Australia-Singapore Digital Economy Agreement
The proposed Australia–Singapore Digital Economy Agreement (the proposed Agreement) will amend the Singapore-Australia Free Trade Agreement (SAFTA), signed in 2003, by replacing SAFTA’s current Chapter 14 (Electronic Commerce) with a new Chapter.
According to the National Interest Analysis (NIA), the proposed Agreement will provide a formal framework for cooperation to support new opportunities in the digital economy between Australia and Singapore, including the adoption of emerging technologies. It will also build and maintain trust in digital trade.
The Government considers Singapore to be a partner of choice for developing norms in digital trade rules which can then be promulgated to other trading partners in the Indo-Pacific region, which has seen a concerning growth in trade-restrictive digital policies in recent years.
The NIA states that the Australian Government considers the provisions in the proposed Agreement to be cutting-edge benchmarks for digital trade.
The NIA identifies as a basis for Australia’s interest in developing new norms in digital trade rules a 2018 Brookings Institute Report on the digital economy in Asia, Regulating for a Digital Economy: Understanding the Importance of Cross-Border Data Flows in Asia. The Report discusses the economic impact of data regulation in the Indo-Pacific region.
The Report argues that a number of data regulations restricting the flow of data between countries can be understood as potentially protectionist, and consequently damaging to international trade. The practices the Report identifies include:
rules requiring that data pertaining to a particular country be retained in that country;
rules requiring gateways and location servers for a particular country be located in that country;
rules requiring cloud storage networks containing data from a particular country to be located in that country;
on-shoring disaster recovery facilities; and
requiring financial institutions to store data in-country as a prerequisite for operating in that country.
According to Ms Caroline McCarthy, Assistant Secretary, Department of Foreign Affairs and Trade (DFAT):
… more and more countries in the region are requiring onshoring of data and are doing that under cover of a security concern. But industry has indicated to us that requiring onshoring of data does not equate to securing data. Securing data is about the actual security techniques that you use to secure the data, and so it is argued by industry that these requirements to onshore data are actually protectionist in intent.
According to Ms McCarthy:
Australia's service suppliers are particularly well positioned to benefit from this agreement. Singapore is a sophisticated services economy and an important market for Australia's service suppliers. The financial services sector, including banking, insurance and funds management, is one of the most dynamic sectors of Australia's economy and will benefit from [the proposed Agreement], particularly for cross-border banking where [the proposed Agreement] addresses the critical needs of Australian companies to transmit data to and from Singapore and by prohibiting data localisation requirements in the financial services sector.
A number of submissions to the inquiry are broadly supportive of the proposed Agreement, recognising the proposed Agreement as a new benchmark for international digital trade. For example, the Global Data Alliance states:
Negotiating progressive data transfer rules is of paramount importance in any agreement designed to promote the growth of the digital economy.
Entry into force of [the proposed Agreement] will complement Australia’s advocacy for ambitious digital trade rules in multilateral and plurilateral fora.
The Committee notes that the proposed Agreement, and the consequent amendment to SAFTA, needs to be understood within the wider framework of existing agreements and other negotiations relating to electronic commerce between Australia and Singapore.
According to the NIA, the multilateral negotiations underway in the World Trade Organisation (WTO) to liberalise digital trade rules are progressing positively, but to multi-year timeframes.
The digital trade arrangements in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), signed in 2018 will continue to apply to digital trade between Australia and Singapore.
Australia and Singapore are both participants to the recently signed Regional Comprehensive Economic Partnership Agreement, but this is not expected to enhance the standard of digital trade between Australia and Singapore beyond those extant in SAFTA and the CPTPP.
Although the difficulties faced by businesses and others navigating a number of different agreements applying to a particular area of trade has not been raised by inquiry participants during this inquiry, it has been discussed previously by the Committee and may have some relevance in relation to the proposed Agreement.
While not directly addressing this issue, the submission from Chartered Accountants Australia and New Zealand recommends the Government considers practical support for small and medium sized enterprises that may not have the resources to adapt to new digital financial exchange mechanisms.
The proposed Agreement comprises a set of implementing articles and two annexes. Annex A will replace the existing Chapter 14 (Electronic Commerce) of SAFTA. Annex B contains consequential amendments to other Chapters of SAFTA to reflect the new Chapter 14.
SAFTA will provide the broader legal architecture for the operation of the provisions in the annexes of the proposed Agreement.
Legislative change will not be required to implement the proposed Agreement.
The proposed Agreement prevents either Party from prohibiting the cross-border transfer of information by electronic means provided the activity is ‘for the conduct of business of a covered person.’
However, nothing in the proposed Agreement can stop one of the Parties preventing such a transfer to achieve a legitimate public policy objective.
