Global Digital Governance & Cooperation
Governing Digital Economy
Regulatory Sandboxes for Technological Innovations
William J. Drake, Columbia Institute for Tele-Information, Columbia Business School, civil society, WEOG
Neha Mishra, Geneva Graduate Institute, civil society, Asia-Pacific Group
Stephanie Honey, APEC Business Advisory Council, private sector, WEOG
Maiko Meguro, Digital Agency of Japan, Government of Japan, government, Asia-Pacific Group
Neha Mishra, Geneva Graduate Institute, civil society, Asia-Pacific Group
Eli Noam, Columbia Institute for Tele-Information, Columbia Business School, civil society, WEOG
Chris Riley, Annenberg Public Policy Center, University of Pennsylvania, civil society, WEOG
Richard Samans, International Labor Organization, intergovernmental organization
Marta Soprana, London School of Economics and Political Science, civil society, WEOG
William J. Drake
William J. Drake
Targets: SDG 9 concerns e.g. infrastructure upgrades, industry retrofits, enhanced technological capabilities across economic sectors, support for domestic technology development, and increased access to ICTs and the Internet. SDG 10 on equality includes implementing special and differential treatment for developing countries in trade arrangements. SD 17 on the Global Partnership for Sustainable Development includes efforts to mobilize domestic resources including via support to developing countries, and enhancing North-South and South-South cooperation on technology and knowledge sharing. To varying degrees, the DEAs agreed to so far directly address or indirectly facilitate the pursuit of these goals, and there is no reason future ones could not align even more with the SDGs.
This Day 0 session will be conducted in hybrid format, with most of the panelists being onsite. It will be conducted as an interactive, “talk show” style roundtable. The moderator will pose questions that were agreed in advance by the panelists in order to provide structure and ensure that the conversation moves in a fluid manner through the entire agenda. Additional questions and follow-ups will be posed in accordance with the flow of the conversation. At least 25 minutes will be reserved for open dialogue among all participants.
At the 2022 IGF in Addis Abada there was a Day 0 session on ‘Understanding Internet Fragmentation: Concepts and their Implications for Action.’ That session sorted through the competing perspectives on the definition of fragmentation in order to help feed ideas into some of the fragmentation sessions to follow and to set up a subsequent discussion about moving from concepts to global governance responses. The present Day 0 session is that subsequent discussion. Our hope is that by exploring the potential utility of a concrete and innovative new governance model we can again feed into some of the policy-oriented fragmentation sessions to follow in Kyoto.
The model we will explore is Digital Economy Agreements (DEAs). DEAS follow an agile approach that is designed to institutionalize ongoing and flexible cooperation and policy convergence on a range of digital economy issues. DEAs employ a “modular” architecture that treats issue sets differently based on their technical properties and associated interest configurations but under an integrative umbrella framework. Not imposing a uniform approach allows policymakers to mix and match: for some issues, either binding or normative soft law rules and related commitments may be functionally necessary and politically feasible. For others where rules are not needed or not yet possible, programs of ongoing dialogue and collaboration can be established with an eye toward enhanced convergence and agreement in the future. The latter approach is especially useful for fluid new issues like artificial intelligence and fintech. By assembling a range of topical workstreams subject to different, modular solutions and mutual commitments, DEAs are able to achieve broad scope and yet avoid the ‘all or nothing’ negotiation dynamics that often block other international governance efforts, especially international trade negotiations. In addition, modularity and differentiated paths for issue-sets also opens up possibilities for heterodox patterns of engagement and more inclusive multistakeholder participation in ongoing programs.
The DEAs agreed to date variously have included disciplines and launched ongoing collaborations on such issues as transparency, supply chains, inclusion, identities, cross-border data flows, forced data localization, online customs duties and the trade treatment of digital products, business and trade facilitation, e-invoicing and certifications, the protection of source code, cybersecurity, consumer protection, privacy and data protection, open government data, standards and interoperability, fintech and e-payments, innovation and regulatory sandboxes, artificial intelligence and support for small and medium-sized firms.
