China-ROK FTA could do with a digital upgrade
When the China-Republic of Korea Free Trade Agreement came into force in 2015, the global economy was still a world of steel, saltwater and physical inventory. Success was measured by the rhythmic clank of a shipping container landing on a dock. Back then, "trade" meant heavy machinery, industrial components and consumer gadgets. Digital elements were merely a footnote.
Fast forward to 2026, when trade is going digital at an irreversible scale. While the "cargo" moving between China and the ROK remains critical, the economic gravity has shifted toward the byte, the algorithm, and the cloud. Artificial intelligence has become a foundational utility fundamentally changing how people live and do business in both nations.
In 2024, the total global trade of "digitally delivered services" touched $4.78 trillion. Both China and the ROK are active players in digital trade, and bilateral online shopping continues to grow rapidly, with the digital corridor as a primary engine of the China-ROK trade relationship.
The scale of this shift is hard to ignore. The ROK's gaming and fintech sectors are sprinting into the Chinese market, while China's hyper-efficient e-commerce apps have become staples of the Korean digital lifestyle. This is not just "business as usual"; it's an accelerating digital merger of two of the world's most tech-savvy populations, demanding a trade framework that can keep pace.
Yet, as the two countries navigate this high-tech frontier, they are essentially using an analog map. The current China-ROK FTA is anchored in an outdated framework focused on traditional tariffs on physical goods. This "norm-reality mismatch" means that while the physical ports of both countries are wide open, the digital highway connecting the two countries is riddled with potholes and regulatory speed bumps.
The good news is that following the January summit in Beijing, both nations have beefed up efforts to conclude these long-standing negotiations. Once these lingering issues are resolved, China and the ROK must immediately pivot toward a "digital upgrade" of the bilateral FTA.
To make this upgrade work, we have to address the missing links and sketchy parts of the current rules. In today's economy, you can't separate a product from its data. You can't export a humanoid robot without the massive data streams that power its AI, nor can you offer modern medical services without moving sensitive medical data across borders. Currently, these transactions are in a legal gray area because the 2015 FTA could not have anticipated the data-driven reality of 2026.
Notably, the agreement doesn't have a dedicated chapter on digital trade. While it contains a brief chapter on e-commerce, its nine articles are merely limited to noncontroversial, largely symbolic statements. The heavy hitters of modern digital trade — cross-border data transfers, server localization requirements, and AI — are nowhere to be found. There are also no clear rules on when a government can restrict data movement or mandate domestic servers. In the eyes of the 2015 framework, AI is largely absent. Its utilization is unaccounted for and its regulation is legally invisible.
Then there's the elephant in the room: national security. This concept now permeates every sector of commerce, constantly redefined with every new semiconductor breakthrough or AI model. Because the China-ROK FTA follows a template from a bygone era, we are witnessing a head-on collision between national sovereignty and free trade principles. The scope and contours of national security need to be clarified in the agreement — especially as questions and concerns over this concept surface on the digital frontier and fuel broader economic disputes. Without a modern mechanism to settle these matters, we are simply inviting a future of endless tit-for-tat barriers.
It is striking that bilateral trade rules remain out of step with the digital realities of both countries. Attempting to govern modern commerce with a decade-old rulebook is overly optimistic to put it mildly, and dangerously obsolete to put it bluntly. We must treat the digital modernization of the FTA as an immediate priority.
When the rules of the road are this fuzzy, innovation stalls. Small startups that should be our growth engines are often the first to apply the brakes when they encounter a maze of confusing, defensive regulations. A trade agreement should be able to address these challenges. An upgraded China-ROK FTA can effectively serve this purpose.
In fact, this push for a digital upgrade aligns perfectly with the theme of this month's Boao Forum for Asia:"Shaping a Shared Future: New Dynamics, New Opportunities, New Cooperation." Not surprisingly, many of the topics on this year's agenda focus on new digital technologies, humanoid robotics, AI and future readiness. A"digitalized" FTA between China and the ROK could serve as a reliable benchmark for other nations. By finding the critical balance between data security and a seamless marketplace, it would offer a solid template for the broader international community to build upon.
The digital revolution is changing the very definition of trade in every corner of the globe. An agreement that ignores this shift is an anchor holding us back, rather than a sail catching the wind. Businesses on the ground are calling for the bilateral FTA to move from managing the trade of the past to building a high-speed lane for the future. The shipping containers defined the last decade; the digital upgrade is our launchpad for the next.
The author is a professor of law at Seoul National University in the Republic of Korea.
The views don't necessarily reflect those of China Daily.
If you have a specific expertise, or would like to share your thought about our stories, then send us your writings at opinion@chinadaily.com.cn, and comment@chinadaily.com.cn.
