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Towards An Asian Digital Trade Zone

Are the Himalayas too high for the internet to pass? The prospect of an Asian digital single market seems remote, especially when India and China seem to be pulling apart. India is busy banning Chinese apps like TikTok, while China promulgates ever stricter rules on data transfer abroad. Asian governments still fail to see that rising above local conflicts might yield enormous dividends, strengthening their own economic security in the process.

Digital single markets permit consumers and businesses to engage across national borders via the internet. They enable broad supply chains, build companies that can compete at a global level and reduce prices for consumers and businesses. Digital single markets help small businesses by reducing prices for key services from design, marketing, customer relations and accounting to hiring employees in foreign countries. But achieving a digital single market is not easy. It requires a degree of regulatory integration that few countries are prepared for. Nations typically agree to abide by the country-of-origin principle, allowing a company to operate across regional markets under the rules of its home country.

Many of the benefits of a digital single market can be achieved through a digital trade zone. Digital trade zones do not require the high degree of regulatory integration or recognition required by digital single markets. Digital trade zones require the dismantling of barriers to trade, but still oblige companies to abide by the laws of the countries where they do business. While digital single markets potentially offer greater dividends in terms of reducing costs for businesses, regulatory integration requirements mean that they are often a distant ideal.

Continent-wide digital markets can be enabling, boosting local businesses and consumers in a myriad of ways, including through the reduction of inflationary pressures. Without an ambitious agenda promoting digital trade, Asian countries risk falling behind and being relegated to providing digital services within shrinking geographies. They also risk being shut out of digital services in many foreign countries.

Many Asian countries have been reluctant to liberalise digital trade for two major reasons — because of its impact on customs duties and to protect local enterprise.

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