During the hearing, Ms McCarthy stated:
… we certainly believe that the exceptions that are provided for in this agreement would enable the government to take any action necessary to protect human, animal or plant life or health.
Protection of personal information is a significant issue and was raised by the Australian Fair Trade and Investment Network (AFTINET). In particular AFTINET is concerned that the European Union’s (EU’s) General Data Protection Regulation provide greater protections for personal privacy, and should have been considered for the proposed Agreement.
In relation to privacy concerns, Ms McCarthy advised, the proposed Agreement:
… says that each party shall have a privacy framework. The Australian Privacy Act is the standard that Australia applies in terms of privacy and there's nothing in the Australia–Singapore Digital Economy Agreement that changes that … each country, Singapore and Australia, will choose their own standard of privacy protection, and there's nothing in this agreement that will impinge on their ability to do that.
In other words, according to DFAT, the proposed Agreement will ensure that the Australian Privacy Principles that apply to personal information will continue to apply even if that data is transferred to Singapore:
Privacy Principle 8 deals with cross-border transfer of personal information, and that requires that anyone transferring information across borders must be confident that the information is protected to the standard that it would be protected in Australia.
The Committee expects that if there is a breach of these Principles it would be pursued through Australian diplomatic channels with Singapore.
In response to a Question on Notice, the DFAT did provide a comparison of the privacy protections application in the EU and Australia. The protections are broadly similar, but the EU does provide a ‘right to be forgotten’ provision, which is not available in Australia.
The proposed Agreement contains provisions preventing the parties from requiring a person to use or locate computer facilities in a Party’s territory as a condition for conducting business in that territory.
However, a Party can still apply its own regulatory requirements relating to the use of computer facilities, including to ensure the security, and confidentiality of communications. In addition, these provisions only apply in relation to financial institutions if:
… the Party’s financial regulatory authorities, for regulatory or supervisory purposes, have immediate, direct, complete and ongoing access to information processed or stored on computer facilities that the [financial institution] uses or locates outside the Party’s territory.
These rules will impose new restrictions on Australia’s policy flexibility to impose certain measures to restrict data flows or require data localisation with respect to financial services. However, the Government considers these restrictions are outweighed by the benefits …
Article 27 of Annex A commits the parties to provide access to Government data that is non-proprietary and anonymised for economic, social and research benefits. The data covered in Australia is limited to Commonwealth data.
In the proposed Agreement, the Parties commit to not requiring access to or transfer of software source code as a condition for the import, sale or use of software from the other Party. The NIA states this is the first time Australia has made the commitment in relation to both mass market and bespoke software.
Exceptions to this provision will permit Australia to continue to require access to source code for the purposes of specific examinations, investigations or judicial proceedings, or for national security reasons.
According to DFAT, in circumstances where Australia requires access to source codes for these purposes, and the owner of the source code does not comply with this requirement, the owner of the source code can be prosecuted under Australian law.
The proposed Agreement contains a minimum standard of protection for Australian business and consumers against misleading and deceptive conduct by Singaporean businesses online.
The proposed Agreement also contains provisions that will make it easier to install, maintain and repair physical infrastructure, such as submarine telecommunications cables, between the Parties.
The Australian Council of Trade Unions (ACTU) and AFTINET are concerned about the potential impact of the proposed Agreement on what the ACTU refers to as ‘insecure work.’ The ACTU argues that a significant proportion of jobs associated with the digital economy are precarious and exploitative. The ACTU is concerned that agreements like the proposed Agreement may prevent Australia from regulating to improve the job security, wages and conditions of workers employed in these industries.
In relation to employment matters, Ms McCarthy clarified that the proposed Agreement does not prevent the Australian government from regulating employment conditions for Australians working in the digital economy.
The Committee notes that the proposed Agreement will establish a benchmark for digital trade in the region by agreement between two of the region’s largest proponents of free trade.
A number of concerns have been raised in relation to the proposed Agreement, such as the Agreement’s potential impact on privacy and insecure work, and the treatment of emerging technologies like Artificial Intelligence (AI) and facial recognition, but the Committee is satisfied that the proposed Agreement will permit Australia to address these issues, noting that the Agreement has a provision that registers the shared high-level intention to cooperate on the development of ethical governance frameworks for the ‘trusted, safe, and responsible use of AI technologies.’
The Committee requests an update by the end of 2021 on progress towards establishing an ethical governance framework for the use of AI technologies, which is intended to be governed by the existing Memorandum of Understanding.
The Committee recommends that the proposed Agreement be ratified.
The Committee supports the Australia–Singapore Digital Economy Agreement and recommends that binding treaty action be taken.