Digital provision inclusion in trade agreements: the death of (digital) distance through a gravity model approach

Abstract

As the WTO struggled to keep pace with evolving trends in international trade, countries began incorporating subjects such as e-commerce, privacy, AI, and intellectual property into their Preferential Trade Agreements (PTAs). However, little is known about how these “digital provisions” are implemented or what determines the prioritization of specific clauses. This article explores the role of economic factors in the adoption of digital trade provisions by examining the bilateral relationships of countries that have implemented PTAs since the year 2000. Testing a gravity model approach, the study finds that while economic factors are indeed relevant, their influence challenges standard gravity trade expectations: countries with higher GDP tend to seek more digital provisions, while geographically closer countries tend to implement fewer such clauses. In addition, although different types of digital provisions appear to be adopted uniformly at the aggregate level, domestic preferences in digital governance may influence the extent to which e-commerce and privacy clauses are incorporated into PTAs. These results provide valuable insights into the economic and institutional drivers of digital trade provisions, with significant relevance for both researchers and policymakers.