It leaves the regulatory door ajar for each country to force hard, localisation rules for data without being subject to scrutiny at the multilateral platform
The world has seen a major economic negotiating bloc getting “next to a done deal” in the last fortnight, in the form of the Regional Comprehensive Economic Partnership (RCEP), a free trade agreement (FTA) between 10 ASEAN countries and China, Japan, South Korea, Australia and New Zealand. This pact, when ratified, will come to represent 30 per cent of the world’s GDP, impacting almost half of the global population. Most significantly, it is a multilateral trade agreement where China is a leading party. The RCEP has been at the negotiating table since 2012 before it went stagnant in recent years as India resisted opening its industrial and agricultural sectors to increased international competition. Subsequently, given the rise of an “abrasively ambitious and technology-aided” China, India had also pressed for localising data of each country’s citizens, unless the participating nation granted its outbound transfer. India formally withdrew from the RCEP in 2019 due to domestic demands. However, despite the November 15 agreement on the trade deal, New Delhi still has the option to join RCEP.
A post-pandemic world economy gasping to revive, a new regime in the US soon with a strong possibility of rejoining multilateral platforms for trade and strategic cooperation and the vision of a new India are some of the paradigms to be kept in mind before passing any judgment on what works best in our favour at this juncture. New Delhi not joining the RCEP has been received with mixed responses domestically, with those opposing the Government’s stance stating that an isolated India in South East Asia and our sensitivity to China’s imports may be more out of geopolitics than economic realisation. A study found that between 2007-2008 and 2015-16, India’s import of Chinese semi-finished goods and heavy machinery has had a positive impact on our industries, creating jobs and increasing competitiveness.Those who support the Government’s moves of withdrawal have equally strong positions on how importing these goods from China leads to job losses for the unskilled. In the post-pandemic economy, a huge chunk of jobs has to be created for this unskilled category.
The broad tenets of the RCEP agreement aim to achieve zero tariffs on over 90 per cent traded goods between partner countries in 15 years. The economic impact may be dulled by the knowledge that most of these trading partners already have bilateral FTAs in place. However, the geopolitical impact, given a heavy Chinese presence and an ambition to create a counter bloc to the US-led Comprehensive and Progressive Trans-Pacific Partnership (CPTPP), can’t be overlooked. It is often said that China has a huge knack for reverse mastering/engineering the skill sets developed in any successful economy and, therefore, without any significant costs of indigenous development, it can scale up and produce similar goods and services at half the rates offered by original creators. The wordings of the RCEP, in terms of borrowed texts from the CPTPP chapters and approach, seem like a similar exercise. It is here that key emerging technology policy topics like e-commerce, data localisation, as envisaged in the RCEP agreement, have to be studied carefully before India makes any decision.
Electronic commerce, an evolving area of friction on bilateral and multilateral platforms, has found a chapter in the RCEP agreement document. It borrows heavily from the CPTPP. However, on execution, it has bleaker chances as the clauses (at least in their wordings) are less enforceable, ambiguous and too tight-jacketed. The dispute resolution mechanism in case of conflict must be referred to the RCEP joint committee if all other channels of negotiations fail. The contentious issues of source code disclosure requirements, data flows across trading partners and location of data centres and computing facilities have been left for future consultations and agreements. India and the rest of the world economies, including Europe, would be watching this space closely to get cues, before trying to make any overtures. The global policy space is currently staring at tonnes of ideas being floated to control the flow of data beyond sovereign boundaries, thereby acknowledging and equating data as a physical commodity to be traded as a chip on the high tables of multilateral agreements. It would take tonnes of space to argue and potentially arrive at a middle path between different approaches to data regulation globally, except, suffice it to say, this year has been the beginning of national data colonisation policies.
Staying on with data regulations, the text for cross-border data flows and location of computation facilities in the RCEP document leave ample room for subjective and aggressive interpretations. The bloc leaves the regulatory door ajar for each country to force hard, localisation rules for data without being subject to scrutiny at the multilateral platform. This clause may seem to be played to the galleries domestically for each partner but has its own repercussions on global cooperation. India for the time-being has chosen to call for an adjournment on the multidimensional chessboard of multilateral trade/strategic pacts, which is a wise move. It is always better to sleep over the problem and come back with a fresh perspective before going for Sicilian defence or the Queen’s gambit.
(The writer is a policy analyst)
