Harmonizing trading protocols could unleash the digital capabilities of Australia

The digital marketplace isn’t just a sector of the economy – it is the economy. It’s more than just a place for online sales or virtual services. In the contemporary world, digital trade is the foundation of most economies, fostering innovation, connectivity, and international commerce. As we increasingly shift towards digitalization, the lines between physical and digital trade are gradually blurring.

The global health crisis due to the COVID-19 pandemic has played a significant role in this digital transformation. Businesses have had to depend more on digital platforms, reaffirming the importance of robust digital infrastructure. From 2020 to 2021, the value of digital activities in Australia grew by AUD$8.6 billion (US$5.4 billion), as companies pivoted to e-commerce to stay afloat.

However, the true potential of digital trade can only be harnessed with the presence of comprehensive rules governing cybersecurity, data flows, and digital transactions. Diverse regulations across nations have led to increased costs and uncertainty for businesses. The WTO’s Joint Statement Initiative on Electronic Commerce (JSI) presents a solution to this problem, with Australia playing a key role in these negotiations.

The JSI advocates for streamlined rules that promote trust in digital platforms, facilitate e-commerce, and reduce barriers to cross-border data transfers. It allows countries to regulate personal data at the national level, provided it is in line with WTO policies. These measures result in a more predictable trading environment, lower compliance costs, and greater opportunities to access global markets.

By offering international regulations that facilitate a stable digital commerce environment, the JSI aligns legal frameworks and improves safeguards for digital transactions. The initiative covers six areas – enabling electronic commerce, openness, trust and digital trade, transparency, cooperation and development, telecommunications, and exceptions.

With digital platforms increasingly driving economic growth, aligning regulations across borders is crucial to ensure businesses, particularly small- to medium-sized enterprises (SMEs), can compete and innovate without being hampered by trade barriers. The JSI presents Australia with a vital opportunity to address domestic challenges, unlock economic growth, and secure a fairer and more competitive digital future.

Digital platforms can particularly benefit Australia’s SMEs, which make up 42% of the private sector workforce. These platforms allow SMEs to overcome geographical barriers and connect with international customers – a crucial factor for a geographically isolated economy like Australia. Digitalization also enables SMEs to compete with larger corporations by reducing transaction costs and improving operational efficiencies.

However, SMEs continue to face challenges such as limited resources, digital illiteracy, and inadequate infrastructure. A 2018 report showed that only one in five Australian small businesses had a digital strategy, and many lacked the capabilities to implement new technologies. Targeted government support is essential to change this. Initiatives to upskill workers, incentivise digital transformation and improve regional infrastructure can help SMEs overcome these barriers.

The JSI’s focus on data flows also emphasizes the critical role of cybersecurity. As cross-border data transfers become more common, protecting sensitive information and ensuring consumer trust will be crucial. Australia has made significant progress in addressing cyber risks through initiatives such as the Cyber Security Strategy and legislation governing critical infrastructure. But more needs to be done to streamline these frameworks and align them with the JSI’s principles.

While the JSI offers opportunities for growth and innovation, Australia cannot overlook the implications of the United States’ absence from the agreement. As one of Australia’s largest services export partners, the United States’ divergence from JSI rules could increase compliance costs and regulatory complexity for Australian businesses engaging with their US counterparts. US disengagement could also challenge multilateralism, affecting regional cooperation and other WTO efforts. This could disproportionately affect SMEs, which may lack the capacity to navigate competing regulatory systems.

To maximize the benefits of the JSI, Australia needs a coordinated and future-focused strategy. This includes enhancing digital infrastructure, particularly in regional areas, to ensure all businesses can participate in the digital economy. Upskilling the workforce is equally important, as businesses will require employees with advanced digital and data skills to stay competitive.

The government should consider enacting a comprehensive omnibus law that consolidates digital trade regulations, aligning Australia’s legal framework with the JSI and reducing regulatory complexity for businesses. These suggestions also apply to other signatories in the Asia Pacific, where a unified approach will foster regional development.

The JSI presents a unique opportunity for Australia to strengthen its role as a global leader in digital trade. By reducing barriers, fostering innovation, and promoting a fairer digital economy, it creates a pathway for sustainable economic growth. But realizing this potential requires more than just talk – it requires targeted investments, robust governance, and a commitment to bridging the digital divide.

Lily MacFarlane, a graduate of The Australian National University in economics and international relations, is the author of this article.

The original article, “Syncing trade standards can unlock Australia’s digital potential,” was first published on East Asia Forum.</p>

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