UNPACKING THE RCEP AGREEMENT: DIALOGUE 1: THE RCEP E-COMMERCE PROVISIONS AND WHAT THEY MEAN FOR CAMBODIA PUBLIC-PRIVATE DIALOGUE SERIES

UNPACKING THE RCEP AGREEMENT

DIALOGUE 1: THE RCEP E-COMMERCE PROVISIONS AND WHAT THEY MEAN FOR CAMBODIA
PUBLIC-PRIVATE DIALOGUE SERIES

Session 1:

Presentation by H.E. Dr. Sok Siphana

Senior Advisor to the Royal Government of Cambodia

and Founding Partner, SokSiphana&associates

2 November 2021

Excellency Sim Sokheng, Secretary of State, Ministry of Commerce

Excellency Andreas Zurbrugg, Deputy Ambassador, Australian Embassy

Dear friends, ladies and gentlemen,

  1. Let me start by stating outright that the signing of the RCEP, as an ASEAN-led agreement, signals ASEAN’s commitment to trade liberalisation, to deepening regional economic integration, and to a rules-based trading system. Its entry into force at the time of the post COVID recovery period is also significant as it will keep the region well-placed to emerge more resilient from the impact of the pandemic.

 

  1. The RCEP is supportive of ASEAN’s objectives of deepening regional integration and its Community building. It improves on exisiting ASEAN Plus One Free Trade Agreements in several important areas: 1) the comprehensive trade facilitation measures that introduces more flexible rules of origin for companies to benefit from the single rule of origin criteria across all 15 member states; 2) the improved market access for trade in services; 3) the enhanced investment rules and disciplines to support businesses’ regional investments; and 4) the expanded scope and commitments in new areas such as e-commerce, competition law and intellectual property rights.

 

  1. Quite certainly, the RCEP is set to be a major catalyst for post-pandemic recovery across Asia. The significance of digital marketplace is expected to spur continued economic growth following the pandemic as increasing numbers of people go online. To that effect, we can see that E-commerce in Cambodia is also growing rapidly, along with the growth of ICT  infrastructure. Spurred by the pandemic, many digital providers have expanded their footprint in the country.

 

  1. It is interesting to note that since the dot-com boom of the 1990s, lax domestic and global regulation has allowed technology companies to enjoy unfettered freedom to exploit e-commerce and digital services. The exponential rise of digital services led to the increasing concentration of power in the hands of a few major platforms. Unfortunately, digital transformation in developing countries, particularly LDCs, lags dramatically behind. Most of the LDCs, including Cambodia, remain largely excluded from technological breakthroughs such as artificial intelligence, the Internet of Things (IoT), advanced robotics, big data analytics, and cloud computing.

 

  1. Obviously, the global digital trade agenda is complex and encompasses far-reaching provisions on the cross-border delivery of services affecting data protection and consumer privacy, cybersecurity, and new Internet-related IP rights. They have far-reaching impacts, ranging from social and economic issues, education, national and personal security, governance issues, and much more. If well managed, digital industrialisation and innovation have the potential in bridging the economic divide between and within nations and in helping expanding the reach of businesses. But for that, sensitive issues like data governance, cross-border data flows, data collection, storage, privacy and cyber security have to be well regulated.

 

  1. Let me start with data governance. This is extremely important, specially when data is pivotal to both economic growth and national security. Whoever controls the data will control the society. Data access is another important and challenging issue related to market access, for e-commerce involves an exchange of data whenever a product is ordered online, an app is downloaded or a program is streamed. Businesses too rely on the flow of information to monitor their supply chains, and analyse consumer preferences.

 

  1. Intellectual property is as important for e-commerce and vice versa, bearing in mind that the Internet functions are based on components that each are a type of IP such as, software, routers, networks, switches and user interface. E-commerce more than other forms of doing business involves selling products and services that require IP licensing, including but not limited to software, music, and photos.

Ladies and Gentlemen,

 

  1.  Let me now focus specifically on the RCEP E-Commerce Chapter.

 

  1. Chapter 12 calls for a framework for future liberalization in e-commerce. It introduces specific rules on e-commerce that will modernise the trading relationship among the Member States. It covers various topics that are usually standard e-commerce provisions similarly found in other ASEAN Plus One FTAs.

 

  1. To help facilitate cross-border trade, RCEP contains a soft ‘endeavour’ obligation to promote the use of, and accept, paperless trading. A legal signature cannot be rejected, for lack of legal validity, solely because it is in electronic form.

 

  1. For online consumer protection, RCEP requires Cambodia to have consumer protection measures, without setting any minimum threshold. It requires the adoption of consumer protection laws for consumers using e-commerce against fraudulent and misleading commercial activities that cause harm or potential harm to consumers. It requires also the publication of information on consumer protection and outlines how remedies may be pursued and how businesses may comply with regulations.[1]

 

  1. For online personal information protection, Cambodia must have a legal framework that ‘ensures the protection of personal information of the users of e-commerce’.[2] There is no minimum standard, although Cambodia must ‘take into account’ international standards, principles, guidelines, and criteria of relevant international organisations or bodies.

