Managing digital trade in Asia

A woman gets her phone's QR code of the digital payment services scanned at a food shop in Shanghai, China, 10 October 2020 (Photo: Reuters/Aly Song).

Author: Deborah Elms, Asian Trade Centre

For years, digitally enabled trade has grown without significant regulatory oversight. Firms started by delivering goods ordered online and then figured out ways to provide a wide range of services over the internet. Electronic payment methods and new logistics and shipping options evolved to support growing digital trade demands. Eventually, whole new categories of digital commerce sprang up, such as the sharing economy and the Internet of Things (IoT).

Officials have either taken a hands-off approach or struggled to fit offline rules to the online environment. As the online world continues to grow rapidly, these approaches are becoming increasingly untenable. Offline shops were concerned that they were losing competition to less regulated online firms, and that consumers had limited protections. Even firms that were benefiting from the unregulated or lightly regulated environment could see the advantage of having rules in place to ensure that trade lanes remained open. Commerce does not prosper if the environment is risky or uncertain.

While the digital world has many characteristics in common with physical commerce, one key difference is that the internet does not readily recognise national borders. Indeed, one of the great promises of the digital revolution was that firms could become ‘multinational’ regardless of their size. Anyone could launch a global business from their own home.

The global nature of digital trade required officials to grapple with appropriate regulatory oversight in a collective way. But officials were uncertain about the nature of the digital environment and the best ways to manage a growing set of complex challenges. Uneven distribution of digital growth meant that not all governments were looking at the same set of issues at the same time.

The result has been a proliferation of policies and a growing patchwork of regulations, laws and requirements in different markets. This explosion …continue reading


Digital trade integral to East Asia’s recovery and dynamism

A worker walks on stacks of containers at the Tanjung Priok port in Jakarta, Indonesia, 22 January 2021 (Photo: Reuters/Ajeng Dinar Ulfiana).

Author: Editorial Board, ANU

For decades, trade hovered confidently over the Asia Pacific region as its vital growth engine. As average tariffs fell from 17 per cent in 1989 to 5.3 per cent in 2018, regional trade multiplied — faster than the rest of the world — along with jobs and incomes. Deepening integration even helped the region to bounce back from shocks as severe as the Asian financial crisis of 1997 and the 2008–09 global financial crisis.

Escalation of geopolitical tensions seems to have unsettled trade from its perch. As rivalries heightened and criticism of globalisation grew in recent years, the multilateral trading system on which Asia’s prosperity and security had been based was challenged and the WTO’s relevance called into question.

It took a global pandemic to shift the narrative. What the COVID-19 pandemic has done more than anything else is accentuate the importance of the digital economy in the future of the global economy, and how Asia is set to lead its rapid digital transformation.

Our latest issue of East Asia Forum Quarterly,Reinventing global trade‘, launched today, illustrates how the region’s economies have emerged from the COVID-19 crisis bruised but not defeated. Supply chains have proven surprisingly resilient, partly because of their greater interconnectivity within Asia. Lockdowns have accelerated digital transformation to the benefit of small and medium-sized businesses. Some countries such as Singapore, New Zealand and Chile have finalised partnerships aimed at expanding the digital economy. Even long-brewing mega trade agreements like the Regional Comprehensive Economic Partnership (RCEP) came to fruition in the middle of the COVID-19 crisis, highlighting the leadership of regional groupings such as ASEAN.

In our lead article from EAFQ this week, Homi Kharas and Meagan Dooley observe that ‘East Asian economies are famous for delivering growth with equity …continue reading


UNIQLO’s newest commercial features AIRism casual wear and heartwarming sapphic love

Gal pals? No, gal lovers!

Queer representation in Japanese commercials ranges from the fantastical to the more serious, sometimes focusing on the struggles faced by the Japanese LGBTQ+ community. Like the multitudes contained within personal identity, the individual histories of queer folks are diverse and cover a wide range of experiences. Uniqlo’s newest commercial advertising their AIRism line reflects this by taking a slice-of-life approach in depicting a young sapphic couple.

