Digital Growth in Latin America and Southeast Asia:
A Comparative Analysis of MERCOSUR and ASEAN Digital Policies
June 11, 2023
As the globalisation of technological innovations has accelerated the rise of digital economies, countries in Latin America and Southeast Asia experience the highest growth in digital penetration rates and internet access and usage (Cullen International SA, 2019). The Southern Common Market [MERCOSUR] and the Association of Southeast Asian Nations [ASEAN] have respectively played significant roles in fostering digital growth. Internet access in Latin American countries doubled between 2010 and 2018 to reach 68% of the population, with the core MERCOSUR member states of Argentina, Brazil, Uruguay and Paraguay averaging higher in internet penetration and digital adoption rates across Latin America and the closest to the Organisation for Economic Co-operation and Development [OECD] average (OECD et al., 2020). On the other hand, social media usage in ASEAN is among the highest in the world, growing by 31% in 2016 alone at a total of 72 million people, drastically transforming how goods and services are being marketed across the region (World Bank, 2019). Both MERCOSUR and ASEAN have set forth frameworks and guidelines for the implementation of digital policies to varying degrees, each facing its own challenges in establishing effective digital infrastructures to support inter- and extra- regional trade (Cullen International SA, 2019). This paper aims to compare and contrast the function of the MERCOSUR Electronic Commerce Agreement and the ASEAN Digital Masterplan 2025 in their respective regions and its impact on transborder data access and digital data governance.
Socio Political and Historical Context
Although both Southeast Asia and South America have a shared history of colonialism and authoritarian regimes, Kohli (2009) argues that different pathways for economic growth in the late 20th century have led Asian countries to grow exponentially more than their South American counterparts. Whilst Southeast Asian countries have generally built manufactured export-centric economies that leveraged intra-regional trade, the typical pattern in South America relied heavily on foreign capital and dependent on the global economy, receiving 44% of foreign direct investment from the United States [U.S.] and around 30% from European Union [EU] member states in 1995 (Kohli, 2009). As Southeast Asian decolonisation led to the discontinuity of Western hegemony in the region, South American powers somewhat preserved their colonial ties and increasingly became ingulfed in the U.S. soft power empire (Kohli, 2009). The divergent economic growth pathways pursued by both regions have contributed to the significant disparity in their respective levels of development and influence.
Historically, ASEAN’s diverse range of identity politics among member states has led to ideological tensions regarding the efficacy of policymaking, yet they have achieved success in negotiating and harmonising regulatory regimes from an economic and sociocultural perspective (Putra, 2012). For instance, the ASEAN Economic Community Blueprint introduced standardised competition policies. However, only four member states had existing national competition laws, and there were variances among them (Choi & Porananond, 2023). However, as other member states grew to adopt their own versions of competition law through localised harmonisation over the years, they drew inspiration from their regional neighbours (Choi & Porananond, 2023). The perceived relatability and compatibility of the local context made it more appealing for the other member states than the usually referenced models of the US or the EU (Choi & Porananond, 2023). ASEAN’s early acceleration of non-discriminatory free trade agreements and multilateral liberalisation demonstrated strong growth in strengthening intra- and extra- regional trade, which indirectly became the precursor to the ideological foundations of MERCOSUR (Kuwayama, 1999). The EU and the US were key actors in influencing MERCOSUR’s extra-regional economic policies, such as the Audiovisual MERCOSUR Programme, which echoed existing EU policies on transborder access to audiovisual goods alongside financial instruments to support free trade agreements with MERCOSUR (Sarikakis & Ganter, 2013). The region, however, experience drastic shifts in priorities depending on the incumbent MERCOSUR state leaders, swaying from neo-liberal bi-regional trade agreements with the EU to a focus on South-South trade through far-right protectionist neo-patriotic ideology (Hoffmann, 2023). This has subsequently weakened MERCOSUR’s legitimacy and, by extension, power to harmonise regulatory regimes and push for regional integration (Hoffmann, 2023). In the contemporary era, MERCOSUR and ASEAN maintain positive relations and remain committed to improving inter-regional ties primarily through trade and investment cooperation, but also through intellectual property and digital connectivity (ASEAN, 2023). These differences in extra-regional attitudes to the globalised economy, alongside debates on nationalist or dependent capitalist development strategies, shape how both MERCOSUR and ASEAN develop digital policies and their subsequent function and efficacy.
The MERCOSUR Electronic Commerce Agreement
The MERCOSUR Electronic Commerce Agreement ([Acuerdo Sobre Comercio Electrónico del Mercosur, ASCEM] 2021) is an instrument that includes a series of regulatory disciplines in line with international bodies such as the OECD and the World Trade Organization to protect corporate and individual e-commerce activities both within MERCOSUR and extra-regional spaces (ASCEM, 2021). It aims to align consumer protection rules and the protection of personal data amongst member states and facilitates transborder data access to ease e-commerce activity, alongside other digital governance priorities (ASCEM, 2021). MERCOSUR has attempted to weave in e-commerce-related clauses in free trade agreements with other regional blocs in the past few years, but regulatory convergence in the sector have been under-realised due to a lack of harmonisation efforts (Thorstensen & Delich, 2021). The ASCEM presents the latest efforts in initiating steps to converge and standardise e-commerce policies across the bloc.
