On June 21, Vietnam and Singapore agreed to establish a partnership technical working group on digital partnership, examining the development potential of a bilateral digital economy agreement. This initiative took place just before the opening of the high-level political dialogue of the Asia-Europe Meeting (ASEM), indicating its importance for the political agenda of the two countries. This article aims to unravel what this initiative means for Singapore, Vietnam and the future of digital commerce in the region in general.

First, it’s important to understand the potential scope of the upcoming digital economy deal. If completed, this would be the third such digital economy agreement initiated by Singapore. The other two are 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. Although referred to as the “Digital Economy Agreement”, DEPA and SADEA both aim to enable a digital free trade environment. Much of these deals are devoted to classic digital commerce issues such as digital identities, electronic invoicing, electronic payments, paperless commerce, personal data protection and cross-border data flows.

But their provisions differ significantly from those discussed in a chapter on e-commerce of a typical FTA in three aspects: First, they strengthen cooperation on the development of ethical principles and standards for emerging technologies such as AI; second, they support the participation of SMEs in digital commerce by promoting the interoperability of electronic transactions; and third, they take a flexible “building block” approach to broaden participation and accommodate the different levels of business readiness of partners.

As a result, new partners are able to choose which modules to enroll in first, while delaying the more difficult parts until they are ready. Singapore-initiated digital economy deals have been called good models for the United States’ engagement in Indo-Pacific digital trade. In addition to DEPA and SADEA, South Korea and the United Kingdom have also officially launched negotiations on digital partnerships with Singapore, in june 2020 and June 2021, respectively.

The creation of a joint technical working group on the digital partnership with Vietnam, although not yet officially part of the bilateral trade negotiations, is a political victory for Singapore. Despite being a relatively small country, Singapore has successfully used diplomacy to shape new rules around the digital commerce game. Those who have followed the World Trade Organization (WTO) agenda closely are well aware of Singapore’s active role, alongside Australia and Japan, in advancing consensus on e-commerce regulations.

Do you like this article ? Click here to subscribe for full access. Only $ 5 per month.

One of Singapore’s strategies is to facilitate small group discussions among WTO members to promote consensus on key e-commerce issues of interest in Singapore. These include open government data, electronic contracts, online consumer protection and paperless commerce, which, if achieved at the WTO level, would strengthen Singapore’s position as a clearinghouse. international and regional trade hub. Indeed, as the organizer of these discussions, the Singaporean government has expressed its ambition to conclude its own texts on these questions before the summer. In the context of the 12th WTO Ministerial Conference, due to take place in Geneva in November, it is essential that Singapore wins over Vietnam as another ally in the e-commerce debate.

Another Singaporean strategy has been to promote Bilateral Digital Economy Agreements, a new generation of free trade agreements specially designed to address the unique emerging challenges of digital commerce. Given the slowness of negotiations at the WTO, setting an example through bilaterally negotiated agreements appears to be an effective alternative. Making Vietnam its next potential partner was indeed a strategic move on Singapore’s part.

The city-state’s traditional partners, including Australia, New Zealand, Chile, South Korea, and the United Kingdom, all share relatively high levels of interoperability in terms of regulations and trade standards, which makes digital economy agreements seem like a game for developed countries. As such, Vietnam’s participation as a developing country signals to the world that the conditions for Singapore’s digital trade are open to all. Ultimately, a larger network of digital alliances also means greater economies of scale and scope resulting from interoperability between global platforms.

With these two strategies, Singapore has effectively positioned itself as a decision maker in the digital trade game and a focal point for the digital partnership with ASEAN and the wider Indo-Pacific region, which would inevitably lead to significant economic gains. long-term.

As for Vietnam, the agreement represents both a political and an economic victory. From a geopolitical perspective, a digital trade deal with Singapore offers a window of opportunity for Vietnam to join with other partners in shaping digital trade rules both at the WTO level and at the global level. regional level. Moreover, if Vietnam succeeds in becoming the first ASEAN member state to negotiate this new generation of digital trade agreements with Singapore, it could potentially gain a competitive advantage over other ASEAN counterparts like Indonesia. , Malaysia, Thailand and the Philippines in the race to digitize.

This is especially true in the context of American attempts to reshape global supply chains and re-engage in the Indo-Pacific region by forging commercial partnerships. If properly implemented, this deal could provide momentum for Vietnam’s trade regulatory reform, enhance the country’s potential as a regional digital trade hub, and improve its position in global supply chains. . The economic gains are expected to be significant. If fully harnessed, digital commerce could contribute around $ 42 billion to the Vietnamese economy by 2030.

If successfully negotiated and implemented, the Singapore-Vietnam Digital Trade Agreement could help further liberalize the digital trade environment in ASEAN. The modular format of the Digital Economy Agreement makes it easy for other ASEAN countries to participate and choose their preferred areas of cooperation. The most positive scenario is the establishment of an ASEAN-wide agreement on key building blocks such as digital identities and electronic payments, potentially transforming the region into the largest digital free trade area in the world. world.

In the worst-case scenario, however, the deal might not go beyond a friendly political gesture between the two countries. Singapore has already achieved considerable political gains through digital trade cooperation at both WTO and regional levels and may therefore have less incentive to push for formal negotiations of the deal in the future. Compared to Australia, New Zealand, Chile, South Korea and the United Kingdom, Vietnam indeed presents a more difficult case for the interoperability of digital standards. At the time of writing, Vietnam has neither a unified personal data protection code nor a functioning independent regulator responsible for this key. digital commerce facilitator. In terms of government digital capacity, Vietnam ranked 86th in the 2020 e-government development index, compared to Singapore’s 11th place, indicating a significant gap for intergovernmental collaboration for interoperability of digital standards.

The economic composition of the two countries also shows a great disparity since services, which should benefit the most from the digitization of world trade, constitute 70.38% of Singapore’s GDP but only 41.64% of Vietnam’s GDP. Therefore, the success of the deal, if ultimately negotiated, signed and implemented, depends very much on how Vietnam maximizes this opportunity to fundamentally reform its domestic trade regimes. This grand challenge, if overcome, could be a shining example of the positive impacts that government interventions can have on correcting market inefficiencies in the digital age.

It is still too early to welcome a digital economy agreement between Singapore and Vietnam. And it will be an even longer road before Vietnam can align with Singapore’s digital trade standards so that the two countries can take full advantage of any potential deal. But by agreeing to start talks, the two nations are signaling recognition of the benefits of a liberalized approach to tackling the emerging challenges of digital trade. At the very least, taking the first steps down this path, Vietnam and Singapore have recognized that no nation can fully reap the benefits of digital trade by imposing protectionist regulations, separating themselves from global standards of digitization. There must be a win-win cooperation for digital commerce to realize its full potential.