Worldwide: Digital Trade Chapters In FTAs: What Can India Consider At The Negotiating Table?

BACKGROUND

The India-UAE Comprehensive Economic Partnership Agreement (CEPA) is the first major agreement that India has signed in over a decade.¹ The CEPA is being hailed as a "new-age" Free Trade Agreement (FTA) which has incorporated new topics that have hitherto remained underdeveloped in India's FTA experience.² These include more comprehensive chapters on government procurement, intellectual property rights, stricter rules of origin and the inclusion of a digital trade chapter, among others.³

This article provides a bird's eye view of the digital trade chapter of the CEPA and endeavours to leave readers with some thoughts as to how such chapters can be fleshed out in future FTAs. More detailed analysis on the topic shall follow in the coming weeks.

DIGITAL TRADE CHAPTER

The CEPA is India's first FTA to have a separate chapter on digital trade.⁴ The chapter primarily focuses on introducing paperless trading, adopting measures for consumer protection, promoting cross-border flow of information, adopting a legal framework for protection of personal data of users of digital trade, provisions on digital invoicing and payment, authentication of E-signatures, cybersecurity etc.⁵ The chapter will further focus on building cooperation and harmonizing regulatory standards.⁶ Both India & UAE have agreed on maintenance of status quo with respect to the World Trade Organization's "e-commerce moratorium" wherein the parties will not be imposing custom duties on electronic transmission between both the parties.⁷ Notably, the chapter has been kept out of the purview of dispute settlement under the agreement, thereby confirming the aspirational nature of the chapter.⁸

THE CASE FOR DIGITAL TRADE

The digital trade Chapter of India-UAE CEPA in essence is a "best endeavour" chapter wherein notably data protection is still subject to domestic laws of the parties.⁹ Considering that India still does not have a personal data protection law, it remains to be seen how the provisions of the chapter will be utilized in the absence of an appropriate legal framework.¹⁰ The provision also does not set any international standards for the development of such legal framework. Additionally, while the CEPA aims at promoting cross-border flow of information,¹¹ it is unclear as to how such flow of information will interact with the data localization requirements, if any, imposed by either party.

The provisions on cybersecurity are non-committal with little clarity on the approach that both the parties will undertake to promote secure digital trade.¹²

Against such background India may look to more robust digital trade Chapters in other FTAs, such as the U.S. – Mexico – Canada Agreement (USMCA) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), for guidance. The importance of this is underscored given India's future plans to sign ambitious FTAs with the developed nations such as UK, Canada, US, EU etc.¹³ Some of the unique features in the digital trade chapters of USMCA and CPTPP are non-discriminatory treatment of digital products¹⁴ and prohibition on requiring the disclosure of source code of a software as a condition to conduct trade between both the parties.¹⁵ Moreover, the chapter is subject to the dispute settlement provisions under the respective agreements.

Furthermore, the digital trade chapters in USMCA & CPTPP contain elaborate commitment specific provisions on cross-border flow of information,¹⁶ which is mandatory in nature, location of computing facilities¹⁷ and means of protection against unsolicited commercial electronic communications.18 In this context it is essential to note that the aforementioned areas are being addressed in the digital trade chapter of India-UAE CEPA but only in an aspirational manner with no specific commitments and enforcement mechanism.

WAY FORWARD

The economic growth and opportunity that digital trade provides is well recognized and is something that is set to assume primary importance in the coming times.¹⁹ While, the CEPA's digital trade chapter sets a promising framework to foster an environment conducive to the growth of digital trade and promote consumer confidence, more robust provisions may be worth considering going forward as digital trade continues to gather pace in and around the world.

KEY TRADE REMEDIAL UPDATES

WTO, FTAs

• WTO panel issues report regarding Costa Rican import restrictions on Mexican avocados
• Global Review of Aid for Trade to take place in late July
• WTO Secretariat note examines impact of the crisis in Ukraine on global trade and development
• EU to plan three rounds of talks with India, all within this year to conceptualise a basic framework to negotiate a comprehensive deal to raise bilateral trade
• India-U.A.E. Trade Pact to Be Reviewed Next Year, More Items May Be Included
• UK music execs hail benefits of UK-New Zealand trade deal

TRADE POLICY

India

• Egypt, the world's top wheat importer, approves India as a supplier to fill a sizeable void in the North African nation's food stocks due to the Ukraine conflict

USA

• Readout of Secretary Raimondo's Meeting with Austrian Digital & Economic Affairs Minister Margarete Schramböck
• Readout of Deputy Secretary Graves' Meeting with German State Secretary for Economic, Finance and European Affairs Jörg Kukies
• Readout of Secretary Raimondo's Meeting with Indian Minister of External Affairs, Dr. Subrahmanyam Jaishankar
• Readout of Deputy Secretary Graves' Meeting with Governor of the Japan Bank for International Cooperation Tadashi Maeda

