DEPA: Amended data rules, MFN and CPTPP-exceptions
The Digital Economy Partnership Agreement (DEPA) between Chile, New Zealand and Singapore, was recently amended in preparation for Korea’s accession.
The main substance of the changes were to address what a New Zealand Cabinet Paper described as “a somewhat unusual structure” for the key data provisions. In brief, these provisions just had the Parties “affirm” existing “levels of commitment” they’d made elsewhere (generally CPTPP, which all DEPA Parties are parties to). For example:
Article 4.3: Cross-Border Transfer of Information by Electronic Means
The Parties affirm their level of commitments relating to cross-border transfer of information by electronic means, in particular, but not exclusively:
“1. The Parties recognise that each Party may have its own regulatory requirements concerning the transfer of information by electronic means.
2. Each Party shall allow the cross-border transfer of information by electronic means, including personal information, when this activity is for the conduct of the business of a covered person.
3. Nothing in this Article shall prevent a Party from adopting or maintaining measures inconsistent with paragraph 2 to achieve a legitimate public policy objective, provided that the measure:
(a) is not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination or a disguised restriction on trade; and
(b) does not impose restrictions on transfers of information greater than are required to achieve the objective.”
[italics and quotation marks in the original]
DEPA also explicitly clarified that these articles “do not create any rights or obligations” and carved them out of dispute settlement.
New Zealand’s National Interest Analysis for DEPA justified this non-binding approach by saying the articles “set a high standard for new partners who wish to accede to the DEPA in the future”. It is also possible that MFN-concerns were at play here, given that DEPA doesn’t benefit from GATS Article V.
However, with Korea' acceding to DEPA this approach was no longer workable given that Korea is not yet a CPTPP party.1 As such, in July, Chile, New Zealand and Singapore signed a short Protocol amending DEPA to turn these provisions into legally binding rules (and do a few other things).2
This change also highlights two potential shifts or confirmation of digital trade law trends that could be relevant to other negotiations such as the WTO’s Joint Initiative on E-Commerce:
As noted above, DEPA is not an FTA for GATS MFN purposes. So there is no straightforward path for DEPA Parties to argue that they can apply DEPA’s commitments preferentially. This means that all WTO members could be entitled to benefit to DEPA-level treatment from DEPA Parties without having to follow the DEPA themselves. By making these data rules binding, it means that the DEPA Parties are:
not discriminating on things like data flows or localisation requirements;
only discriminating in a way they think they can justify under a relevant WTO (and FTA when relevant) exception; or
have a novel argument to expand the GATS (and FTAs) MFN exception to cover DEPA treatment.
This isn’t as clear, but it seems that DEPA is missing a typical exception to the relevant data rules which cross-references services and investment commitments (see e.g. Article 14.2(6) of CPTPP). The exception would have been difficult to include in DEPA given DEPA does not have services or investment commitments. This would suggest its absence was intentional (the United States-Japan Digital Trade Agreement similarly doesn’t include it). However, the New Zealand Cabinet Paper approving the Protocol has an interesting footnote that appears to say this was actually considered:
Footnote 6: There are some changes to the original CPTPP text for clarification, e.g. to define “broadcasting” and replace the reference to “covered person” with “person of a Party” (which is already defined in the DEPA). The DEPA provisions have also required slight adjustment from the CPTPP to make the provisions operational in a digital-only agreement where there are no services or investment market access obligations and associated schedules of reservations.
I haven’t been able to find any of the “slight adjustments” referred to here (the provisions and structure seem very similar to CPTPP). If anyone knows what’s going on here I would welcome any clues.
China, Canada, Costa Rica, Peru and the United Arab Emirates, are all also interested in joining DEPA.
The Protocol also adds a new scope carve-out for measures “a Party…deems necessary to protect or promote indigenous rights, interests, duties, and responsibilities…” (a key New Zealand interest that it is also hoping to add to the CPTPP if/when that agreement is reviewed). See MFAT officials discussing this with a New Zealand Parliamentary committee here.