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China says it applied to enter digital free trade agreement days after proposing law against cross-border data movement

China’s Ministry of Commerce said on Monday the country has officially applied for entry into the Digital Economy Partnership Agreement (DEPA).

According to the ministry, commerce minister Wang Wentao submitted the application in a written letter to Damien O’Connor, minister for trade and export growth of New Zealand and DEPA depositary.

President Xi Jinping announced China’s intentions to apply earlier the same day via video address to the G20 summit in Rome. While Xi appeared on video, China’s foreign minister, Wang Yi, attended the meeting in Italy as the president’s special representative.

The DEPA is a new type of digitally focused trade agreement between New Zealand, Chile, and Singapore that was signed into existence in June 2020. Within the agreement, member states agree to recognize each other’s digital identity documents, work on the timely paperless exchange of customs documents, adopt interchangeable e-invoicing standards, and agree to a pro-FinTech philosophy.

Singapore’s Ministry of Trade and Industry described DEPA as “a first of its kind agreement that establishes new approaches and collaborations in digital trade issues, promotes interoperability between different regimes and addresses the new issues brought about by digitalisation.”

Its current members aren’t considered the most powerful nations economically, militarily, or otherwise. However, that didn’t stop South Korea from wanting to join in the digital fun and games back in September. Canada has also expressed interest.

According to news published by the Chinese government, Xi told his fellow G20 members that they must all share the responsibility of the digital age, and therefore must accelerate its infrastructure construction, promote its integration into the “real” economy, and help developing countries eliminate the digital divide.

“China attaches great importance to international cooperation in the digital economy and has decided to apply for joining the Digital Economy Partnership Agreement and is willing to work with all parties to promote the healthy and orderly development of the digital economy,” added Xi, as translated from Chinese.

“Applying to join DEPA is in line with China’s direction of further deepening domestic reforms and expanding high-level opening to the outside world,” wrote China’s Ministry of Commerce.

Grandstanding… or an admission China really needs free trade?

Just last September, Beijing applied to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), another trade agreement of which Singapore, New Zealand, and Chile were founding members. The agreement now includes 11 countries and is one of the world’s largest free-trade areas by GDP.

Many dismissed China’s CPTPP application as grandstanding, with some saying the move represented China’s realization that it needs stable free trade.

There is skepticism as to why China would want to join an organization like DEPA that would require it to allow free flow of information when letting data out of its borders, because that seems to be entirely against Beijing’s core philosophy.

Just a few days before Xi’s speech, Beijing proposed national security screening for businesses that transfer the data of over 100,000 individuals who handle “important” data about critical infrastructure, including that related to communications, finance and transportation; or which handle or contain sensitive data, for example, the fingerprints of over 10,000 people.

“Just like CPTPP, China’s good faith compliance with DEPA will require some decent regulatory and policy reform, particularly in regards to data transparency and the free flow of data,” Nick Marro, lead for global trade research at the Economist Intelligence Unit, told Nikkei Asia, clarifying it might be difficult given Chinese ICT has become increasingly off-limits to foreign investors in the past five years.

Meanwhile, Bloomberg reported last July that White House officials were discussing proposals for an Indo-Pacific digital trade agreement as the administration looked for ways to check China’s influence in the region. Advocates had suggested DEPA, among others, as an option. ®