As Lerman et al. (2022) argue, the enforcement of the ECA through ‘self-regulation’ is better understood through the idea of ‘co-regulation’, as the bloc’s policies are not meant to supersede but to complement existing national laws. Small and medium enterprises [SMEs] play a driving role in MERCOSUR economies, where co-regulation mechanisms like Trust Seals fosters “conformance to law, trust-building, and legal certainty in e-trade” amongst SMEs to earn the respect of consumers (Lerman et al., 2022, p. 31). Art. 2 para. 5b, for example, “encourage[s] self-regulation in the private sector to build up trust and legal certainty in e-commerce, considering the interests and rights of users through initiatives such as guidelines, model contracts, codes of conduct, and trust seals” (ASCEM, 2021). This is later elaborated in Art. 6 para. 7 where member states are expected to “apply to the personal data they receive from another Party an adequate level of protection by means of a general standard or specific autonomous regulation … admitting for the private sector the implementation of contracts or self-regulation” (ASCEM, 2021). Lerman et al. (2022) argue that by empowering private actors to self-regulate within the pre-defined scope, certainty and transparency on regulatory standards across different jurisdictions throughout the bloc increases general consumer confidence in interacting with e-commerce companies. MERCOSUR’s approach through co-regulation and the localised harmonisation of regulatory regimes becomes the defining factor in how the ASCEM is to be upheld.
Although the efficacy and effectiveness of co-regulation remains to be seen, the localisation and territoriality of data may simultaneously inhibit tangible progress. On the location of computer facilities, Art. 8 para. 1 states that “… each Party may have its own regulatory requirements regarding the use of computing facilities, including requirements that seek to ensure the security and confidentiality of communications” (ASCEM, 2021). However, para. 3 attempts to limit the potential misuse of para. 1, stating that “provided that the measure is not applied in a manner that constitutes a means of arbitrary or unjustifiable discrimination or a disguised restriction on trade” (ASCEM, 2021). It may be important to note the potential influence of Argentina’s Data Sovereignty Bill (2017), which views locally produced data as a strategic resource and to be exclusively stored within Argentine territory. Considering Argentina’s regional power, this may be a contributing factor as to the ambiguity of the ASCEM, where it explicitly and simultaneously bans and allows for member States to enact territoriality requirements. The ASCEM’s function is clear in its efforts to safeguard public and private interests, however the localised harmonisation aspect of the ASCEM appears to be the remaining obstacle in maximising the scope of the digital policy.
The ASEAN Digital Masterplan 2025
The ASEAN Digital Masterplan 2025 ([ADM] 2021) functions as a comprehensive visionary framework for ASEAN member states to foster a digitally inclusive society in the region by increasing the capability of both public and private actors to participate in the digital economy alongside strengthening digital data governance efforts. The ADM 2025 is the latest step in ASEAN’s continued efforts to proliferate the digitisation of the region, with the ASEAN ICT Masterplan 2015 ([AIM] ASEAN, 2011) and AIM 2020 (ASEAN, 2015) as its predecessors. There remains a considerable digital divide in the region with varying levels of digital readiness amongst member States, which could be both beneficial and detrimental to ASEAN’s efforts on digitalisation, depending how the different ASEAN economies embrace the opportunities while mitigating possible challenges (Box & Lopez-Gonzalez, 2017). As the ADM 2025 is not a legally-binding agreement, this section will focus on discussions of the ADM’s Desired Outcomes [DOs] and Enabling Actions [EAs].
The ADM 2025 provides a thorough framework on personal data protection and data governance through DO3, titled “the delivery of trusted digital services and the prevention of consumer harm” (ASEAN, 2021, p. 21). To achieve DO3, EA3.3 encourages member States “to build harmonised principles-based data protection and privacy regulations and frameworks, including on data management and cross-border data flows” (ASEAN, 2021, p. 22). This is later built upon through EA4.1, imploring for ASEAN itself “to map remaining barriers to cross-border digital flows” in the region to “either align regulation … or develop mutual recognition of data protection regimes” (ASEAN, 2021, p. 23).
Trust and cybersecurity are recurring themes in ASEAN’s attempt to build a strong regional digital economy and a secure digital environment, where the harmonisation of data protection regulations would endorse cross-border data transfer mechanisms. However, Nasution (2021) points out that the quality and strength of data protection regulations amongst ASEAN member States vary wildly and with different objectives, as some have clear and dedicated laws in place where others are scattered across different regulatory documents. Malaysia was the first member to adopt data protection regulations in the region in 2010 and Singapore following suit in 2012, where both focus on data collection and data use primarily in the private sector (Nasution, 2021). Malaysia, however, does not protect user data on social media despite it being a notoriously vulnerable space, with no requirement for companies to notify data subjects in the event of a cyber breach (Nasution, 2021). The Philippines’ regulatory framework is an outlier to ASEAN ideology, where because of its extensive trade with the EU, it prioritises compliance with the EU’s General Data Protection Regulation [GDPR], widely regarded as the most comprehensive data protection regulatory regime globally, and yet simultaneously, the Phillipines does little to ensure domestic data protection (Nasution, 2021). Vietnam has only recently passed Decree No. 13/2023/ND on the Protection of Personal Data (2023), which follows much of the recommendations set out in the ADM 2025, such as rigorous impact assessments prior to facilitating cross-border data transfers. Prior, Vietnam’s scattered regulations on cross-border data transfers were the strictest in the region, pushing for territoriality and data localisation to promote growth in the domestic technology sector (World Bank, 2019).
