Economic Impact of Adopting Digital Trade Rules: Evidence from APEC Member Economies

Digitalisation has transformed the way that goods and services are being supplied and procured both within economies and across the world, and digital trade is an integral component of the digital economy today. In 2017, Asia-Pacific Economic Cooperation (APEC) Leaders pledged to “work together to realise the potential of the internet and digital economy” and welcomed the adoption of the APEC Internet and Digital Economy Roadmap (AIDER). AIDER builds on previous initiatives and sets a framework to guide APEC economies on key areas and actions needed to facilitate technological and policy exchanges among member economies and to promote innovative, inclusive and sustainable growth, as well as bridge digital divide in the region. The roadmap identifies 11 Key Focus Areas including on “Facilitation of E-commerce and Advancing Cooperation on Digital Trade”, “Enhancing trust and security in the use of ICTs” and “Promotion of Interoperability”.

As digitalisation changes the way that international trade is conducted, it is important to adopt trade rules to govern and support such trade. Increasingly, economies are including provisions aimed at enabling digital trade into trade agreements, and some economies, including APEC members, have entered agreements focused on strengthening digital collaboration. While there is broad recognition that growing digital trade could bring economic benefits to economies and the region, research on the effect of adopting digital trade rules, including e-commerce rules (hereafter referred to as “digital trade rules” or “digital trade provisions”), on economic growth has been more limited to-date. This study seeks to contribute to this body of research, including by taking a novel approach to estimate bilateral digital trade flows for APEC member economies and its largest trading partners.

The report is structured into three sections:

▪ Section 1 defines digital trade and provides observations about the trends in digital trade flows over the last two decades in APEC economies. It explores the relationship between increased digital trade and economic growth for economies through an economic contribution model and systematic analysis.

▪ Section 2 considers recent developments on digital trade rules in the APEC region and explores the potential impact of adopting such rules on digital trade flows and economic growth. It uses a “Digital Trade Openness Index” to approximate the extent of trade liberalisation and seeks to identify the digital trade provisions with the most observable effects on digital trade flows through a study of APEC economies.

▪ Section 3 provides recommendations on how APEC policymakers can unlock the benefits of digital trade.

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