On July 25, 2024 the European Union and Singapore announced that they had concluded negotiations for a Digital Trade Agreement (“DTA”). It is the EU’s first agreement specifically governing digital trade, and the latest in its series of economic agreements with Singapore, which include the EU-Singapore Free Trade Agreement, the EU’s first bilateral trade agreement with a Southeast Asian nation, which entered into force in 2019, as well as the EU-Singapore Investment Protection Agreement, which will enter into force once it has been ratified by all EU Member States, and the EU-Singapore Partnership Cooperation Agreement, which is likewise undergoing ratification by Member States.
Singapore is the EU’s largest trading partner in ASEAN. In 2022, it was the EU’s 11th largest trading partner, with total trade in goods and services amounting to €130 billion, and both sides have been keen on increasing digital cooperation, which was not covered extensively in the EUSFTA. Following discussions between the Singapore Ministry of Trade and Industry, Ministry of Communications and Information, DG TRADE and DG CONNECT, both sides signed an agreement to advance a Digital Partnership (EUSDP) in February 2023, which was accompanied by a set of non-binding Digital Trade Principles. The Digital Partnership paved the way for both sides to commence negotiations on a full-fledged, legally-binding agreement. Negotiations took place over five rounds, concluding in July 2024.
The EUSDTA covers all trade, whether in goods or in services, enabled by electronic means. It has three major objectives:
- to build consumer trust
- to ensure predictability and legal certainty for businesses
- to remove and prevent unjustified barriers to digital trade
Thus, once signed and formally concluded, the DTA will set digital trade rules and facilitate cross-border data flows between the EU and Singapore. The DTA is significant as it could serve as a blueprint for similar agreements in the future between the EU and the other ten ASEAN countries, and even between the EU and ASEAN, even as ASEAN is negotiating its own Digital Economy Framework Agreement (DEFA).
Indeed, in their joint statement, the EU and Singapore specifically mentioned Southeast Asia’s “pivotal role” due to the size of its digital economy. The region is home to over 696 million people, and according to Meltwater and We Are Social’s Digital 2023 October Global Statshot Report, 71.6% percent of them use the internet, accounting for 9.3% of global internet users. Moreover, Southeast Asians are among the “most digitally engaged” consumers in the world: users from the Philippines, Thailand, Malaysia, and Singapore spend more time daily using the internet than the worldwide average.
It is no surprise, then, that according to the e-Conomy SEA 2023 report published by Google, Temasek, and Bain & Company, the aggregate digital economy of the six (6) biggest Southeast Asian countries—namely, Singapore, Indonesia, Malaysia, Singapore, the Philippines, and Vietnam—has steadily increased since 2016, mainly driven by e-commerce, food delivery, and digital financial services. In 2023, the digital economy generated US$ 100 billion in revenue and US$ 218 billion in gross merchandise value (the sum of goods sold through customer-to-customer platforms), outpacing GDP growth. It is projected to hit US$ 1 trillion by 2030.
The text of the EUSDTA can be found here.
The EUSDTA will now have to be approved by Member States at the European Council, and then the European Parliament. It is likely that the EUSDTA will fall under EU-competence, avoiding the need for a lengthy ratification process by individual Member States.
With so much at stake within the region, other ASEAN countries should observe the implementation of the EU-Singapore DTA closely, with a view to exploring the possibility of negotiating their own agreement with the EU.