East and West: Singapore and Australia aim for digital trade deal

Singapore and Australia have begun negotiations on a digital tech trade pact designed to smooth the path of business and build growth for both nations. Can this cooperation help to offset the damage caused by ongoing global trade disputes?

Singapore and Australia have begun negotiations intended to deliver a new digital trade pact and with it "greater connectivity" and mutual economic benefits. The trade ministers of the two nations last month shook hands on the agreed scope of the talks, which are set to cover various areas of tech business including "digital trade facilitation, e‑invoicing, e-payments, fintech and cooperation on the digitisation of trade documents, artificial intelligence (AI), digital identities, and e-certification for exports".

Aspirations for an Australia-Singapore Digital Economy Agreement were originally aired in June by the two countries' heads of state, Prime Ministers Lee Hsien Loong and Scott Morrison.

The Australian Department of Foreign Affairs and Trade (DFAT) notes that tech business is becoming critically important to the land Down Under. Department officials assess that Australia's digital exports were worth AU$6bn and climbing in 2017, making digital the nation's fourth largest export sector. Singapore is an important part of this, as Australia's largest trade and investment partner in Southeast Asia.

Smart nations work together

The Australian Trade and Investment Commission (Austrade) specifically notes Singapore's Smart Nation initiative, launched in 2014, as an opportunity for Australian tech business. According to Austrade:

In Smart Nation, Singapore strives to support better living, stronger communities, and create more opportunities for all its citizens. "Smartness" here refers more to how well the society uses technology to solve problems and address existing challenges, rather than complexity of the technology …

Australian developers can leverage opportunities in Singapore, particularly those related to developing applications and contributing to building the Smart Nation infrastructure.

Certainly nobody can doubt Singapore's importance in the tech world. Singapore is a regional base for most of the world's major digital multinationals including IBM, Microsoft, Oracle, Amazon Web Services and Google. It is also a global data management hub connected to 15 active submarine cables, with a total submarine capacity of 114 Terabits/sec and more than 50 per cent of the commercial data centre space in South East Asia. Singapore's IT industry has seen steady annual growth above 15 per cent this decade and there are more than 150,000 tech professionals working in the city-state.

Austrade's assessment suggests that "four key frontier tech capabilities of focus" for Aussie business in Singapore are Cybersecurity, the Internet of Things, Immersive Media and Artificial Intelligence (AI).

Announcing the agreed scope of the talks last month, Canberra trade minister Simon Birmingham was enthusiastic about the potential benefits for Australian tech business.

"Southeast Asia's digital economy is growing rapidly. Connectivity and internet use across the region are increasing with a rising number of businesses and consumers now engaged in cross-border digital commerce," Birmingham said.

"Half of Australian businesses are already engaged in the digital economy in some way, and this number is growing exponentially. This agreement will ultimately deliver practical improvements that lower the costs and increase the efficiency of doing business."

‘Trade is the bedrock'

Birmingham's Singaporean counterpart Chan Chun Sing was equally upbeat.

"Trade has been and continues to be the bedrock of the Singapore economy. The Singapore-Australia Digital Economy Agreement will enhance digital trade opportunities for our companies, with Australia and the broader region.

"With the digital economy of Southeast Asia expected to triple by 2025, this Agreement will lay the groundwork for bilateral digital economy cooperation geared towards enabling our companies to tap into this regional growth."

Minister Chan noted that the two nations already enjoy close economic ties through the existing Singapore-Australia Free Trade Agreement and Comprehensive Strategic Partnership, on which he expected the new digital deal to build, and noted that both Singapore and Australia are leading the way on development of international e-commerce rules at the World Trade Organisation.

"Through high-standard digital trade rules and pilot initiatives, we will push the frontiers of digital trade and digital connectivity," Chan said.

"The Agreement will complement both Australia's and Singapore's networks of free trade agreements, as well as our efforts as co-convenor of the World Trade Organization Joint Statement Initiative on E-Commerce."

With the scoping document now agreed upon, detailed negotiations are under way and officials are hoping that an agreement will be finalised by "early in 2020". The Australian government expects the deal to stay in place for a long time, and therefore nobody should expect specific mention of particular past, present or future technologies. According to the DFAT:

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 Free Trade Agreements (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.

Despite the mention of "prohibitions on requirements to store data locally", there may well be exceptions on privacy or national-security grounds. There have been many scandals in many countries when sensitive information has been found to be stored overseas and so perhaps subject to access by another nation's intelligence services. In this context Australia's recent tech access legislation permitting its security officials not only to demand cooperation from tech companies but to insist that such cooperation be kept secret is bound to cause some friction. Similar situations exist in many other countries.

‘We'll all be poorer' if nations can't agree

That said, the aspiration for free movement of data does have good business reasoning behind it and it is not driven only from the Australian side. Minister Chan warned in August this year that the global economy risks "balkanisation" if the drive towards free digital trade and cooperation is stalled - as, for example, by the ongoing trade dispute between China and the USA. That dispute is based at least in part on national-security concerns.

"We will all be poorer for it," said Chan, speaking at a tech conference in Singapore. "Companies such as Google, IBM, and PayPal, or any company that relies on digital services and on having data flow across borders to produce products and services, won't survive very well."

"The moment we lose sight of integration and innovation, we're all done for," the Singaporean minister added on that occasion, and went on to stress the importance to international business and investment of transparency and a rules-based system, regardless of the products and services being traded.

The question for everyone in the tech sector, in Singapore, in Australia and indeed around the world, is whether regional cooperative agreements like this between medium sized nations - combined, perhaps, with ongoing work at the WTO - can help to offset the undoubted damage being done by the ongoing clash of the giants as the US and China continue to wage their trade war. With President Trump's most recent comments seeming to cast doubt on prospects of a long-hoped-for US-China deal early next year, and further US tariffs set to come into effect in December, the Singapore-Australia pact may be one of the few pieces of good news on the horizon.