On 10 March, the European Commission announced the conclusion of negotiations on the ‘Digital Trade Agreement’ with the Republic of Korea.
Through this Agreement, the EU and Korea are setting high standards of regulation to foster open, predictable, and straightforward digital trade, creating new business opportunities and strengthening consumer confidence. It establishes a regulatory framework that enables businesses, especially SMEs, to fully benefit from digital trade by accessing competitive digital technologies and promoting a more predictable environment with greater legal certainty. But what does digital trade really mean in practice? How does it influence the way we work and shop, and why is it important for the EU economy?
What is digital commerce?
The OECD defines digital trade as “all trade that is ordered and/or delivered digitally”. In other words, the international sale and purchase of a good or service carried out over computer networks by methods specifically designed for placing or receiving orders.” In turn, the WTO classifies digital commerce into two categories, depending on whether the transaction is digitally ordered or digitally delivered.
Digital services, on the other hand, are defined as services marketed through electronic networks, such as applications or digital platforms.
Examples of digital commerce range from cloud services and financial services to any product or service ordered digitally—including everyday actions such as downloading an app on a smartphone, booking travel through an application, or purchasing a book online.
Nevertheless, the definition of digital commerce—and its distinction from related concepts such as digital services or e-commerce—is sometimes complex and potentially confusing, making it difficult to quantify. Digital intermediation platforms, such as marketplaces and service apps, play a crucial role in the digital economy and pose specific measurement challenges. It is therefore essential to distinguish between the transactions they facilitate and the intermediation fees they charge.
What is the scope of the Agreement?
It is a wide-ranging agreement covering all digital commerce, excluding only audiovisual services and certain services and data managed by public administrations.
Why is this Agreement relevant to the EU?
From the perspective of the bilateral trade relationship with the United States, EU countries export automobiles and industrial equipment to the US, in a segment that in 2023 represented a surplus for Europeans of around 157 billion euros (164 billion dollars).
However, services are a segment in which US companies are clearly dominant. Technology giants such as Google and Meta have no competitors in the European market. Considering services alone, the US has a surplus in its relationship with the EU of approximately 109 billion euros (about 114 billion dollars).
For all these reasons, this Agreement is an important milestone that reinforces the European trade strategy. It complements the EU–Korea Free Trade Agreement of 2011 and strengthens ties with one of the most promising regions in the digital ecosystem, adding to the agreement signed with Singapore in 2023.
“In a time of geopolitical uncertainty, strengthening our ties with like-minded partners such as the Republic of Korea is of paramount importance. Today marks a double success in that regard, as we not only contribute to the well-being of our businesses and citizens but also demonstrate our strong commitment to the international rules-based system. Our FTA and DTA will ensure businesses and consumers benefit from a fair, safe and open trade system, both online and offline.”
Maroš Šefčovič, Commissioner for Trade and Economic Security; Interinstitutional Relations and Transparency
What are the main benefits?
This ambitious Agreement reflects the EU’s commitment to establishing a state-of-the-art regulatory framework for the development of digital trade, while further connecting the EU and Korean digital markets. The Agreement establishes binding rules that foster consumer confidence, ensure predictability and legal certainty for businesses, and enable reliable data flows, while removing and preventing the emergence of unjustified barriers to digital trade.
The Digital Trade Agreement promotes a people-centred approach to building digital and data rules that respect individual rights. It ensures that the EU and Korea preserve the policy space needed to develop and implement measures to address the emerging challenges of the digital economy.
The provisions cover issues such as the free flow of data across borders, privacy and the protection of personal data, customs duties on electronic transmissions, electronic contracts, authentication and trust services, source code protection, online consumer trust, unsolicited direct marketing communications, open government data, and regulatory cooperation in digital commerce.
In addition, this Agreement seeks to enhance digital trade in services and goods and strengthen legal certainty for European businesses in Korea. It recognises the legal validity and enforceability of electronic contracts and encourages the use of electronic signatures. This will allow European companies to serve their South Korean customers directly from Europe more efficiently. European consumers will benefit from improved regulation and stronger consumer protection measures addressing unsolicited communications.
At a time of geopolitical uncertainty and significant tensions in international trade, we welcome the EU’s commitment to advancing digital trade and establishing rules that guarantee predictability and legal certainty. This Agreement marks a step forward in the EU’s digital strategy, consolidating its commitment to the digitisation of global trade and strengthening cooperation with strategic partners such as Korea.
