The Institutional Anomaly<\/p>\n
Korean and Japanese firms are deeply linked across semiconductor supply chains, digital content, gaming, e-commerce, cloud services, payments, and AI infrastructure. In practice, the two economies already share digital markets in gaming, media, and entertainment. The Korea Development Institute\u2019s data suggests that about 70 percent of Korea\u2019s content exports<\/a> are concentrated in Asian markets, specifically China, Southeast Asia, and Japan.<\/p>\n Both countries already clear a high privacy bar. The European Union, among the world\u2019s strictest public data regulators, has certified each as safe<\/a> to receive Europeans\u2019 personal data. Korea and Japan\u2019s only shared digital rulebook, though, is the e-commerce chapter of RCEP. But those rules are weak and subjective. Furthermore, there is no free trade agreement (FTA) between Korea and Japan, and efforts to establish one have stalled since 2004. A trilateral FTA with China has likewise made little progress.<\/p>\n China makes the case more urgent. It applied to join DEPA in November 2021, though its state-centered approach to data governance fits awkwardly with DEPA\u2019s high standards. At the same time, Korea and China have continued to deepen services and investment trade since signing their FTA in 2015. Both tracks point in the same direction and could pull digital rules toward a common denominator that would clash with Japan\u2019s CPTPP commitments and its commitments to the United States.<\/p>\n A Korea-Japan agreement would lock in high standards between Seoul and Tokyo first, before those rules face pressure in wider trilateral or China-led talks.<\/p>\n The Bottlenecks Are Real<\/p>\n If the logic is clear, then why have negotiations not begun? First, Japan wants binding, CPTPP-level disciplines and regards soft cooperation frameworks as redundant. Japan\u2019s absence from DEPA, in this light, is deliberate rather than accidental. Analysis by the Research Institute of Economy, Trade and Industry<\/a> shows that before the DEPA 2023 Protocol, its data-flow and localization provisions merely affirmed CPTPP-level commitments, while Japan pursued regulatory interoperability through the data free flow with trust<\/a> agenda and the OECD instead. DEPA omits binding disciplines that Japan considers essential, including rules on source code, and relied heavily on cooperation-based language. Moreover, with China\u2019s accession application pending, joining DEPA risked signaling acceptance of weaker standards<\/a> at the very moment Japan was holding the line on CPTPP accession criteria.<\/p>\n Second, the bilateral relationship has long been constrained by political and historical disputes. A Korea-Japan FTA does not exist in part because such disputes have pushed the economic agenda to the back burner. Third, digital-trust friction has become a concrete obstacle. In 2024, Japan\u2019s Ministry of Internal Affairs and Communications issued administrative guidance<\/a> urging Japanese firm LY Corporation to reduce its reliance on capital from the Korean tech company Naver following a data breach, drawing official protests from Seoul. The circumstances showed how quickly a shared digital market could become a diplomatic issue.<\/p>\n Nevertheless, a digital-only negotiation that excludes sensitive issues such as agriculture and market access could offer a feasible alternative and preserve the strategic and commercial payoff of a bilateral agreement. At the same time, binding digital trade commitments could provide both governments and companies with a more predictable framework. Indeed, the same RIETI report above urges Tokyo to engage with DEPA members to maintain digital commitments at the CPTPP level. A bilateral digital trade agreement with Korea would be the most direct way to do that.<\/p>\n Compatible Substance, Separate Architectures<\/p>\n Korea and Japan have arrived at high-standard digital rules from opposite directions. The former has worked through the Korea-Singapore Digital Partnership Agreement<\/a>,DEPA<\/a>, and the U.S.-Korea FTA<\/a>. Japan has worked through CPTPP Chapter 14<\/a> and the U.S.-Japan Digital Trade Agreement<\/a>. The U.S.-Japan agreement goes further than CPTPP in two ways. It limits when a country can require financial-services computing facilities to remain onshore under Article 13, which the CPTPP\u2019s e-commerce chapter omits. It also protects algorithms expressed in source code under Article 17 and drops CPTPP\u2019s limit to mass-market software. In other words, Japan has already signed on to rules that, in places, look more like an advanced U.S. model.<\/p>\n Regardless, CPTPP remains the first agreement to establish a comprehensive set of digital trade rules, and subsequent agreements have largely built on that framework. Table 1 compares how the four agreements treat the core disciplines. The critical distinction among them is not simply coverage, but enforceability. The CPTPP and the U.S.