Digital trade

Digital technologies increasingly enable trade. For example:

• banks rely heavily on the international transfer of data;
• agricultural commodity traders use e-signatures to conclude international purchases;
• manufacturers, freight operators and logistics enterprises can track and improve the performance of their machines and vehicles around the world thanks to electronic data transfers, and;
• everyday items increasingly combine sensors and internet-enabled applications, large datasets, and high-performance computing capabilities (‘Internet of Things’).

The global e-commerce market is growing at a dynamic rate. In 2018, global e-commerce sales were estimated at more than €21 trillion, with around 1.5 billion people shopping online.

Digital trade in the EU’s trade strategy

The growing importance of digital trade is reflected in the EU’s trade policy communication, An Open, Sustainable and Assertive Trade Policy, published in 2021.

The communication provides that, “trade policy will play a vital role in attaining the EU’s objectives linked to the digital transition. European businesses rely on digital services, and this will only increase”.

Against this backdrop, the EU has set itself ambitious goals. The communication states that, “supporting Europe’s digital agenda is a priority for EU trade policy. The objective is to ensure a leading position for the EU in digital trade and in the area of technology, most importantly by promoting innovation”.

Digital trade in bilateral trade agreements

The increasing importance the EU attaches to digital trade is reflected in its bilateral trade agreements. The EU’s approach to digital trade in its free trade agreements has gradually been adapted to respond to this growing strategic priority.

Modern EU trade agreements contain a self-standing chapter on digital trade. The overarching goals of this chapter are:

• to ensure predictability and legal certainty for businesses;
• to ensure a secure online environment for consumers, and;
• to remove unjustified barriers.

The digital trade chapter contains almost 20 binding provisions on a wide range of issues, including the following:

• banning customs duties on electronic transmissions (this does not forbid the imposition of internal taxes);
• promoting electronic contracts, electronic authentication methods and electronic trust services (such as e-signatures, e-seals and time stamps), which are necessary for the validation of online transactions and thus constitute a key enabler for digital trade;
• ensuring online consumer protection, including protection against spam;
• prohibiting unjustified government access to software source code;
• prohibiting unjustified barriers to data flows, including data localisation requirements and protecting privacy, and;
• facilitating regulatory cooperation.

Digital Trade Agreements

The EU also negotiates modern, self-standing digital trade agreements with key partner countries. The digital trade agreements aim to build consumer trust, ensure predictability and legal certainty for businesses, and remove and prevent the emergence of unjustified barriers to digital trade. They are also designed to help the parties to the agreements to develop and implement the policies required to address new challenges posed by the digital economy. 

The digital trade agreements demonstrate the EU's commitment to being at the forefront of new digital developments, while upholding open digital economies that are competitive, transparent, fair, and free of unjustified barriers to international trade.

On 27 June 2023, the Council of the European Union authorised the Commission to open negotiations for digital trade agreements with Singapore and the Republic of Korea. These self-standing digital trade agreements should build on and complement the EU's existing trade frameworks with its partner countries.

The negotiations also build on the cooperation and convergence in the Digital Partnerships and Digital Trade Principles that the EU has agreed with the Republic of Korea and Singapore. These negotiations reflect the strategic importance of digital trade and the pivotal role of the Southeast Asian region.   

The digital trade agreements with the Republic of Korea and Singapore will put forward clear and binding rules, thereby enhancing the EU's synergies in the Indo-Pacific region: one of the most vibrant and forward-looking hubs of the digital transformation. 

These agreements will:

• unlock new markets;
• make electronic transactions easier; 
• promote a safe online environment for consumers;
• create legal certainty for businesses;
• improve access to electronic commerce, and;
• facilitate digital trade.

More on digital trade agreements 

Digital Trade Principles

The EU has concluded Digital Partnerships with some of its partner countries to advance cooperation on several digital issues, including digital economy and trade, as well as trusted data flows and data innovation, standards, and the digital transformation of businesses and public services.

The Digital Partnerships pave the way for cooperation in new and emerging areas with transformative economic potential for our economies. They also enable regulatory cooperation and common positions in international forums.

