Indonesia’s digital economy commitments in EU and RCEP trade agreements

An analysis
04 November 2021

In recent years, Free Trade Agreements (FTAs) have started to include rules for the digital economy as a result of pressure from Big Tech. These trade measures are potentially damaging to a country’s possibilities of digital industrialisation, permanently locking in advantages for the richest nations. This summary analyses the most important points being negotiated by Indonesia with the European Union and RCEP.

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Context

Negotiation of the free trade agreement between Indonesia and the EU began in 2016. Many of EU’s positions were typical of various free trade agreements, but noticeably it also included new requests related to digital trade. The new demands suggest an EU strategy to achieve a level of digital dominance that could allow the region to think of itself as a player in the digital economy, where it currently lags far behind the US and China. It is already falling behind in terms of providing infrastructure for 5G. However, the battle for the digital services to be provided by the new network may still put the continent in a privileged position.

The EU is keen to insert itself into the Global Value Chains in an intelligent way. Strategically, it is seeking to accumulate data globally, which will allow the development of new services provided by European manufacturing companies. This implies a strategy of indiscriminate, colonialist digital extractivism that has up to now been carried out by the mainly US big technology companies, but in which European companies are now jostling for their own part of the pie.

But rather than search engines or stores, European companies are seeking to build ‘smart’ versions of their existing manufactured products. For example, an intelligent refrigerator wouldn’t just keep food cold, It would also be capable of suggesting purchases and promotions in the local neighbourhood. All these services incorporated into industrial manufacturing are only possible if there is sufficient data storage and processing. To develop the Internet of Things in manufacturing, companies need a big amount of data (big data) which requires extracting the data, localising it and processing it in the European Union, keeping control of all the raw materials and the algorithms to process it.

The European Data Strategy is thus a strategy to dominate digital capitalism through developing cybernetic value chains based on digital extractivism from the global South to the global North. This situation has also been strongly shaped by the strong lobbying efforts of North American technology companies in the region, who have sought not only to construct a liberal model in the digital economy in trade relations, but also within the EU, seeking to minimise regulations that limit their extractive capacity in the European market.

Indonesia has been negotiating these Free Trade Agreements for a long time now, without analysing the cost in terms of industrialization. The measures will put handcuffs on the state capacity to regulate and have their own data strategy. It seems like Indonesia is ready to be a provider of data to other countries wich will develop technologies and sell them back to the Indonesian people. It appears that the Indonesian state is content give up the possibility of digital industrializstion, transforming the country once and for all into a mere producer of data and a consumer of technologies designed and produced abroad.

These type of clauses are also present in RCEP, an FTA agreed and signed by various Asian and Pacific countries (Australia, Brunei, Cambodia, China, Indonesia, Japan, Laos, Malaysia, Myanmar, New Zealand, the Philippines, Singapore, South Korea, Thailand, and Vietnam).This agreement is seeking to construct a new comercial bloc in Asia with China as the main leader, imposing norms that will expand its market. This is especially the case in terms of the digital economy given China’s dominance in this sector. This agreement will prevent countries from adopting the same measures that the Chinese goverment implemented in order to become a leader in the digital market.

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Indonesia’s digital economy commitments in EU and RCEP trade agreements(pdf, 196.73 KB)
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