-Japan Digital Trade Agreement are subject to binding dispute settlement. DEPA strengthened its enforceability through the 2023 DEPA Protocol<\/a>, which brought key obligations on digital products, such as non-discrimination, cross-border data flows, and data localization, within the scope of Module 14 dispute settlement. By contrast, RCEP preserves much of the modern digital trade structure but drains it of compulsory force, making it the weakest common baseline currently shared by Korea and Japan. A Korea-Japan bilateral digital trade agreement would therefore replace that weak common denominator with a more binding framework.<\/p>\n Table 1. Digital Trade Rules Across Korea- and Japan-Relevant Agreements<\/p>\n RulesCPTPP Note. The year for each agreement is its year of signing. Article and module numbers refer to the operative texts. \u201cOverall model\u201d summarizes each agreement\u2019s overall design. \u201cBest-efforts obligation\u201d means a country must genuinely try to reach a goal but does not breach the agreement by failing to; \u201cCooperative\u201d denotes a non-binding recognition of importance without a defined obligation.<\/p>\n From Familiar Rules to New Frontiers<\/p>\n A bilateral agreement should start with familiar rules on digital trade facilitation, such as customs duties on electronic transmissions, paperless trading, and online consumer protection. Korea and Japan have both accepted these rules through CPTPP, the U.S.-Japan Digital Trade Agreement, RCEP, and DEPA, so committing to them again would impose little additional burden. The next step would be to strengthen the core data rules from RCEP. There, cross-border data flows and the data-localization ban are subject to broad self-judging general and security exceptions, and RCEP does not impose binding non-discriminatory and source-code rules. Because Korea and Japan have already accepted CPTPP-level obligations in most of these areas\u2014Korea through DEPA and the KSDPA, and Japan through CPTPP and the U.S.-Japan agreement\u2014a bilateral agreement could simply reaffirm those stronger commitments between them.<\/p>\n More ambitiously, the two countries could negotiate rules on financial services and emerging technologies. They could, for example, permit the free flow of cross-border financial data while preserving safeguards for data privacy and regulatory supervision. Digital identity is a similar frontier. Existing agreements cover only electronic authentication, while DEPA\u2019s Article 7.1 promotes cooperation on digital identities, giving Seoul and Tokyo a template for working toward interoperable digital ID systems.<\/p>\n A further area of cooperation is AI governance and infrastructure. Korea\u2019s AI Basic Act<\/a> and Japan\u2019s AI Promotion Act<\/a> suggest paths for adopting cooperative rules to build trusted and responsible AI along the lines of DEPA\u2019s Article 8.2. Data can flow freely only when trusted infrastructure can carry, process, and secure it. Existing digital trade agreements do not yet provide a developed framework for AI infrastructure, including secure cloud services, data centers, computing capacity, energy supply, cooling systems, and energy-efficient computing. A Korea-Japan agreement could fill that gap by linking digital trade rules with cooperation on trusted, resilient, and sustainable AI infrastructure.<\/p>\n Why Washington Should Care<\/p>\n Even though it would not be a party, the United States has a stake in how a Korea-Japan digital agreement materializes. The central problem with digital rules today is that they are fragmented and divided. For a company, that patchwork is an additional cost and burden. Small and medium-sized companies are the ones most often shut out. The political cost runs alongside it. When rules are weak and fragmented, the country with the most leverage tends to set the terms in practice. RCEP serves as a prime example of these limitations, with modern-looking commitments that a country can largely ignore at will and no dispute settlement to push back.<\/p>\n A binding Korea-Japan agreement would set clear rules across both markets, which means lower compliance costs and greater predictability for companies. For American firms, which already operate extensively in both countries under the same basic rulebook through the CPTPP and the U.S.-Japan agreement, the deal would extend familiar terms across a larger, trusted zone that Washington would not have to negotiate. Because Korea and Japan are both U.S. treaty allies, the agreement would solidify a bloc that resists the drift toward weaker rules and would leave a template for future U.S. administrations.<\/p>\n From Diplomatic Repair to Economic Architecture<\/p>\n Korea and Japan have already done the hard part by rebuilding enough trust to make this cooperation possible. Digital trade is the most realistic place to turn that repair into something lasting. It matters strategically, it pays off commercially, and it carries less political baggage than a fight over market access. All that is left is the political decision to write the agreement down. The next step is not another general statement of intent, but a formal decision by Seoul and Tokyo to launch negotiations on a stand-alone digital agreement.