What does the Digital Trade Agreement between Singapore and Vietnam uphold?

Digital Trade Agreement

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Key Highlights:

  • • Vietnam and Singapore begin negotiations on Digital Trade Agreement
  • • The joint agreement is an accomplishment for both the countries on political as well as geographical and e-commerce levels
  • • Despite all the challenges, an agreement between the two nations would further liberalize the digital trade environment

Third Initiative on Digital Trade Frontiers

Recently on June 2021, Vietnam and Singapore jointly agreed on establishing a joint technical working group on Digital Partnership to examine the potential for developing a bilateral digital economy agreement. The joint agreement was announced prior to the High Level Opening of the Asia Europe Meeting (ASEM) High Level Policy Dialogue, hinting towards the political agenda of both Vietnam and Singapore respectively.

Aspects of the Digital Partnership

The digital trade agreement between Singapore and Vietnam holds many chief potentials for the prospect of trade in both the countries, both on individual and mutual levels. For Vietnam, the agreement can act as an impetus for reforming trade regulations in Vietnam, if successfully implemented. This will help in improving the country’s potential as a regional digital trade hub, and upgrading its position in global supply chains, with significant economic gains. If fully leveraged, digital trade could contribute approximately $42 billion to Vietnam’s economy by 2030.

The Singapore-Vietnam digital trade agreement could help further liberalize the digital trade environment in ASEAN, if it is successfully negotiated and implemented. The modular format of the digital economy agreement allows other ASEAN countries easy participation and to choose their preferred areas of cooperation. The most positive scenario is establishment of an ASEAN-wide agreement on key modules like digital identities and e-payments, potentially turning the region into the world’s largest free digital trade zone.

Distinguished Digital Trade Agreements

The latest digital agreement with Vietnam can be counted as the third initiative by Singapore on digital trade frontiers. Previously, Singapore had initiated two agreements, namely— the Digital Economy Partnership Agreement (DEPA) between Singapore, Chile, and New Zealand and the Singapore-Australia Digital Economy Agreement (SADEA)—both of which were signed in 2020. Furthermore, South Korea and the UK have also launched official negotiations on digital partnerships with Singapore in June 2020 and 2021 respectively.

The two agreements uphold distinguished provisions from those addressed in an e-commerce chapter of a typical FTA. They differ in two aspects:

  • They enhance cooperation on developing ethical principles and standards for emerging technologies like AI; and
  • They support SMEs’ participation in digital trade by promoting interoperability of e-transactions; and third, they adopt a flexible “modular” approach to expanding participation and accommodating partners’ varying levels of trade readiness.

Accordingly, new partners are able to choose which modules to sign up for first, while delaying more challenging parts until they are ready. The digital economy agreements initiated by Singapore have been referred to as good models for the U.S. engagement in Indo-Pacific digital trade.

Accomplishment for Singapore and Vietnam

Although the partnership is yet to confirm the official partnership of Vietnam in the digital agreement, the establishment of a joint working group with Vietnam is an accomplishment for Singapore on political levels. Being a relatively small country, Singapore has been successful at leveraging diplomacy in order to shape new rules around the digital trade game. Upon taking a close look at the agenda of the World Trade Organization (WTO), Singapore’s active role in pushing forward consensus on e-commerce regulations is prominently visible along with that of Australia and Japan.

On the other hand, for Vietnam the agreement represents both a political and economic win. From a geopolitical point of view, a digital trade agreement with Singapore presents a window of opportunity for Vietnam to join other partners in shaping digital trade rules at both the WTO and regional levels. Moreover, if Vietnam manages to become the first fellow ASEAN state to negotiate this new generation of digital trade agreement with Singapore, it could potentially gain a competitive advantage over other ASEAN counterparts like Indonesia, Malaysia, Thailand, or the Philippines in the digitalization race.

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