In response to rising geopolitical tensions, both the EU and the US are increasingly restricting the cross-border flow of trade and investments. This presents a challenge to trade liberalisation efforts in general and affects digital trade in particular. This report reviews ongoing efforts to advance the integration of digital trade and proposes a way forward for the EU’s digital trade integration, while acknowledging the need to address certain security concerns related to the digital economy. With this report, we aim to provide input for ongoing discussions on the future of the EU-US Trade and Technology Council (TTC), while contributing to the EU’s policy agendas on economic security, competitiveness and de-risking.
We conclude that the EU can and should pursue negotiations for a digital agreement with the United States regardless of which candidate wins the US presidential election in November 2024. Such a digital agreement could be inspired by the Digital Economy Partnership Agreement (DEPA), which was initially negotiated between Singapore, Chile and New Zealand as a complement to multilateral efforts. By studying existing EU and US digital trade commitments, we conclude that an EU-US agreement could include binding rules on data flows, data localisation and source code, usually considered among the most important provisions for digital trade today.
Importantly, in agreements with other trading partners, both parties have previously agreed to rules on data protection and an exception on audiovisual services, which should help the two parties reach an agreement. Moreover, digital trade facilitation could be part of a potential deal. Finally, an EU-US agreement could build on the framework of the TTC to further improve regulatory cooperation on AI, quantum, connectivity and other emerging technologies and digital infrastructure, such as subsea cables. It would therefore have a strong potential for significant economic benefits for both parties, which would likely only increase in the age of Artificial Intelligence (AI).
Such an agreement could also contribute to both parties’ efforts to address intensifying security challenges. Moreover, negotiating a digital agreement could help stabilise the EU-US relationship more generally and open the door for further trade talks in the future. As such, deepening EU-US integration on digital trade would help address what this report brands ‘friendmentation’, that is, unnecessary fragmentation between otherwise closely allied trading partners.
We also conclude that the EU should investigate the possibility to include provisions on digital security. Such provisions would be WTO-compatible measures aimed partly at emergency supply cooperation on critical technologies and partly on limiting the diffusion of dual-use technology to actors that do not respect human rights, intellectual property rights and non-aggression principles.
By better harmonising the parties’ digital regulatory agendas and focusing on narrowly defined threats to peace, security and human rights instead of implementing broad industrial policy objectives, an EU-US agreement could have several benefits beyond the bilateral economic and security effects.
For example, it could help reduce global trade frictions and incentivise more countries to pursue modern digital agreements.
Source: Hannes Berggren, Kommerskollegium. National Board of Trade Sweden