Varying stipulations and varying degrees of implementation could potentially hinder ASEAN efforts to effectively support cross-border data transfer, which would affect adequacy assessment decisions in engaging with extra-regional trade.
Obstacles in Integration and Harmonisation
The MERCOSUR E-Commerce Agreement and the ASEAN Digital Masterplan 2025 show common themes of strengthening cybersecurity and cross-border data transfer, both within the region and extra-regional transfers, whilst also aiming to build trust amongst public and private actors. Both the ASCEM and the ASM 2025 function as regulatory frameworks for member states to follow and harmonise their own regulatory regimes, yet the apparent power disparity and readiness between member states hinder the effective implementation of such policies.
Unlike most other economic unions and trade blocs, MERCOSUR is directly governed by the heads of each member state, thus closely intertwining national interests with state leaders as influential personalities (Cullen International SA, 2019). Brazil’s leadership, with the re-election of left-leaning Lula da Silva in 2022, makes a good example. President da Silva reopened the Brazilian economy and looked to strengthen trade ties with the EU but to also strengthen regional institutions like MERCOSUR (Canning House, 2023). His presidency also means strengthening diplomatic ties with left-leaning Argentine President Alberto Fernández and the stagnation with centre-right Uruguayan President Lacalle Pou (Canning House, 2023). The closer alignment between two of South America’s largest economies would be able to accelerate the integration and harmonisation of regulatory regimes and to boost trade, however those conditions could change depending on Argentina’s own presidential elections in late 2023 (Canning House, 2023). Yet as Kohli (2009) notes, Brazil’s need for the continuous inflow of foreign capital may prevent even the leftist da Silva from enacting nationalist policies that may scare off investors, perpetuating the region’s reliance on American and European donors. The ASCEM appears to be a soft proposal to adopt international norms, which Lerman et al. (2022) argues that although it aims to establish similar standards and harmonising regulatory regimes amongst member states, it does so without requiring drastic changes to existing local legislations. Until MERCOSUR achieves more even standing between member states and assists each other in readiness – away from the influence of regional politics – the ASCEM is yet to be effectively realised.
The ADM 2025 has thoroughly addressed regional demands on regulatory harmonisation, with an earlier critique by the World Bank (2019) on ASEAN’s digital readiness urging for “a strong implementation plan that incorporates concrete targets, timelines, and institutional coordination to ensure delivery and accountability”. However, issues of power disparity and a lack of coordination, whilst evident between member states, is also a problem between the state and its people, which feeds into issues of a lack of trust between the two and further hinders effective implementation of digital policies. Throughout the COVID-19 pandemic, ASEAN member states imposed greater control over the virtual space, implementing strict attitudes on digital sovereignty and restricting cyber connectivity (Abdurrohim, 2022). This runs antithetical to the trust-building and cooperative attitudes of the ADM 2025, which as Abdurrohim (2022) argues, is more akin to China’s cyberspace policies in restricting the free flow of information, both within and beyond its borders. These appear to stem from the domestic insecurities of each member state, whereby reactive policymaking, despite having had a clear active regional approach, leads to ambiguous and contradictory implementations of regional policies (Abdurrohim, 2022). The implementation of digital policies within ASEAN faces challenges due to power disparities, lack of coordination, and domestic insecurities among member states, which hinder the effective execution of the ADM 2025.
Conclusion
The MERCOSUR Electronic Commerce Agreement and the ASEAN Digital Masterplan 2025 aim to promote digital growth, cross-border data access, and digital data governance in their respective regions. However, both face challenges in integrating and harmonising regulatory regimes due to power disparities and varying levels of readiness among member states. MERCOSUR’s structure, with governance directly influenced by the heads of member states, results in a power disparity and varying levels of readiness among countries, hindering the implementation of harmonised regulations. The ASCEM’s approach of co-regulation and self-regulation by private actors aims to increase consumer confidence but may require further harmonisation efforts to maximise the scope of the agreement. Similarly, the ADM 2025 faces challenges due to power disparities among member states and a lack of coordination between the state and its people. Varying data protection regulations and implementation levels hinder ASEAN’s efforts to effectively support cross-border data transfer. Despite these challenges, both policy frameworks are still in their infancy. Both MERCOSUR and ASEAN would need to prioritise regional cooperation amongst member states should they desire to maximise the efficacy of their digital policies.
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Originally submitted as coursework for the Master of Global Media Communication, University of Melbourne
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