▼ Playing in the background is Keisuke Kuwata’s “The Wanderin’ Street.”

The commercial follows the day-to-day lives of a sapphic couple dressed in Uniqlo’s AIRism casual wear. From enjoying breakfast together to snuggling up in bed, the commercial’s atmospheric lighting and its soft, intimate vibes pull immediately at the viewer’s heartstrings.

After a montage of the couple’s daily life, the commercial breaks into a tender moment in a florist shop where the couple visit for a bouquet. Not only does the one-and-only Haruka Ayase make a cameo as a friendly florist, but she also inquires if the happy couple are picking up flowers to celebrate their anniversary, which makes my inner romantic swoon.

▼ Not gonna lie, but I’d kind of freak out more if I met Haruka Ayase in real life.

Near the last part of the commercial, we also see bits of sneaky PDA such as the couple holding hands behind a park bench. Small moments like these are no doubt relatable to any queer individual in a relationship—sometimes you wanna show a little love to your significant other, …continue reading


East Asia leads e-commerce and the digital trade revolution

Cui Shuxia, a streamer in her eighties, selling local apricots to customers all over the country via the internet, Taipingbao village, Taiping Town, Xixian New Area, Xi'an city, northwest China's Shaanxi province, 28 May 2020 (Photo: Reuters).

Authors: Homi Kharas and Meagan Dooley, Brookings Institution

East Asian trade is set to rise even further in importance because the scale of the region’s economic recovery is larger and faster than anywhere else. Asia was already the second most integrated regional trade network after the European Union in 2019, with regional trade at 58 per cent of total trade. East Asia’s trading system is likely to become more inclusive and sustainable with its rapid shift to digital platforms.

East Asia is leading the global e-commerce revolution. Business-to-consumer (B2C) platforms (e-commerce, online travel, advertising technology, transport, e-services and digital media) generated US$3.8 trillion in revenue in 2019, with US$1.8 trillion of it in Asia. E-commerce alone accounted for US$1.9 trillion in revenue globally and US$1.1 trillion regionally. China is at the front, accounting for 45 per cent of e-commerce transactions. Online sales already represent 12 per cent of total retail sales in Asia, compared with 8 per cent in Europe and North America. The digital economy is expected to add US$1 trillion to Asia’s GDP in the next 10 years.

The e-commerce movement is evolving to include cross-border transactions. Cross-border B2C e-commerce generated an estimated US$404 billion in sales in 2018, up 7 per cent from the year before. Business-to-business (B2B) sales account for 80 per cent of cross-border e-commerce, but B2C represents the fastest growth. China is the global leader, home to most of the largest online retail and auction sites. Cross-border transactions now account for 10 per cent of e-commerce sales in China. COVID-19 has likely driven these figures higher as consumers turn online.

There is still considerable room for growth. E-shopper penetration — the share of the …continue reading


Japan’s response to the coup in Myanmar

Demonstrators gathered near Yoyogi Park and marched down to Shibuya to protest against the military coup and demanded the release of Aung San Suu Kyi, 14 February, 2021 (Photo: Viola Kam / SOPA Images/Sipa USA).

Author: Patrick Strefford, Kyoto Sangyo University

On 1 February 2021, military television channel Myawaddy told the people of Myanmar that a state of emergency had been declared. President Win Myint and State Counsellor Aung San Suu Kyi, both senior members of the National League for Democracy (NLD), had been arrested.

Former vice president Myint Swe — now serving as President — used his constitutional authority to declare the state of emergency, then transferred state power to the Commander-in-Chief of the Myanmar Armed Forces (Tatmadaw), Min Aung Hlaing.

The Tatmadaw claimed that widespread election fraud in the November 2020 elections resulted in the NLD landslide victory. On 2 February 2021, they announced that a new State Administrative Council had been formed to take over all state legislative, judicial and executive functions. This has been called a coup by most Western media.

