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June 29, 2021

Here’s why the UK’s digital trade talks with Singapore matter

A digital trade deal with the Asian city state would place the UK in a club of countries seeking to write the rules for the global digital economy.

By Pete Swabey

The UK and Singapore kicked off talks for a digital trade agreement this week. Singapore is a moderately significant trading partner for the UK but, more importantly, the talks mark the UK’s accession to a club of countries that is vying to write new rules for the global digital economy. And they may reveal how the UK government proposes to balance its ambition to become a “technology hub for the global economy” with its obligations to citizens and other trading partners.

uk singapore digital trade

Through trade agreements with Australia, New Zealand and Chile, Singapore has been setting standards for the global digital economy. (Photo by Hit1912 / Shutterstock)

On Monday, UK international trade minister Liz Truss announced that “the government will launch negotiations with Singapore towards a bilateral trade agreement, the UK-Singapore Digital Economy Agreement”.

“Singapore and the UK are both global leaders in the digital economy, and our bilateral trade was worth £17bn in 2019, with 70% of services exports digitally delivered,” Truss said. “The DEA can expand the UK’s access to Singapore’s digital economy – worth an estimated £9.4bn in 2019.”

Singapore was the UK’s 20th largest trading partner in 2019, according to figures from the Office of National Statistics, ahead of many European countries. The two countries signed a free trade agreement (FTA) in December last year, removing tariffs on goods and services, and non-tariff barriers such as duplicate testing requirements for cars.

What is a digital trade agreement?

Digital trade agreements typically focus on removing data-related barriers to trade, such as mismatched data standards or data localisation obligations. An FTA signed between the UK and Japan in September last year – the UK's first FTA to include a chapter on digital trade – clarified rules on cross-border data transfers, including a ban on data localisation requirements. This means UK exporters do not need to store data on Japanese customers within the country.

But Singapore has been party to a handful of 'digital economy partnerships' that go beyond trade facilitation and include commitments to ongoing cooperation on technology regulation. The Digital Economy Agreement between Singapore and Australia, for example, which came into force in December last year, included various Memoranda of Understanding (MoU), committing the two countries to regulatory collaboration on AI, data innovation and digital identity, among other areas.

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"The main barriers to digital trade are not things that happen at the borders," explains Sabina Ciofu, head of EU and trade policy at industry body techUK. "It's all the elements around the regulation of the digital economy that every country – at least our major trading partners – is thinking about, whether it's regulation of content, competition in digital markets, how you keep consumers safe, data flows, [or] data protection."

The MoU approach allows trade agreements to evolve as technology advances, says Ciofu. "We think that's the best way of doing a digital trade agreement because it allows it to be a living document. You don't have to rewrite the FTA every few years."

A digital trade deal with Singapore "is something techUK has advocated for a long time," Ciofu adds. "This is the club of countries that the UK should be looking to [sign] trade agreements with."

According to the OECD's Digital Trade Restrictiveness Index, more countries have increased restrictions on digital trade in the last five years than have loosened them. But with its DEA with Australia, and the Digital Economy Partnership Agreement with Chile and New Zealand, Singapore has been spearheading a move to promote free flow of data and open digital trade. By entering digital trade talks with Singapore, the UK is adding its geopolitical weight to that initiative.

"The meaning of these agreements is that they build ties and create standards," explains Ciofu. "There is a group of countries that we think are at the forefront of innovating in this space that ... coalesce this position within the WTO, the OECD, the G7 and the G20."

What's at stake in the UK and Singapore's digital trade talks?

Emily Jones, associate professor at Oxford University's Blavatnik School of Government and director of its Global Economic Governance Programme, agrees that the significance of the talks outweighs the monetary value of UK-Singapore digital trade.

She views them in the context of the "push for the UK to be a leader in digital standards-setting and wanting to be part of the group that's essentially setting the rules for the global digital economy moving forward," she says. "Singapore is in that club. So this actually is quite an important agreement, less for the magnitude of trade flows that would be affected, but more in the sense of a partnership between the UK and Singapore with a view to setting a precedent."

This push to facilitate digital trade, and harmonise regulation of emerging technology has largely been driven by the business community, Jones says. But it may clash with other policy objectives, she says, and the talks could reveal the UK government's priorities and ambitions.

Chief amongst these is privacy and data protection. This week, the EU officially ruled that the UK's data protection regime is adequate for data flows to continue unimpeded after Brexit. This ruling will stand for four years unless the UK changes the protections it grants EU citizens. It is unclear whether the UK intends to maintain GDPR compliance, however, Jones says. A recent report on regulatory reform led by former Cabinet minister Ian Duncan Smith recommended that the country "replace GDPR with a new UK framework for data protection".

Singapore's data protection regime, meanwhile, has not been deemed adequate by the EU, although reforms that came in to force earlier this year, including the introduction of mandatory breach notifications, brought its data protection closer in line with the bloc. Nevertheless, the UK's trade negotiations with Singapore may reveal how committed to GDPR it is.

Another potentially contentious area, Jones says, is access to source code. Digital trade agreements typically prohibit governments from demanding access to the source code of software that is imported into their countries, a measure to protect the IP of importing companies. Recent agreements have included an exception, Jones explains, that would allow governments to inspect algorithms for evidence of discriminatory bias in specific circumstances. However, the precise way in which these circumstances are defined could limit individuals' rights to understand how algorithmic products affect them. "I think we need to that we absolutely need to get the details on this," she says.

The agreement may also have implications for consumer protections. Trade agreements typically focus on the interests of businesses, which have historically conducted the vast majority of international trade, but the internet allows consumers to buy directly from foreign suppliers. This means there may need to be new rules for when a product is broken during delivery, for example. Currently, though, "we don't have much cross-border cooperation on consumer protection," says Jones.

What is the UK's digital trade strategy?

The kind of decisions that countries make during the trade talks will shape the digital economy, Jones argues. "Digitalisation of the global economy is bringing up these big new policy questions," she says. "Trade agreements are the space where a lot of this is starting to get hashed out."

Digitalisation of the global economy is bringing up these big new policy questions. Trade agreements are the space where a lot of this is starting to get hashed out.
Emily Jones, Oxford University

This is why, given the increasing digitisation of supply chains, businesses of all kinds should keep an eye on these deals, she says. And it's why the UK's intentions and ambitions in such deals should be subject to public scrutiny.

A hearing on digital trade by the House of Commons International Trade Committee heard multiple recommendations for the government to publish a digital trade and data strategy, "which would increase predictability and ease of compliance for businesses and citizens," a report published by the committee this week revealed.

"This is a pivotal moment for the government to craft a clear approach to digital trade and data which will guide the development of its independent trade policy," the committee concluded. "We recommend that the government produces and publishes a digital trade and data strategy, clarifying the UK’s approach to digital trade and positioning it in relation to prominent approaches taken by other states."

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