[Analytics] Washington should pursue a digital deal with Seoul and Tokyo

In June 2021, the United States and the European Union announced the creation of a joint trade and technology council, an initiative that aims to put democracies at the forefront of writing the rules governing digital trade. Despite their embrace of shared liberal values, the member nations will have to reconcile conflicting national interests. Elliot Silverberg, Daniel Aum specially for the East Asia Forum.

The council will also face resistance from China, which continues to extend the influence of its authoritarian model over the digital landscape. As nations jockey for position, the United States should expand its multilateral efforts in Asia — beginning with a three-way digital trade deal with Japan and South Korea.

In recent debates, the United States and the EU have tussled over the concept of ‘digital sovereignty’. The issues mainly centre around who owns the data, what cross-border digital activities should be taxed and how technology companies should be regulated. Washington, while sharing concerns with Brussels about the outsized influence of the technology industry, still broadly prefers a decentralised approach — one that allows US companies to capitalise on their innovations in the global marketplace.

The United States and the EU will also need to align policies on how to contend with China’s rising footprint over a range of digital issues, including data privacy, competition policy, intellectual property protections and cyber security. The Regional Comprehensive Economic Partnership (RCEP) between Asia Pacific nations is the world’s largest trade bloc. With China its largest member, RCEP sets provisions for loosening cross-border data flows and eliminating data localisation requirements. But it includes a blanket ‘public policy’ exception that enables any party to be judge and jury in deciding when to sidestep their commitments.

In the absence of unified global rules, digital users must navigate a balkanised digital landscape. Over 133 jurisdictions have already ratified separate data protection laws. In the United States, states like California and Washington are drafting their own state legislation. The EU’s General Data Protection Regulation was widely adopted as a first-mover for privacy regulation, but it has also faced business pushback.

Even as other negotiations proceed, Washington should undertake a trilateral digital trade deal with Tokyo and Seoul. US President Joe Biden has sought to make his mark on global digital trade early in his administration. But while Washington remains active in WTO e-commerce negotiations, so far it has only signed comprehensive digital trade deals with Japan, Mexico and Canada. And as an outsider to RCEP and the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP), the United States has limited influence over the world’s fastest-growing digital markets in Asia.

Given both nations are technology leaders in Asia, Japan and South Korea would be ideal partners in the Biden administration’s efforts to promote economic growth while strengthening US influence in the Indo-Pacific region through a multilateral approach.

Negotiations involving two credible US allies would also complement other efforts to bring together like-minded, democratic partners to discuss the role of technology in supporting open societies and tackling global challenges. These include efforts like the Open Government Partnership founded in 2011, the OECD’s Global Partnership for AI and the recent G7 Compact on Research Collaboration.

Such a deal would likely be welcomed by Congress. While a narrow digital trade agreement might not even require approval from Congress, it will play an important role in exercising oversight over agencies responsible for regulating cross-border data flows and considering legislation to implement new trade rules. There is bipartisan consensus on the need to spur multilateral investment in the digital economy, and the Senate reflected this shared commitment with its recent 68–32 vote passage of the US Innovation and Competition Act.

Recent reports indicate that the Biden administration is discussing an Indo-Pacific digital trade deal with up to seven nations, so far including Japan but not South Korea. This new effort is reportedly designed to balance China’s growing influence in the region. It would bind together nations leading the way in crafting digital trade agreements in the region, similar to the New Zealand–Chile–Singapore Digital Economy Partnership Agreement and the Singapore–Australia Digital Economy Agreement.

But even as larger multilateral deals have wider reach, they also add administrative, bureaucratic and domestic political hurdles with each additional country. Rather, if the United States pursued a US–Japan–South Korea deal alongside other smaller, more agile DEAs, it could help facilitate a negotiating environment conducive to more ambitious efforts.

There are good reasons for Tokyo and Seoul to sign this trilateral deal. Both governments seek to mitigate the socioeconomic effects of their shrinking and ageing workforces. Japan and South Korea have already initiated efforts to digitise public services, fund foundational industries like semiconductors, close the digital skills gap and spur companies to embrace digital transformation practices.

This deal would also add momentum to efforts by Japan and South Korea to stave off the deterioration of high digital standards. Japan has been a leading proponent of the Data Free Flow with Trust framework. Alongside the other Quadrilateral Security Dialogue nations — the United States, Australia and India — Japan is committed to developing unified standards in emerging technological domains that advance a ‘free, open, inclusive and resilient’ vision of the Indo-Pacific.

Similarly, South Korea has shown itself keen to export strong rules protecting and advancing its innovation ecosystem. These commitments were affirmed during Biden’s bilateral summits with Prime Minister Yoshihide Suga and President Moon Jae-in in April and May 2021, respectively. Both Tokyo and Seoul already have or are working towards codifying high standard deals such as the US–Japan Digital Trade Agreement concluded in 2019 and the South Korea–Singapore DEA currently under negotiation.

A trilateral agreement would allow Tokyo and Seoul to divert attention from their recent political differences by cooperating in an area of obvious and long-lasting mutual concern. This could, in time, encourage the two recalcitrant neighbours to collaborate on a wider set of shared interests.

Elliot Silverberg is a non-resident James A Kelly Fellow at the Pacific Forum. Daniel Aum is a PhD student in international affairs, science and technology at the Georgia Institute of Technology.