After 10 years of varying levels of cooperation between the Tatmadaw and the NLD, the democratic transition has taken a serious U-turn. But given the strained relations between the Tatmadaw and the NLD — and given the fragility of all democratic transitions — the potential for such a reversal was always there, lingering in the shadows.

Most Western governments and media outlets were quick to denounce and condemn the Tatmadaw and tried to draw attention to what they saw as a slow and weak response from the Japanese government. Certainly, Japan was not included in the 15 February statement by ambassadors to Myanmar that called for the military to show restraint and condemned the detention of political leaders.

But Japan was a signatory to the G7 Foreign Minister’s statement on 3 February, ‘condemning the military coup’. On 21 February and again on 28 February, the Japanese government said it ‘strongly condemned’ the situation in Myanmar. In the same statement it said, ‘the …continue reading


Cola made from the island that inspired Princess Mononoke begins crowdfunding

“Natural” and “world heritage” aren’t words often used to describe cola.

Cola is a beverage often associated with junk food and large corporations, but in recent years the trend of “craft cola” has been bringing the art back to cola production. From roadside stands selling handmade drinks to homemade recipes, the limits to cola can go far beyond just “Coke” and to exotic places like Yakushima.

Yakushima is an island off the southern tip of Kagoshima Prefecture, renowned for its carefully preserved natural beauty and designated as a World Heritage Site by UNESCO. Its lush, moss-covered forests and ancient trees are said to have inspired the backdrops of Princess Mononoke.

However, with the ongoing travel restrictions to limit the spread of COVID-19, it’s not as easy to get there as it used to be. It would be great if one could take all the age and beauty of Yakushima, bottle it up, and send it to us, so that’s just what the cola craftspeople of Biground have done with Yakushima Millennium Craft Cola.

This cola contains turmeric that has been grown in Yakushima and infused with the essential oils and minerals of the land. Cinnamon, cloves, and cardamom are also added and this mixture is all sweetened with muscovado and unrefined sugars from the neighboring island of Tanegashima.

The water in this cola is also from Yakushima, where it is said to “rain 35 days a month.” This high precipitation, combined with the pristine ecosystem of the island, generates a distinctly “ultra soft water” that gives …continue reading


Geopolitics drives vaccine access in Asia

Workers offload boxes of Oxford/AstraZeneca vaccines received under the COVAX scheme, Phnom Penh International Airport, Cambodia, 2 March 2021 (Photo: Reuters/Cindy Liu).

Author: David P Fidler, CFR

From the start of the COVID-19 pandemic, vaccines were seen as critical to countering it. The World Health Organization (WHO) and other stakeholders created the COVID-19 Vaccine Global Access facility, or COVAX, to ensure equitable access worldwide. But countries with the means to make or buy vaccines locked up global manufacturing capacity and supplies. This vaccine nationalism generated urgent questions about when low-income countries will get vaccines. In Asia, geopolitics, not equity, are driving vaccine access.

With the United States and other Western democracies pursuing vaccine nationalism, China exploited the global access crisis by selling and donating Chinese vaccines in Asia in ways that advanced its foreign policy interests associated with its Belt and Road Initiative. With a wary eye on China, India has donated vaccines regionally, and Russia has also sold and donated vaccines to Asian countries.

Even so, bilateral vaccine diplomacy has had limited impact on vaccine needs, and whether sold or donated doses materialise as promised remains unclear. China, India and Russia face domestic vaccination needs that could delay deals and donations. Questions have persisted about the safety and efficacy of Chinese vaccines, and comments by the head of China’s Centre for Disease Control and Prevention about the low efficacy of Chinese vaccines threaten to damage China’s vaccine diplomacy.