 

  1. For unsolicited commercial electronic messages, Cambodia must adopt measures that can tackle the issue of unsolicited commercial electronic messages (UCE) or ‘spam’ messages. The ability to regulate UCE messages (i.e. direct marketing, promotional emails sent to consumer without their prior request) will provide consumers with options to enable opt-outs and other consent-based requirements. There are also provisions  requiring the adoption or maintenance of measures that minimize unsolicited e-commerce messages, as well as measures to enable recourse against non-complying suppliers.[3]

 

  1. For domestic regulatory framework, the RCEP contains provisions aimed at supporting digital trade and commits Cambodia to maintain a domestic regulatory framework governing electronic transactions to ‘takes into account’ of, or that are consistent with, the United Nations Commission on International Trade Law (UNCITRAL) Model Law on Electronic Commerce 1996, the United Nations Convention on the Use of Electronic Communications in International Contracts, or other applicable international conventions and model laws relating to electronic commerce. Cambodia must also ‘endeavour’ to avoid ‘any unnecessary regulatory burden on electronic transactions’. Even though Cambodia must only ‘endeavour’, it still has a positive obligation to do so. As an LDC, Cambodia has a 5 year grace period after the date of entry into force of this Agreement.[4]
  2. For customs duties, the RCEP commits to maintain its current practise of not imposing customs duties on electronic transmissions, subject to any further WTO Ministerial decisions on customs duties on electronic transmissions.[5] Currently, as pa.rt of the WTO Ministerial Decision, digital products such as e-books or films are not

1 Article 12.11(1): Customs Duties. However, electronic transmissions are not defined. That leaves it unclear whether the moratorium applies to all material transmitted electronically, including content, as the US has claimed, or does not apply to electronically-transmitted goods and services, as Indonesia confirmed with the WTO Secretary General (WT/MIN(17)/68, 20 December 2017)

Cambodia, Lao PDR, and Myanmar are granted a grace period for a period of five years after the date of entry into force of this Agreement.

Cambodia, Lao PDR, and Myanmar are granted a grace period for a period of five years after the date of entry into force of this Agreement.

4 Cambodia, Lao PDR, and Myanmar are granted a grace period for a period of five years after the date of entry into force of this Agreement.

5 Article 12.10: Domestic Regulatory Framework.

charged with customs duties. The moratorium on customs duties on electronic transmissions is not made permanent. This practice is expressly maintained in accordance with the WTO Ministerial Conference decisions related to the WTO Work Programme on Electronic Commerce.[6] Adjustments to this RCEP provision are tied expressly to further ministerial decisions on the Work Programme.[7] However, it does not preclude a Member State from imposing taxes, fees, or other charges on electronic transmissions, provided that they are imposed in a manner consistent with the RCEP Agreement. To resolve the issue of reduction of custom revenues, the government is adapting consumption taxes, like value-added taxes (VAT) for cross-border e-commerce for the purchase of goods and services bought online.

16. On the location of computing facilities, the RCEP includes provisions that constrain Member States from imposing data localisation requirements on businesses so as to provide for a more conducive digital trade environment with the free flow of data across borders. By limiting the scope for government to impose these restrictions, i.e. not forcing businesses to build data storage centres or use local facilities as servers within each country that they seek to trade with, the RCEP can reduce the cost and complexity of doing business in Cambodia.

17. RCEP allows Cambodia to impose whatever national regulatory restrictions they wish, i.e. inconsistent measures, to achieve a ‘legitimate public policy objective’ as long as they are applied in a non-discriminatory way, equally applied to domestic and foreign businesses.

 

18. On cross-border transfer of information by electronic means, the RCEP includes commitments to ensure that parties do not prevent business data and information from being transferred across borders where such activity is for the conduct of their business. These commitments will not apply to the financial services sector and also include exceptions for measures implemented for national security or other public policy reasons. Cross-border transfer should only be prevented in case where it is “necessary to achieve a public policy objective” or “necessary, in the country’s opinion, for the protection of its essential security interests or national interests”.[8] The LDCs, including



6  Article 12.11(2): Customs Duties. The practice referred to in paragraph 1 is in accordance with the WTO Ministerial Decision of 13 December 2017 in relation to the Work Programme on Electronic Commerce (WT/MIN(17)/65).

7 If the WTO moratorium lapses, at the 12th WTO Ministerial Conference in December 2021, an RCEP Party could unilaterally adjust its practice accordingly. If the moratorium does not lapse, the WTO could decide whether there will be a permanent ban, or at least a longer term moratorium, which in either case it is left to each RCEP Party to decide whether to adjust its approach to reflect that new position.

8 Article 12.15(3): Cross-border Transfer of Information by Electronic Means. 

Cambodia, Laos PDR and Myanmar, have 5 years grace to comply, with a possible 3-year extension.[9]

19. For settlement of disputes, the RCEP e-commerce chapter has no enforcement mechanism and so, in the event of disputes, the state-state dispute settlement does not apply. The concerned parties shall first engage in consultations in good faith and make every effort to reach a mutually satisfactory solution. In the eventuality of a failure to reach a solution, any Member State engaged in the consultations can move to the RCEP Joint Committee for further discussion, although the latter does not have any power to impose any decision.

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Provisions

RCEP

1.

Protection of personal data and privacy

Obligates parties to adopt a legal framework to protect personal information.

2.

Cross-border transfer of information

Allows cross-border transfer of information by electronic means.

Gives parties indisputable right to adopt measures for protecting their essential security interests.

3.

Data localization

Prohibits parties from requiring the use of or locating of computing facilities in that party’s territory.

Gives parties indisputable right to adopt measures for protecting their essential security interests.

4.

Non-imposition of customs duties

Prohibits customs duties on electronic transmissions.

Allows Members to adjust this provision based on the outcome under the WTO’s work programme on electronic commerce.

5.

Prohibition on disclosure of source code

No provision.

 

9 Article 12.15(2): Cross-border Transfer of Information by Electronic Means. Footnote. For both Articles 12.14 and 12.15 Cambodia shall not be obliged to apply this paragraph for a period of five years after the date of entry into force of this Agreement, with an additional three years if necessary.