The Digital Partnerships address digital trade and include Digital Trade Principles as an important deliverable. The Digital Trade Principles are non-binding instruments that reflect a common understanding on key issues relevant to digital trade and a joint commitment to an open digital economy, free of unjustified barriers to international trade.

The Digital Trade Principles cover data governance (including free flow of data with trust, and open government data), digital trade facilitation (including paperless trading, single windows, electronic contracts, electronic authentication and electronic signatures, electronic invoicing), consumer trust (including online consumer protection and safety), and business trust (including open internet access, cybersecurity, and protection of source code and cryptography-related technology).

They also provide a forum for cooperation on unjustified barriers to digital trade.

• The EU and the Republic of Korea signed Digital Trade Principles, on 30 November 2022 (full text)
• The EU and Singapore signed Digital Trade Principles, on 31 January 2023 (full text)

The EU’s approach to ensuring free flow of data

Data is the lifeblood of the digital economy. It is therefore vital that EU companies can move their data across borders.

When negotiating trade agreements, the EU proposes the straightforward prohibition of protectionist barriers to cross-border data flows. At the same time, it ensures that trade agreements cannot be used to challenge existing and future EU law on the protection of personal data and privacy, which are fundamental rights in the EU.

The EU’s approach to data flows is based on the premise that high standards of data protection and the facilitation of international trade can go hand–in-hand. Accordingly, the EU promotes a vision in which a high level of protection for privacy and personal data is a pre-condition for stable, secure and competitive global commercial flows in the digital world.

The provisions negotiated by the EU in its trade agreements reflect this balanced approach.

Digital trade in the World Trade Organization

Multilateral rules are needed to develop a common, coherent approach that tackles global challenges effectively, fosters new opportunities, and encourages the expansion of digital trade (or 'e-commerce' as it is historically called in the WTO).

During the 11^th WTO Ministerial Conference, held in Buenos Aires in December 2017, a group of WTO Members decided to explore the opportunity to negotiate WTO rules on e-commerce. After a year of exploratory talks, plurilateral WTO negotiations on e-commerce were officially launched in January 2019. 86 WTO Members, including EU Member States, are currently engaged in these negotiations.

The e-commerce negotiations in the WTO aim to:

• facilitate electronic transactions (e.g. e-contracts, e-signatures, e-payments);
• enhance consumer and business trust;
• address barriers related to cross-border data flows and data localisation requirements;
• protect computer source code;
• facilitate online trade in goods (e.g. paperless trade);
• improve the regulatory conditions for telecommunications services by updating the WTO Telecommunications Reference Paper, and;
• improve market access in services sectors and goods that are key for e-commerce.

The EU’s objective in the e-commerce negotiations is to reach an agreement on a comprehensive and ambitious set of WTO rules and obligations, enhancing both domestic and global e-commerce. The EU wants to facilitate business operations, especially those of SMEs, and to strengthen consumer trust in the online environment.

The EU also wants the negotiated outcome to be supported by as many WTO Members as possible. It is therefore adopting a flexible negotiating approach that takes into account the different opportunities and challenges that Members may face in relation to e-commerce.

More on e-commerce negotiations at the WTO

Moratorium on customs duties on electronic transmissions

Since 1998, WTO Members have agreed not to impose customs duties on electronic transmissions – which range from software, emails, and text messages to digital music, movies and videogames.

This moratorium is renewed every two years at the WTO Ministerial Conference. The EU is in favour of permanently prohibiting customs duties on electronic transmission, including the transmitted content.

The EU considers that it is not in any WTO Member’s interest to retain the right to impose customs duties on electronic transmissions. Such a policy decision would discourage enterprises, and especially SMEs, from engaging in global e-commerce. Customs duties could also increase the cost of business input – and therefore result in higher prices for consumers, market distortions and trade diversion. Many WTO Members have committed in their free trade agreements to ban such customs duties permanently.

The EU believes that permanently prohibiting customs duties on electronic transmissions should be part of the negotiated outcome in the WTO e-commerce negotiations.