Vaccine diplomacy has produced political attention disproportionate to its health consequences. Rather than disavow vaccine nationalism at their February 2021 summit, G7 leaders engaged in geopolitical handwringing about China and Russia gaining influence through vaccine …continue reading


Priority on dealing with US–Japan alliance perception gap

Lloyd Austin, US Secretary of Defense (R) and Japanese Defense Minister Kishi Nobuo (L) attend a review an honour guard prior the US–Japan Defense Ministers Bilateral meeting at the Japan Ministry of Defense, Tokyo, Japan, 16 March, 2021 (Photo: David Mareuil/Pool via Reuters).

Author: Ben Ascione, Waseda University

When Japanese Prime Minister Yoshihide becomes the first world leader to be hosted by US President Joe Biden on 16 April, restoring trust in the US–Japan alliance and deepening cooperation will top the agenda. This includes dealing with a still rising China, North Korea’s nuclear weapons, climate change and COVID-19.

After the damage wrought by the Trump administration, the Biden administration’s focus on cooperation has been welcomed by US allies including Japan. Yet as China continues to rise and the United States encourages allies to take on greater burden sharing efforts, there is a risk of a serious perception gap emerging between Japan the United States.

The US–China high-level officials meeting in Alaska on 18 March showed that taking a tough posture towards China is a bipartisan endeavour in the United States. US Secretary of State Antony Blinken lambasted his Chinese counterparts over human rights in Xinjiang and Hong Kong, assertiveness toward Taiwan and the South China Sea, cyber attacks, and economic coercion to establish these credentials.

While Japan has serious concerns about Chinese behaviour, its approach has been more cooperative than confrontational in recent years. In October 2018, former prime minister Shinzo Abe visited Beijing and Japan signed MOUs with China on over 50 joint infrastructure projects in third countries. Chinese President Xi Jinping was scheduled to make a reciprocal state visit to Japan in April 2020, but it was postponed due to the pandemic.

Under Suga, China doves and hawks in Japan’s ruling Liberal Democratic Party (LDP) are jostling for influence. The hawks sought to cancel Xi’s visit in light of developments in Xinjiang and Hong Kong. LDP Secretary General Toshihiro Nikai, a key backer of Suga who has spearheaded engagement, fended off the cancellation, but the visit is not …continue reading


Global digital governance can start in Asia

A worker assembles servers on the assembly line of China's Dawning Information Industry Co., also known as Sugon, in Tianjin, China, 14 March 2018 (Photo: Reuters).

Author: Editorial Board, ANU

Data is not the new oil, it’s much more. The digital economy is the new economy and will underpin productivity growth and recovery from the pandemic.

Healthcare, education and service delivery were all enabled during COVID-19 lockdowns and social distancing as digitalisation of economies accelerated by several years in a few months.

Sources of innovation and technological progress are increasingly diffuse across the globe and physical distance matters less for international commerce and exchange. So we appear to be on the crest of a new wave of globalisation and connectivity. Information sharing and the cost of transporting digital services is virtually zero.

But digital protectionism is also on the rise and geopolitics are propelling a digitally divided global economy. The strategic rivalry between China and the United States is leading to digital decoupling and contributing to digital economic fragmentation.
The difficulty for governments is to balance the competing policy objectives of privacy, intellectual property protection, consumer protection and competition policy. There is an absence of multilateral rules governing the digital economy so Europe, the United States and China as well as other countries are pushing ahead with their own systems as the world tries to navigate them.

In our lead article this week, Shiro Armstrong, Rebecca Sta Maria and Tetsuya Watanabe argue that getting things right in the Asia Pacific can help avoid a fractured global digital economy. Armstrong, Sta Maria and Watanabe are authors on a report released today, Towards an Asia-Pacific Digital Economy Governance Regime.

‘The Asia Pacific includes China, the United States, and countries that are proactively engaged in rule-making’, Armstrong, Sta Maria and Watanabe argue. ‘East Asia is the most data rich region in the world’ and ‘there are shared global interests and common challenges, as well as huge potential …continue reading