem "IBMFoodTrust" using blockchain technology to optimize the layout of the supply chain and form control over the upstream supply chain. The second trend is that a group of multinational logistics and supply chain companies are relying on digital technology to build an international digital trade finance platform and form a digital trade network driven by supply chain finance. For example, the global trade blockchain platform TradeLens, jointly developed by IBM and shipping giant Maersk, has attracted a large number of physical partners including dozens of port operators, customs, and logistics companies. In order to create a more open supply chain ecosystem, TradeLens is actively promoting its open application program interface and establishing cooperative relations with transportation standards organizations and industry organizations such as CEFACT. The third trend is that traditional economic and trade centers represented by Singapore are sparing no effort to promote policy innovation and technological innovation, with the intention of competing for the status of a platform-type node in the digital economic and trade network. For example, the Singapore government established the ICCTradeFlow alliance and cooperated with the International Chamber of Commerce (ICC) and many multinational companies to accelerate the deployment of digital technology in trade and commerce, and realize the transition from paper-based systems to digital trade in order to reduce time and operating costs. And the occurrence of trade fraud and human error.
However, with the adjustment of the interest pattern, global digital trade barriers and friction risks have also increased significantly. In recent years, the European Union is vigorously promoting the collection of digital services tax (DST). Due to the transnational nature of digital services, traditional taxation principles are not applicable to digital trade. For example, a digital company in country A has a large number of users in country B and earns a lot of income. According to traditional taxation rules, the company only needs to pay taxes in country A, but country B thinks this is unreasonable, because although The company is not registered in country B, nor does it even have an office, but the company does make a lot of profits based on users in country B, such as placing digital advertisements and selling electronic music. Country B believes that the enterprise should also pay corresponding taxes in Country B, otherwise it will put the same type of enterprise in its own country at a disadvantage, thereby damaging fairness and efficiency. In addition, digital companies in country A are also likely to conceal part of their profits in country B and evade part of the tax, because it is not easy to define how much profits a digital company has earned based on users in country B. At present, the international community has not yet reached a consensus on whether to levy a digital tax. Even countries that plan to levy a digital tax have not reached an agreement on the tax base and tax rate. For example, Austria and Hungary only levy digital service tax (DST) on online advertising, while France’s tax base is broader, including the provision of digital interfaces, targeted advertising, and user data transmission for advertising purposes. The tax rate is also from 2% in the United Kingdom to Between Hungary and Turkey's 7.5%. The EU and the United States have launched multiple rounds of games on the digital service tax issue. In the long run, the EU will inevitably implement a digital service tax, which may have an important impact on technology companies in the United States and China.
China's influence on the global digital trade landscape needs to be improved:
OES understanding. At present, my country has become a big country in the digital economy, but its influence on the global digital trade pattern still needs to be improved. According to the "China Internet Development Report 2021", China's digital economy will reach 39.2 trillion yuan in 2020, accounting for 38.6% of GDP, maintaining a high growth rate of 9.7%, and becoming a key driving force for stable economic growth. Among them, the e-commerce transaction volume reached 37.21 trillion yuan, a year-on-year increase of 4.5%, and the scale of business income of the e-commerce service industry reached 5.45 trillion yuan, a year-on-year increase of 21.9%. The vigorous development of the digital economy has promoted the rapid growth of new market players, created a large number of jobs, and has become an important channel for ensuring employment, protecting people's livelihood, and protecting market players.
But from the perspective of international discourse power, my country's influence on the global digital trade network does not match its own scale. For example, the field of cross-border e-commerce is still monopolized by international platforms such as Amazon. Under the influence of Sino-US trade frictions, my country's cross-border e-commerce companies have been frequently suppressed in recent years, posing a huge risk to the international development of my country's digital trade. Although some digital trade finance platforms have been established in China in recent years, they have focused more on system development and project construction, and their influence on the global industry is very weak. For example, despite the huge transaction volume of the central bank's trade finance blockchain platform, it has not formed an international influence. In contrast, platforms such as TradeLens use open interfaces and cooperate with the world's leading transportation standards organizations to directly promote their own technology as a digital standard for the global logistics industry.
In order to integrate into the global digital trade system as soon as possible, the Chinese government has actively participated in various new trade cooperation agreements in recent years, whether it is applying to join the DEPA or the previous application to join the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP). Out of China’s will to participate in the construction of new rules for international trade. Although DEPA has a small number of member states, it has strong strategic significance. As a key traditional trade node, Singapore has been exhausting its efforts in deploying digital trade in recent years, which has achieved initial results and maintains a stable trade relationship with China. Although New Zealand is a "Five Eyes Alliance" country, its overall foreign policy towards China has been relatively friendly in recent years, and it is also the first developed country to sign a free trade agreement with China. At present, New Zealand's monthly export volume to mainland China has surpassed the combined exports of the United States, Britain, Australia, and Japan. China has become its largest trading partner. The in-depth cooperation with New Zealand will have a substitution effect on the Australian market, which is conducive to my country's geopolitical planning. As the most developed country in Latin America, Chile's bilateral trade with China has grown rapidly under the epidemic. In the first half of this year, the total bilateral trade between China and Chile reached 199 billion yuan, a year-on-year increase of 38.5%. The common feature of the above three member states is that trade with China occupies a leading position in their exports, and the political environment is more friendly, with fewer differences of interest, which has laid a good foundation for further expansion in the future.
DEPA is a small and sophisticated circle of friends, which is an important supplement and support compared to big guys such as CPTPP. China's accession to DEPA will further catalyze the evolution of the international trade pattern, which will help my country take the initiative in digital trade rules and standards. On the one hand, my country's e-commerce platform companies have established in-depth cooperative relations with DEPA countries, and have a realistic basis for further rule-making and negotiation. On the other hand, the DEPA platform can be used to form a voice in the global trading system, especially to give play to the influence of member states. For example, Singapore can further influence ASEAN and Southeast Asia, New Zealand can further connect the markets of developed countries such as the European Union, and Chile can radiate my country's influence in Latin America and the vast majority of developing countries.
From a technical point of view, the key factor determining the development of DEPA lies in the interconnection of trade data between countries. Chongqing and Singapore have signed a China-Singapore strategic interconnection demonstration project, which includes the China-Singapore International Data Channel and the China-Singapore Cross-border Investment and Financing Channel. This provides a good case for the negotiation of the DEPA agreement. In the future, how to use the application of digital technology to realize the cross-border flow of data and the consistency of regulatory rules, improve the level of commerce and trade facilitation, and promote the free circulation of digital products will be the core issue of DEPA. As a big digital economy country on par with the United States, in the short term, joining DEPA is conducive to enhancing my country's ability to compete in trade frictions with the United States; in the long term, it will further strengthen my country's voice and initiative in global digital economic rules.