CUSTOMS

• All goods of Heading 5201 subjected to nil rates of Basic Customs Duties and Agriculture Infrastructure and Development Cess from 14th April 2022
• Amendments to Notification No. 36/2001-Customs (N.T.), dated the 3rd August, 2001
• Amendments in Chapter 5 of the Handbook of Procedures 2015 20 related to Export Promotion Capital Goods Scheme to reduce Compliance Burden and enhance Ease of doing Business

SANCTIONS AND EXPORT CONTROL

USA

• Commerce Department Identifies First Belarusian and More Russian Aircraft Exported to Belarus and Russia in Apparent Violation of U.S. Export Controls
• Russia Sanctions US & Canada officials
• Russia: Bankruptcy moratorium introduced with effect until 1 October 2022

UK

• UK hits key Russian oligarchs with sanctions worth up to £10 billion
• UK sanctions 178 Russian separatists in breakaway regions
• UK announces sanctions under Bosnia and Herzegovina sanctions regime: 11 April 2022

Footnotes

1 Worldview with Suhasini Haidar | India-UAE FTA: what does it mean for bilateral ties?, The Hindu, 19 February 2022, available at: https://www.thehindu.com/news/national/worldview-with-suhasini-haidar-india-uae-fta-what-does-it-mean-for-bilateralties/article65063798.ece

2 Why is the India-UAE partnership deal a game changer for trade?, Money Control, 22 February 2022, available at: https://www.moneycontrol.com/news/trends/current-affairs-trends/explained-why-is-the-india-uae-cepa-deal-a-game-changer-for-trade-8141371.html

3 Ministry of Commerce & Industry, Press Release, 20 February 2022, available at: https://pib.gov.in/PressReleaseIframePage.aspx?PRID=1799756

4 Chapter 9 of India-UAE CEPA (CEPA), Chapter-9.pdf (commerce.gov.in)

5 Id.

6 FTA to come into effect by early May, Indian goods to get duty-free access to UAE in 5 years, The Financial Express, 20 February 2022, available at: https://www.financialexpress.com/economy/fta-to-come-into-effect-by-early-may-indian-goods-to-get-duty-free-access-to-uae-in-5-years/2439032/

7 Article 9.5, Chapter 9 of CEPA, Chapter-9.pdf (commerce.gov.in)

8 Article 9.3, Chapter 9 of CEPA , Chapter - 9.pdf (commerce.gov.in)

9 Article 9.10, Chapter 9 of CEPA , Chapter - 9.pdf (commerce.gov.in)

10 India-UK FTA talks should champion digital trade, Financial Express, 3 November 2021, available at: India - UK FTA talks should champion digital trade | The Financial Express

11 Article 9.11, Chapter 9 of CEPA , Chapter - 9.pdf (commerce.gov.in)

12 Article 9.19 Chapter 9 of CEPA , Chapter - 9.pdf (commerce.gov.in )

13 India's FTAs: What Hasn't Worked? What's The Change In Strategy?, Bloomberg Quint, 29 January 2022, available at: https://www.bloombergquint.com/law - and - policy/indias - ftas - what hasnt - worked - whats - the - change - in - strategy

14 Article 19.4, Chapter 19 of USMCA, FTA/USMCA/Text/19 - Digital Trade.pdf ; see also Article 14.4, Chapter 14 of CPTPP TPP Final Text Electronic Commerce.pdf

15 Article 19.16, Chapter 19 of USMCA, FTA/USMCA/Text/19 - Digital Trade.pdf ; see also Article 14.17, Chapter 14 of CPTPP, TPP - Final Text - Electronic - Commerce.pdf

16 Article 19.11, Chapter 19 of USMCA, FTA/USMCA/Text/19 - Digital Trade.pdf ; see also Article 14.11, Chapter 14 of CPTPP, TPP - Final Text - Electronic - Commerce.pdf

17 Article 19.12, Chapter 19 of USMCA, FTA/USMCA/Text/19 - Digital - Trade.pdf , see also Article 14.13, Chapter 14 of CPTPP, TPP - Final - Text - Electronic - Commerce.pdf

18 Article 19.13, Chapter 19 of USMCA, FTA/USMCA/Text/19 - Digital - Trade.pdf , see also Article 14.14, Chapter 14 of CPTPP, TPP - Final - Text - Electronic - Commerce.pdf

19 India-UK FTA talks should champion digital trade, Financial Express, 3 November 2021, available at: India - UK FTA talks should champion digital trade | The Financial Express  

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