US and China to collide over digital trade in Southeast Asia

The US proposes a digital “Marshall Plan” in the Indo-Pacific. Biden wills to counterbalance the Chinese influence in the region, but Southeast Asia has very close relations with Chinese technology companies

The Biden administration is discussing a proposal for a digital trade deal in Asia-Pacific to revive the US role in the region. President Donald Trump had downsized Washington's international leadership with a series of unequivocal moves: among others, interventions against the institutions of the liberal international order and the abandonment of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership in 2017. Joe Biden changes course, and after having spent the first months of his presidential mandate strengthening existing agreements and retracting the positions taken by his predecessor, he is considering launching what has been called a digital "Marshall Plan" for Asia and the Pacific. According to analysts, besides the economic interest of US brands and investors, strengthening Washington's presence in the region is also a way to counterbalance Chinese influence. Wendy Cutler, from the Asia Society Policy Institute in Washington, said the deal "would bring the United States back into the business game in Asia while considering the benefits of rejoining the Comprehensive Transpacific Partnership Agreement (CPTPP)."

Apparently, the goal is to create a paradigm of shared standards for the digital economy, which includes rules on the use of data, electronic customs agreements and trade facilitation. Countries such as Japan, Malaysia, Singapore, Australia and New Zealand would be included in the project. As the associate director at the Information Technology & Innovation Foundation Nigel Cory contends, when negotiating commercial treaties, the difficulty lies in having to reconcile different and sometimes divergent demands, such as those on work, services and environmental regulations. "It is a very challenging and complicated task" he noted, "while with specific agreements for digital commerce it is a little easier."

Moreover, Southeast Asia has already embarked on the path towards greater digital integration. The region is currently home to around 400 million internet users, 10% of whom landed online for the first time in 2020. ASEAN's efforts are moving towards greater international cooperation on the issue, both between member countries and between the 'Association and its dialogue partners. As the Singapore Minister of Communication and Information Josephine Teo pointed out, the fragmentation of the technological and digital space should be prevented by stepping up efforts towards partnerships that foster digital commerce in the area. “We should look for more partnerships, not fewer” he suggested, “instead of technological bifurcation, we are actually trying to have more interoperable systems and standards (...) [to] promote cross-border data flows and grow digital commerce that will help our businesses, both large and small ".

However, the anti-Chinese strategic interests of the United States are a controversial issue for Southeast Asia. Although the relationship between the ASEAN countries and China may be ambivalent, the possibility of being co-opted into the Atlanticist countries is not a trivial matter. The Chinese technology giants invest heavily in the region: between infrastructure, trade and financing they represent a real resource for local economies. Large Chinese companies such as Alibaba Group Holding Ltd. and Tencent Holdings Ltd. have spearheaded a wave of investment among ASEAN countries in recent years. This week, national representatives from some Asian countries expressed support for Biden's proposal, taking care to avoid any mention of Beijing's potential exclusion. Malaysian Commerce Minister Azmin Ali welcomed the idea and called on American companies to use his country as a "gateway" to Southeast Asia. All this just a few days after Kuala Lumpur's decision to choose Ericsson and not Huawei for the development of the 5G network infrastructure. Move that was noted in Washington. while Singapore has suggested that the deal has the potential to create "open and trusted global digital commons". In any case, as analysts have observed, greater exposure of Southeast Asia to Western rules can undermine the relationship with Chinese technology companies, advocates of a totally different approach to privacy, transparency and surveillance.

Some Chinese state media have negatively welcomed the White House proposal. They have accused the US administration of hypocrisy, accusing it of promoting a treatment that is only apparently on par with Southeast Asia, which lacks the adequate economic stability to enjoy fair trade with the US. According to the Global Times, the United States has adopted a zero-sum mentality to promote discord and instability in the region. One of the sectors in which ASEAN and China cooperate most profitably are digital infrastructures, which would create the preconditions for developing the virtual commerce sector. The economies of the Indo-Pacific seem willing to take advantage of cooperation with Washington, without giving up the intense relationship with Beijing. Regional stability remains the top priority of all the actors involved, which is why the most disruptive geopolitical consequences of a digital trade agreement with the United States will have to be mitigated.