DEAs and their modular approach more generally are growing in use. The most widely discussed example is the 2020 Digital Economy Partnership Agreement (DEPA) between Chile, Singapore and New Zealand (which several other countries have applied to join). Other intergovernmental pairings include the 2020 Singapore-Australia Digital Economy Agreement, the 2022 UK-Singapore Digital Economy Agreement, and the 2023 Korea-Singapore Digital Partnership Agreement. In addition, the 10-member Association of Southeast Asian Nations has launched negotiations of an ASEAN Digital Economy Framework Agreement that could constitute another variant.
In parallel, the European Union is undertaking a series of Digital Partnerships involving a range of modalities that echo the modular approach. To date, these include the 2022 EU-Korea Digital Partnership, 2022 Japan-EU Digital Partnership, and the 2023 EU-Singapore Digital Partnership. The digital work being conducted in such processes as the EU-US Trade and Technology Council and the Connected Economy pillar of the Indo-Pacific Economic Framework for Prosperity may also be viewed as having modular features. And in substantive terms, the DEAs and related frameworks mesh with other recent institutional innovations like the Japanese government’s ‘Data Free Flow with Trust’ approach in the Group of 7 and the Group of 20, including the new Institutional Arrangement for Partnership on DFFT, as well as the Declaration of the Future of the Internet.
Accordingly, the purpose of this Day 0 session is to consider whether the common architectural features of DEAs and related institutional innovations can provide a productive path forward for containing and perhaps ameliorating some of the more pressing forms of Internet fragmentation. This bears in particular on fragmentation that is governmental in origin, i.e. derives from government policies that continually impede the exchange of packets between willing endpoints and interfere with the interoperability and uniformity of Internet functions. But cooperation institutionalized under the DEA and similar umbrella frameworks could also be useful in mobilizing relevant states and stakeholders around fragmentation originating from technical and commercial sources as well.
Among the policy issues to be explored in the session are the following:
1. How have the DEAs that have been agreed to date addressed fragmentation issues like barriers to cross-border data flows and forced data localization? Could the DEA model be built upon to address these and other fragmentation issues more fully than has been done to date?
2. What are the key common institutional attributes of DEAs and the other innovative initiatives mentioned above that could be leveraged and built upon to advance inclusive responses to fragmentation? In particular, are there options for building ongoing and expert multi-stakeholder engagement and experimenting with multitrack cooperation in order to progressively advance international consensus and policy coherence?
3. To date, DEAs usually have been formed primarily by developed countries. Exceptions include Chile’s participation in the DEPA, and perhaps the proposed Asian pact, TBD. Why have not more developing countries pursued the DEA approach to date? What are the prospects for employing this model or something similar on either a North-South or South-South basis? Could this model be scaled to the broad multilateral level, or is it more suited for ‘minilateral’ deals among small groups of like-minded partners?
4. How do the market openness provisions contained in the DEAs agreed to date compare with similarly focused provisions in international trade agreements like the Japan-US Digital Trade Agreement, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, and the Regional Comprehensive Economic Partnership? In cases where trade negotiations struggle to bridge the differences between parties and attract broad stakeholder support, could DEAs provide a less contentious alternative?
5. Could the modular model of DEAs be useful in addressing other Internet governance issues? Could this policy architecture provide a heterodox alternative to the longstanding tensions between intergovernmental and multistakeholder cooperation?
The interactive roundtable format facilitates a dynamic and flexible discussion. The organizers have extensive experience with managing many such sessions in the IGF since 2006, as well as in many other international venues. This includes substantial experience with managing hybrid sessions and ensuring the inclusive and integrated participation of people who are both onsite and online. We will use the Zoom chat to include virtual participants and encourage onsite participants to also log into the Zoom session. The Onsite and Online moderators will keep an eye on raised hands in both spaces, give everyone a chance to speak in turn, read out any typed questions submitted in the chat, ensure that people in one space have heard questions posed in the other. They also will set time limits and promote respectful interactions, ensure that people respond to points directed to them, and so on. We will recruit one or two participants to live tweet the session so that people are also able to follow the conversation in that manner. After onsite and online participants have had their say, we may be able to respond to additional points raised by non-participating tweeters.
This session focused on the “modular” architecture in digital economy agreements (or ‘DEAs’) and related institutional innovations, and their potential role in addressing various policy concerns pertaining to internet fragmentation. In particular, the session focused on fragmentation that is governmental in origin, i.e., resulting from government policies that continually impede the exchange of packets between willing endpoints and interfere with the interoperability and uniformity of Internet functions.
