APRIL 2018

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DISCUSSION PAPER THE FUTURE OF DIGITAL TRADE RULES

The Australian Government is taking a leadership role on digital trade rules through negotiating ambitious rules in our free trade agreements (FTAs), such as those in TPP-11, and driving a new e-commerce initiative in the World Trade Organization (WTO). To ensure our engagement continues to support Australian businesses, including MSMEs, and consumers to take advantage of the opportunities presented by digital trade, the Department of Foreign Affairs and Trade wants to hear from you – business, NGOs, civil society, academia and individuals – on your experience of the digital economy. This will help us assess current digital trade rules and possible future enhancements.

Introduction

Through international engagement, the Australian Government is actively shaping an enabling environment for digital trade. Our focus is on building trade architecture and international regulatory cooperation that is responsive to the contemporary needs of the digital economy, and which assists Australian businesses and consumers engage in international digital trade.

As outlined in Australia’s International Cyber Engagement Strategy, one key way that we do this is through shaping international rules in the WTO and FTA negotiations. In these fora, the Government advocates for a global trading environment that supports digitisation of trade, builds trust and confidence in the online environment, and reduces barriers to digital trade. The Government also reserves regulatory and policy space to accommodate policy sensitivities including with regard to health, environment, consumer and privacy protections and security.

The scope of e-commerce provisions has changed as digital trade has developed rapidly over time. In Australia’s older agreements, these commitments generally focused on aspects of each country’s domestic regulatory system to ensure that online commerce was not treated any differently to physical commerce. In more modern agreements, Australia seeks commitments that also address a broader range of cross-border issues, such as commitments to allow the flow of data across borders and prohibitions on requirements to store data locally. As FTAs are designed to be in place for long periods of time, Australia seeks rules that are, wherever possible, technology-neutral. This ensures that the provisions are futureproofed and substantive obligations of an FTA remain relevant even while technology evolves.

Attachment A provides a more detail outline of what we are doing in the WTO and our FTAs. The International Cyber Engagement Strategy and DFAT’s submission to the Parliamentary Inquiry into the Trade System and Digital Economy also provide further information on the Government’s international engagement on digital trade.

Seeking your views

To inform Australia’s position in the WTO and FTA negotiations into the future, we want to hear from you on the opportunities and challenges you see arising from digital trade. Please send submissions to digitaltrade@dfat.gov.au

In particular, we would welcome your input on:

• which markets are you trading in goods and/or services online and why

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• any e-commerce related regulatory barriers, including “behind the border barriers” such as lack of transparency of laws and regulations, that impede your market access

• any restrictions on cross-border transfers of information or requirements to localise information restricting your business operations or influencing your decision to trade or invest

• any restrictions on digital products, including requirements to disclose source code restricting your business operations or influencing your decision to trade or invest

• if you are trading online into other markets, whether you enjoy the same regulatory treatment (including with respect to operational issues such as licensing, registration, marketing, distribution or price controls) as local companies

• any customs or other border-related restrictions that are limiting the potential of online trade in goods, e.g. low or non-existent de minimus thresholds for customs duties, costs of certificates of origin etc

• whether there are any initiatives (including enhanced cooperation at a government-to-government level, through direct arrangements between regulatory bodies and business associations) that you consider would make operating in particular countries more attractive

• any improvements that could be made to the regulatory environment in overseas markets to build consumer confidence and trust in the digital economy

- for example, this could relate to protection of personal information, online consumer protection and regulatory transparency

• security-related issues that intersect with digital trade

• what impact new technologies, such as AI and blockchain, are having on your business and whether there are policies or practices in other markets that are either assisting or hampering your business in using these technologies

• are geoblocking measures an impediment to trading in overseas markets and what policies or practices would be helpful to promote competition in the digital environment

• any other matter you wish to raise in relation to digital trade and the Australian government’s engagement on it.

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Attachment A

1. What we are doing in the World Trade Organization

Under the WTO, there is not yet a formal multilateral agreement that governs digital trade. There has been a temporary moratorium in place amongst WTO Members on applying customs duties to electronic transmissions since May 1998, which some countries, including Australia, would like to see made permanent. In 1998, WTO Members also agreed to a Work Programme on Electronic Commerce. However, after many years of discussion, there has been limited progress within the Work Programme.

At the 11th WTO Ministerial Conference in Buenos Aires in December 2017, Australia, Japan and Singapore, with the support of 67 other WTO Members, launched the E-Commerce Joint Statement Initiative. The group represents more than 75 per cent of global trade and provides the first opportunity in about 20 years to update international trade rules to ensure they keep place with technological change. Australia is chairing the Joint Statement process, and is working closely with the US, EU, Japan and Singapore to take the initiative forward.

Although there is currently no consensus amongst WTO Members that the WTO should negotiate specific multilateral rules on e-commerce, Australia has signed two agreements negotiated within the WTO containing elements that facilitate e-commerce/digital trade.

