Prime Minister Justin Trudeau and Ministers Mélanie Joly and Mary Ng recently spent a week in Asia for ASEAN, G20 and APEC meetings. In parallel to these meetings, the federal government announced several financial measures, totalling around $1 billion, to implement the economic component of Canada’s Indo-Pacific Strategy, which was finally made public by Minister Joly on November 27.
Much of this funding is focused on infrastructure projects in the region and is intended to facilitate and promote the export of natural resources and agricultural and agri-food products. Such an approach is all good and takes Canada’s (natural) economic advantages into account. However, it ignores a whole part of the Canadian economy and that of the Indo-Pacific region: the digital economy. According to studies by the World Economic Forum and the Robert Schuman Centre for Advanced Studies at the European University Institute, the Indo-Pacific region is the world’s most dynamic digital trade.
For many Canadian companies, especially small and medium-sized ones, digital trade may be one of the best ways to do business across the Pacific. After all, digitalization allows companies to increase their operations’ scope and geographic reach. It also reduces business costs and makes it easier to adapt their supply chain.
To this end, it is important that Canada’s Indo-Pacific strategy includes a strong focus on digital trade. Such a focus would be in line with what the country’s main economic partner is doing: the United States has placed the digital economy at the heart of its Indo-Pacific Economic Framework for Prosperity, whose membership Canada will now seek.
As Canada is a rather marginal player in global digital trade, behind the US, Japan, China, Korea and even Australia, there is a need for a strategy and measures to enable Canadian companies to increase their trade with the Indo-Pacific region and the rest of the world. The development of digital trade as part of Canada’s Indo-Pacific strategy cannot be achieved without developing and implementing a digital trade strategy for Canada as a whole.
Such a strategy should rest on three pillars:
- Extending, upgrading and securing Canada’s digital infrastructure: Canadian businesses across the country should have affordable, reliable, secure and inclusive access to high-quality digital infrastructure. For international digital trade, Canada’s digital infrastructure must interconnect cheaply, easily, reliably and securely with its economic partners’ digital infrastructure.
- Enhancing Canada’s digital capacity: Canadian businesses, especially SMEs, should adopt as well as develop and protect well-established and advanced ICTs to a much larger extent than they have so far. However, it cannot be done effectively without Canadian workers, managers and entrepreneurs possessing the skills and knowledge necessary to make the most of ICTs: digital skills of a technical nature, knowledge of cybersecurity, artificial intelligence, intellectual property and data protection; “softer” skills in sales, marketing, product management, project management, interpersonal relations, problem resolution, etc.
- Removing barriers to international digital trade: Canadian businesses should face minimal barriers to international digital trade from countries abroad as well as at home. This means: (1) ensuring that any taxation of digital activities if any, does not impede international digital trade; (2) removing non-tariff barriers to international digital trade. Canadian governments (at all levels) and businesses should work closely together to develop and implement policies to achieve these two objectives. In doing so, they should also collaborate actively with their peers abroad, which face similar challenges.
Concerning a digital trade strategy’s third pillar, Canada is already very active in the Indo-Pacific region. In the spring of this year, Canada applied to join the Digital Economy Partnership Agreement (DEPA), founded by Chile, New Zealand and Singapore. China and (South) Korea have also applied to join the DEPA, with the latter already negotiating its membership. At the same time, Canada became a founding member of the Global Cross-Border Privacy Rules Forum, which was launched by the United States as part of its Indo-Pacific strategy to remove these rules from APEC (to protect them from direct Chinese influence). Finally, Canada is a member of the Comprehensive and Progressive Agreement on Trans-Pacific Partnership, which includes a chapter on digital trade.
As the discussions on these agreements primarily involve countries in the Indo-Pacific region, it should come as no surprise that Canada’s Indo-Pacific Strategy states that “Canada will work hard to promote rules-based trade in the region, expand trade and digital partnerships and enhance innovation and research” and do so by “work[ing] with partners to develop digital infrastructure, promote interoperability and promote coherent regulations affecting the Internet, the digital economy and trust and security in the use of information and communications technology”.
While it is important to be part of digital trade agreements to support the economic portion of Canada’s Indo-Pacific strategy, it is not enough. Canada also needs to address the other two digital trade pillars. To do this, it is imperative that Canada adopts a digital trade strategy that is clear, coherent and involves close collaboration between governments (federal and provincial) and businesses. In other words, Canada’s Indo-Pacific Strategy must be complemented by a broader digital trade strategy if it is to achieve its economic objective of “expanding trade, investment and supply chain resilience”.