DEAs are a recent addition to the digital regulatory framework. Since 2020, governments mostly in the Asia-Pacific region, led by Singapore, have entered into a number of DEAs focusing on digital-only issues. The DEAs negotiated to date are 2020 Digital Economy Partnership Agreement (‘DEPA’) between Singapore, New Zealand, and Chile; 2020 Singapore-Australia Digital Economy Agreement (‘SADEA’); 2022 United Kingdom – Singapore Digital Economy Agreement (‘UKSDEA’); and 2023 Korea – Singapore Digital Partnership Agreement (‘KSDPA’). Additionally, the 10-member Association of Southeast Asian Nations has launched negotiations for a Digital Economy Framework Agreement likely to be concluded by 2025.
DEAs contain disciplines on a broad variety of issues including transparency, supply chains, inclusion, identities, cross-border data flows, forced data localization, online customs duties and the trade treatment of digital products, business and trade facilitation, e-invoicing and certifications, the protection of source code, cybersecurity, consumer protection, privacy and data protection, open government data, standards and interoperability, fintech and e-payments, innovation and regulatory sandboxes, artificial intelligence and support for small and medium-sized firms. They also provide various avenues for engagement and institutionalised dialogues with different stakeholders including private sector, industry setting bodies, civil society organisations, business associations, and academia.
A key distinguishing architectural feature of DEAs is the “modular” architecture, which treats issue-areas differently based on their technical properties and associated interest configurations but under an integrative umbrella framework. This modularity allows for flexible treatment of different sets of issues. For instance, for certain traditional areas pertaining to the digital economy, parties can agree to adopt binding rules or soft law norms, while in other emerging areas of digital regulation, parties may choose to engage in trust-building exercises through programs of ongoing dialogue and collaboration to enable future consensus. The latter approach is likely to be a lot more effective in dealing with embryonic areas such as regulation of artificial intelligence, fintech and open data ethics. Additionally, this modular approach, enabling differentiated paths for issue-areas, opens up possibilities for heterodox patterns of engagement and more inclusive multistakeholder participation in ongoing programs.
In addition to DEAs, other institutional innovations appear to be moving towards a similar modular architecture. For instance, the European Union has started undertaking a series of Digital Partnerships such as the 2022 EU-Korea Digital Partnership, 2022 Japan-EU Digital Partnership, and the 2023 EU-Singapore Digital Partnership. Although these instruments are not treaties like DEAs, they adopt a modular approach, fostering multi-track/multi-issue collaborations and multistakeholder engagement. Similarly, the work being conducted under the aegis of the EU-US Trade and Technology Council and the Connected Economy pillar of the Indo-Pacific Economic Framework for Prosperity also emulates similar modular features. These instruments also align with other recent initiatives such as the Japanese government’s ‘Data Free Flow with Trust’ approach in the Group of 7 and the Group of 20, including the new Institutional Arrangement for Partnership on DFFT, wherein different working groups will be set up to deal with distinct digital issues.
The deliberations in this session highlighted the potential role of DEAs, digital partnerships, and other institutional innovations in developing a common baseline stance on different aspects of internet fragmentation by institutionalising dialogues on different policy areas including barriers to cross-border data flows, data localisation and variation in internet-based processes and user experience arising from domestic digital regulations. These developments are particularly instrumental as the binding nature of international trade agreements have often prevented fostering meaningful consensus on several aspects of cross-border data regulation.
To date, however, several of these DEAs and partnerships have been formed by relatively like-minded and digitally developed countries. Nonetheless, the panel noted the possibility of extending or scaling up this kind of cooperative framework to a wider group of countries, given their modular, flexible architecture. For instance, these instruments provide different avenues to achieve regulatory interoperability in different areas, undertake joint work programs, and engage the global multistakeholder community in productive working relationships. However, they have inherent limitations given that they are contingent on the political will of the participating countries and have involved very few developing countries and no LDCs to date. More importantly, geopolitical realities and deep ideological divides on certain core aspects of internet and digital regulation are likely to hinder achieving deep consensus on difficult issue-areas. Therefore, the panel concluded that these new instruments are best understood as promising additions to the larger international institutional architecture needed for global Internet and digital governance, rather than a panacea for internet fragmentation.