The Information Technology Agreement (ITA) is an undertaking to liberalise global trade in IT products. The original agreement entered into force on 1 July 1997 and now comprises 81 participants whose trade in IT products accounts for 97 per cent of global trade.

In December 2015, some participating members, including Australia, agreed to update the agreement and expand the coverage to cover additional goods. The expansion of the ITA was the first major tariff-cutting deal at the WTO since the original ITA. The ITA has been one of the most effective mechanisms in reducing duties on IT products thereby making IT inputs cheaper for business and consumers.

Another WTO agreement that contains commitments relevant to e-commerce is the Trade Facilitation Agreement (TFA), which entered into force for all WTO Members on 22 February 2017. Customs, licensing and transit formalities involve complicated administrative processes and burdensome documentation requirements for international trade in goods. The TFA commits parties to reducing red tape and the burden of administrative costs associated with exporting and importing, including an endeavour to establish or maintain a ‘single window’. A single window is a facility that allows businesses to lodge documents required to satisfy export, import and transit-related regulatory requirements through a single entry point. The Australian Government is committed to establishing a single window for export documentation to make it easier for Australian businesses to enter overseas markets.

2. Australian Free Trade Agreements – E-commerce chapters

Specific E-commerce Chapter (in force) • ASEAN-Australia-New Zealand Free Trade Agreement Chapter 10 • Australia-Chile Free Trade Agreement Chapter 16 • Australia-United States Free Trade Agreement Chapter 16 • China-Australia Free Trade Agreement Chapter 12 • Korea-Australia Free Trade Agreement Chapter 15 • Japan-Australia Economic Partnership Agreement Chapter 13 • Malaysia-Australia Free Trade Agreement Chapter 15 • Singapore-Australia Free Trade Agreement Chapter 14 • Thailand-Australia Free Trade Agreement Chapter 11

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E-commerce Chapter (signed but not entered into force) • TPP-11 Chapter 14 • Agreement to Amend the Singapore-Australia Free Trade Agreement Chapter 14 • Peru-Australia Free Trade Agreement Chapter 13

No E-commerce Chapter (but covers digital trade) • Australia-New Zealand Closer Economic Relations Agreement

No E-commerce Chapter • Pacific Agreement on Closer Economic Relations Plus

Under negotiation • Regional Comprehensive Economic Partnership • Australia – Hong Kong, China Free Trade Agreement • Indonesia-Australia Comprehensive Economic Partnership Agreement • Pacific Alliance Free Trade Agreement

Negotiations not commenced • Australia-European Union Free Trade Agreement

3. Outline of FTA provisions

The following table outlines some of the key provisions Australia pursues in its trade agreements to enable digital trade. These objectives are general, may change in specific negotiations and are negotiated in the context that we are able to accommodate our policy sensitivities, including in regard to health, environment, consumer and privacy protections, and security.

Provision Description

Transparency Countries should make available to the public any measures related to e-commerce; including online. Also, to the extent possible, provide advance publication and opportunity to comment.

Paperless trading Countries should provide for online availability of import and export documentation and electronic submission of those documents

Electronic authentication Countries should not deny a signature on the basis it is in electronic form, and should adopt a flexible approach to authentication technologies

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Provision Description

Online consumer protection

Countries should provide the same protections for online consumers as they do for any other consumer

Online protection of personal information

Countries should adopt or maintain a legal framework to protect the personal information of electronic commerce users from unauthorised disclosure

Unsolicited commercial electronic messages (spam)

Countries should adopt or maintain measures to allow consumers to opt out of receiving unwanted commercial messages (for example email and SMS) from various sources and to provide that businesses only send such messages with the expressed or inferred consent of the consumer with the source of the messages identified

Customs duties on electronic transmissions

Countries should continue the practice of not applying customs duties to electronic transmissions

Domestic regulatory frameworks / domestic electronic transaction frameworks

Countries should adopt or maintain legal frameworks consistent with the principles of the UN Commission on International Trade Law (UNCITRAL) Model Law on Electronic Commerce (1996) and the UN Convention on the Use of Electronic Communications in International Contracts (2005)

Localisation of computing facilities

Countries should not require businesses operating in their territory to locate computing facilities (including computer servers and storage devices for processing or storing information for commercial use) within the country's borders

Cross-border transfer of information by electronic means

Countries should allow cross-border transfers of information by electronic means

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Provision Description

Disclosure of source code

Countries should not require the transfer of or access to mass-market software source code as a condition for the import, distribution, sale or use of software

Cooperation Governments should cooperate on areas of mutual interest in digital trade including on cyber security matters

Elimination of customs duties on technological products

Countries should eliminate customs duties on technological business and consumer products through participation in the Information Technology Agreement, or products covered by that agreement

Trade facilitation commitments

Countries should continue to implement commitments made in the Trade Facilitation Agreement and endeavour to build on those commitments to ensure the efficient movement of goods across borders

Commitments on performance requirements

Countries should not require technological transfers as a condition of investing in another country