Cut the red tape: NZTech demands action on digital trade barriers

Digital exports in the form of software and online services have so far managed to dodge Donald Trump’s wall of tariffs. 

But that doesn’t mean digital trade is fair or free, according to NZTech, which is calling for reform to remove barriers in front of our digital exporters.

New Zealand’s technology sector, a rapidly expanding pillar of the national economy, is being held back by a complex web of non-tariff barriers (NTBs) that threaten its global competitiveness, says NZTech, the industry body representing over 2,500 members. 

In a submission to the Ministry of Foreign Affairs and Trade, it has urged the government to take decisive action to address these obstacles through a new “plurilateral” arrangement focused on digital trade.

Understanding the barriers

NZTech’s submission highlights a crucial distinction between “digitally-enabled trade” (where digital tools facilitate the export of physical goods) and true “digital exports” such as software, AI, and gaming products. While New Zealand has made progress in supporting digitally-enabled trade through agreements like the CPTPP and the Digital Economy Partnership Agreement (DEPA), concrete rules for digital exports remain inadequate.

The barriers facing tech exporters fall into four main categories:

Talent mobility: Tech firms often need to deploy staff overseas for implementation and support, but restrictive and opaque visa regimes in foreign markets impede this. The inability to move talent freely is a significant NTB for digital exporters.

Intellectual property (IP) protection: While exporting software as a service reduces some IP risks, exporters still face a patchwork of inconsistent IP protections and enforcement, eroding value and opportunity in certain markets.

Establishing local presence and repatriation of funds: Many exporters are compelled to set up costly local operations due to data localisation rules. Complex regulations around establishing a presence and repatriating profits make it hard for firms to reinvest and grow.

Divergent digital regulations: Increasingly fragmented and rapidly changing rules around privacy, data flows, AI, and certification create compliance headaches. Inconsistent standards force companies to retool products for each market, while some regulations are seen as protectionist or motivated by non-commercial interests.

NZTech also warns that the expiration of the World Trade Organisation’s moratorium on tariffs for digital products would have a “serious negative impact” on the tech and entertainment sectors.

What NZTech recommends

To address these challenges, NZTech recommends a multi-pronged strategy:

Negotiate binding digital trade rules: New Zealand should push for comprehensive, binding rules covering AI, data privacy, standards development, and platform regulation, treating digital trade with the same seriousness as traditional goods trade.

Reduce regulatory fragmentation: The government should work to simplify the “digital noodle bowl” of overlapping and divergent digital trade rules, seeking greater coherence across agreements.

Support a permanent WTO moratorium: New Zealand should advocate for a permanent WTO moratorium on customs duties for digital products transmitted electronically.

Resource government agencies: Equip and resource officials in MFAT and related agencies to tackle digital NTBs proactively, as is already done for non-digital trade barriers.

NZTech emphasises the importance of working with a broad range of international partners, prioritising those willing to engage constructively, and urges the government to maintain a creative, influential presence in global digital trade negotiations.

“New Zealand has already negotiated some useful trade agreements to support digitally-enabled trade – for example, in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) or the ASEAN Australia New Zealand Free Trade Agreement (AANZFTA), and some useful building blocks for developing rules for digital trade, such as the Digital Economy Partnership Agreement (DEPA),” NZTech chief executive Graeme muller wrote in the submission.

“But concrete rules to support ‘digital trade’ are largely lacking – what is needed now is a new focus on how to boost “digital trade” into global markets.”

A sector on the rise, facing global headwinds

According to the submission, the New Zealand tech sector now employs 121,000 New Zealanders and contributes approximately $22 billion to GDP, making it the country’s third-largest export sector with $10.7 billion in export receipts in 2023. Software exports alone are growing at more than 20% annually. Yet, despite this impressive growth, NZTech warns that a lack of coherent international rules and persistent NTBs are constraining further expansion.

Photo credit: Erik Mclean/Unsplash