Some General Observations

The new digital economy inherently connected to new information and communication technology (ICT) and the development of global value chains (GVC) in the 1990s have since had a profound effect on international trade, and both have seemingly increased trade inclusivity, benefitting the trade participation of micro, small, and medium-sized enterprises (MSMEs) and developing countries. The COVID-19 pandemic has strengthened the digital economy and the role of digital platforms as the global economy becoming increasingly virtual due to physical distancing measures. MSMEs are also able to capture some of the growth in e-commerce both domestically and internationally, particular in specialized manufacturing and services, which are areas of competitive advantage for MSMEs. The internet renders it easier for these MSMEs to find and target niche demand opportunities, with small enterprises being able to export their products from initiation. In a UNCTAD report on the preliminary assessment on the impact of COVID-19 on online retail, the share of online retail sales now accounts for nearly a quarter of retail sales in China, Korea and the United Kingdom. The value of online shopping has grown steadily in recent years, and is estimated at USD26.7 trillion in 2019 or some 30% of global domestic product.

One of the reasons why the RCEP Agreement is being described by some commentators as a modern FTA is that it includes chapters in a number of areas that are new to some Contracting Parties and effectively aligned them in line with the best practice from recent FTAs concluded by Contracting Parties under different settings, the so-called “noodle bowl”. Both electronic commerce as well as small and medium enterprises are amongst the aforesaid new chapters along with competition policy, government procurement as well as economic and technical cooperation. This article which purports to analyze the chapters on e-commerce and small and medium enterprises is the third piece of a series of articles introducing the RCEP framework to be published by us. Please free feel to contact us should you require additional information or advice on all other aspects of the RCEP Agreement not covered in this article.

Principles and Objectives

The Contracting Parties recognize the importance of electronic commerce in providing opportunities for businesses and consumers to transact online and enhancing economic growth. It follows that the objectives of the Chapter are to create frameworks that promote consumer trust & confidence in electronic commerce and the development and use of electronic commerce amongst the Contracting Parties themselves and globally.

Creating a Conducive Environment of Trust and Confidence

On the issue of creating a conducive environment of trust and confidence in the use of electronic commerce, the Chapter imposes on Contracting Parties an obligation to adopt or maintain a legal framework governing electronic transaction, which should avoid any unnecessary regulatory burden. The aforesaid legal framework includes the following obligations:

Online Consumer Protection: the Contracting Parties are obliged to adopt and maintain laws and regulations for the protection of consumers using electronic commerce against fraudulent and misleading practices that cause harm or potential harm to consumers, and shall publish information on consumer protection as regards electronic commerce users, including how “(a) consumers can pursue remedies; and (b) business can comply with any legal requirements”. The provision further emphasizes the importance of cooperation between the Contracting Parties’ authorities in charge of consumer protection activities related to electronic commerce.

Online Personal Information Protection: Article 12.8.1 obliges Contracting Parties to adopt and maintain a legal framework for the protection of personal information of the users of electronic commerce. Footnote to this Article clarifies that to mean, by adopting or maintaining: (a) measures such as comprehensive privacy or personal information protection laws and regulations, (b) sector-specific laws and regulations covering the protection of personal information, or (c) laws and regulations that provide for the enforcement of contractual obligations assumed by juridical persons relating to the protection of personal information, shall constitute compliance of Contracting Parties’ obligation under Article 12.8.

The Contracting Parties are further mandated “to take into account international standards, principles, guidelines, and criteria of international organizations or bodies” when developing such legal framework. Article 12.8.3 provides that Contracting Parties shall publish information on consumer protection as regards electronic commerce users, including how individuals can pursue remedies; and how business can comply with any legal requirements. Article 12.8.4 obliges Contracting Parties to encourage juridical persons to publish, including on the internet policies and procedures relating to the protection of personal information.

Unsolicited Commercial Electronic Messages: Article 12.9 provides that each Contracting Party shall adopt or maintain measures regarding unsolicited commercial electronic messages (junk mail), which require suppliers of such messages to (i) facilitate the ability of recipients to stop receiving the same; (ii) seek consent according to laws and regulations from recipients  ; or (iii) otherwise provide for the minimization of unsolicited commercial electronic messages. The Contracting Parties are further obliged to provide recourse against suppliers of unsolicited commercial electronic messages for non-compliance of the aforesaid measures, and endeavour to cooperate in appropriate cases for this matter.

Customs Duties, Transparency and Cyber Security: Article 12.11 mandates Contracting Parties to maintain their current practice of not imposing customs duties on electronic transactions between the Parties in accordance with the WTO Ministerial Decision of 13 December 2017 in relation to the Work Programme on Electronic Commerce.

On the issue of ensuring transparency, Contracting Parties are required to publish as promptly as possible, or make publicly available on internet all relevant measures of general application pertaining to or affecting the operation of the Electronic Commerce Chapter12, and to respond as promptly as possible request from other Contracting Party for specific information of the aforesaid measures.

As regards Cyber Security, the Contracting Parties reaffirm the importance of capacity building of their respective authorities responsible for computer security incident response through the exchange of best practice and using existing collaboration mechanism to cooperate on cyber security matters.

Trade Facilitation and Cross Border Electronic Commerce Promotion

In relation to facilitation of trade, the Contracting Parties are obliged to work towards implementing initiates which provide for the use of paperless trading, by drawing reference to the methods agreed by international organizations including the World Customs Organization, and to cooperate in international fora to enhance acceptance of electronic versions of trade documentation. The Contracting Parties further agree to endeavour to accept electronic trade administration documents as the legal equivalent of the paper documents, and to make these documents available to the public in electronic form.

On the question of cross border electronic commerce promotion, a major breakthrough was made on provisions related to data flow and data localization, with the Contracting Parties agreeing not to “require a covered person to use or locate computing facilities in that Party’s territory as a condition to conducting business in that Party’s territory.”, or “prevent cross-border transfer of information by electronic means where such activity is for the conduct of the business of a covered person.” However, these two provisions are over shadowed by national security concern allowing members to adopt “any measure that it considers necessary for the protection of its essential security interests. Such measures shall not be disputed by other Parties”. In addition, an exception applies if a Contracting Party “considers necessary to achieve a legitimate public policy objective, provided that the measure is not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination or a disguised restriction of trade”.

One of the distinctive features of this Chapter is the establishment of a forum, known as “Dialogue on Electronic Commerce” amongst the Contracting Parties to discuss topics such as cooperation, current and emerging issues, and other matters relevant to electronic transactions, for example, “anti-competitive practices, online dispute resolution, and the promotion of skills relevant for electronic commerce including for cross-border temporary movement of professional.” This dialogue may hopefully help to narrowing the scope of exceptions on data flows, data localization in financial services, source code, and treatment of digital products in the future.

This Chapter mandates Contracting Parties to share information on RCEP online and include publicly accessible links to other information of relevance to SMEs, such as the legal text of the RCEP Agreement, trade and investment-related laws and regulations which Contracting Parties consider relevant to SMEs, as well as business-related information useful for SMEs interested in benefitting from the opportunities provided by the RCEP framework. These provisions would ensure businesses having good access to information which could assist them in making the best decision to manage and grow their business.

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