<\/p>\n Hyerim Kim is Lecturer at Seoul National University\u2019s Graduate School of International Studies and former Deputy Director at the South Korean Ministry of Trade, Industry and Energy.\u00a0The views expressed here are the author\u2019s alone.<\/p>\n This material is distributed by KEI on behalf of the Korea Institute for International Economic Policy. Additional information is available at the Department of Justice, Washington, DC.<\/p>\n","protected":false},"excerpt":{"rendered":"South Korea and Japan rank among Asia\u2019s most advanced digital economies. Their firms are deeply linked across semiconductor…\n","protected":false},"author":2,"featured_media":48578,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2],"tags":[28282,28283,27554,31,28284],"class_list":["post-48577","post","type-post","status-publish","format-standard","has-post-thumbnail","category-korea","tag-cptpp","tag-depa","tag-digital-trade","tag-korea","tag-korea-japan"],"_links":{"self":[{"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/posts\/48577","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/comments?post=48577"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/posts\/48577\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/media\/48578"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/media?parent=48577"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/categories?post=48577"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/tags?post=48577"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}![\"\"](\"https:\/\/www.europesays.com\/korea\/wp-content\/uploads\/2026\/06\/shutterstock_2697403815-1024x576.jpg\")
The lack of binding digital trade rules between Korea and Japan allows China to bend such rules in their favor, warns KEI Non-Resident Fellow Hye Rim Kim | Source: Shutterstock<\/p>\n
2018U.S.-Japan
2019RCEP
2020DEPA
2020\/2023 ProtocolOverall modelE-commerce chapter (Article 14)Stand-alone digital trade agreementE-commerce chapter (Article 12)Modular; Stand-alone digital economy agreementCore data rulesCross-border data flowsBinding, with objective public-policy exception (Article 14.11)Binding, with objective public-policy exception (Article 11)Binding, but broad self-judging exceptions (Article 12.15)Binding, with objective public-policy exception (Article 4.3)Data localization banBinding, with objective public-policy exception (Article 14.13)Binding; no general public-policy exception (Article 12)Binding, but broad self-judging exceptions (Article 12.14)Binding, with objective public-policy exception (Article 4.4)Source codeBinding, but limited to mass-market software and excluding critical infrastructure (Article 14.17)Binding, including algorithms expressed in source code; no mass-market limitation (Article 17)Dialogue only; no binding source-code rule (Article 12.16)NoneNon-discrimination of digital productsBinding (Article 14.4)Binding (Article 8)NoneBinding after 2023 Protocol; subject to Article 3.3 carve-outs (Article 3.3)Personal information protectionBinding (Article 14.8)Binding (Article 15)Binding obligation to adopt a legal framework, taking international standards into account (Article 12.8)Binding and most detailed; prescribes OECD-based principles and interoperability mechanisms, including mutual recognition of trustmarks (Article 4.2)Financial services and emerging technologyCross-border financial dataCovered in finance chapter; exception applies (Annex 11-B)Covered (Article 11)Covered in Annex 8A Article 9 but exception appliesNoneFinancial-service data localization banNoneConditional, regulator access (Article 13)NoneNoneFinTechNoneNoneNoneCooperative (Article 8.1)AI governanceNoneNoneNoneCooperative (Article 8.2)Digital identityNone (electronic authentication only, Article 14.6)None (electronic authentication only, Article 10)None (electronic authentication only, Article 12.6)Cooperative (Article 7.1)Digital Trade FacilitationCustoms duties on electronic transmissionsPermanent ban (Article 14.3)Permanent ban (Article 7)WTO standstill (Article 12.11)Permanent ban (Article 3.2)Paperless tradeBest-efforts obligation (Article 14.9)Best-efforts obligation (Article 9)Best-efforts obligation (Article 12.5)Best-efforts obligation (Article 2.2)Online consumer protectionBinding (Article 14.7)Binding (Article 14)Binding (Article 12.7)Binding (Article 6.3)Binding dispute settlementAppliesNot AppliesNot applies unless parties agree (Article 12.17(3))Applies after 2023 Protocol removed Annex 14-A carve-outs for Articles 3.3, 3.4, 4.3, and 4.4<\/p>\n![\"\"](\"https:\/\/www.europesays.com\/korea\/wp-content\/uploads\/2026\/06\/54508191553_311320a153_k-1024x683.jpg\")
President Donald Trump in the Oval Office, May 2025 | Source: Official White House Photo by Molly Riley<\/p>\n