The Digital Trade Agreement signed between the European Union (EU) and South Korea on March 10, 2025 is an important milestone in the development of the global digital economy. This agreement aims to remove barriers to digital trade between the two parties, simplify data flows and strengthen consumer protection. The digitalization of global trade is transforming economic relations between countries and requires new regulatory frameworks. In this analysis, the background of the agreement, its key elements, its economic impacts, its potential to set a global example and its potential challenges will be discussed.
1. Background and Evolution of the Agreement
Economic relations between the EU and South Korea have deepened with the Free Trade Agreement (FTA) that entered into force in 2011. While the FTA ensures the free movement of goods, it has become clear that digital trade needs an extensive regulation. The rapid growth of the digital economy in the 2020s and the increase in competition in the global market have made digital co-operation between the parties mandatory.
The Digital Partnership Agreement signed in November 2022 aimed to increase cooperation in digital areas and formed the basis of the digital trade agreement. Within the scope of this agreement, the parties cooperated in strengthening digital infrastructures, increasing cyber security measures and linking new generation technologies such as artificial intelligence to common standards. The increasing digitalization trend of global trade and technology-based economic growth targets were decisive in the emergence of the agreement.
2. Fundamental Elements of the Agreement
The agreement facilitates cross-border data flows and sets high standards for the protection of personal data. It aims to harmonize the principles of the EU’s General Data Protection Regulation (GDPR) with South Korea’s Personal Information Protection Act (PIPA). The parties agreed to adopt common encryption methods and cybersecurity measures that enhance data security. In addition, it is planned to establish a common audit mechanism for the ethical conduct of artificial intelligence-assisted data analyses.
The agreement includes regulations on the facilitation of e-commerce transactions and the free movement of digital goods and services. The integration of digital payment systems, the recognition of electronic contracts and the acceleration of digital customs procedures are among the focal points of the agreement. The EU and South Korea have committed to set common standards on the transparency of digital marketplaces and their compliance with competition rules.
The development of digital trade also makes it necessary to protect consumer rights. The agreement includes regulations such as strengthening the rights of online consumers and increasing measures against fraud and cyber threats. The parties agreed to establish a common database to combat online fraud and to utilize artificial intelligence solutions for fraud detection.
3. Economic and Commercial Effects
This agreement will increase the volume of trade between the EU and South Korea by providing new opportunities for businesses operating in the digital services sector. In particular, small and medium-sized enterprises (SMEs) will have easier access to international markets through digital platforms. In addition, the development of common regulations in digital services is expected to harmonize between firms, speeding up transactions and reducing costs. The growth of digital trade will also have a transformative impact on traditional sectors. For example, innovative service models are expected to develop in sectors such as logistics, financial technology (fintech) and telecommunications.
Removing barriers to digital trade will facilitate the business processes of innovative technology firms. The integration of new generation technologies such as artificial intelligence, blockchain and big data analytics into the business world will accelerate. In addition, as digital infrastructure investments increase, collaborations in areas such as 5G and cloud computing are expected to expand. In addition, the spread of new applications in digital payment systems and decentralized finance (DeFi) may lead to radical changes in financial systems.
This agreement will give the parties a competitive advantage on a global scale. Increased exports of digital services will contribute to the economic growth of the EU and South Korea. In particular, the acceleration of cross-border data flows will facilitate the entry of multinational companies into new markets. Nevertheless, how to integrate this agreement into the long-term growth strategies of both parties will be a critical factor for the sustainability of the economic impacts.
4. Setting an Example for Global Digital Trade
The EU has already signed a similar digital trade agreement with Singapore and this new agreement with South Korea could serve as a model for future digital trade co-operation with other countries. As digital trade grows in importance globally, the EU’s leadership in this area will contribute to shaping global standards on issues such as data protection, AI ethics and the free movement of digital services.
This agreement can be a reference point, especially for developing countries. The EU and South Korea can create a global framework by ensuring that elements of the agreement, such as data security, cross-border digital service flows and cybersecurity, are regulated in line with international norms.
Today, the digital economy is not only an economic area, but also a strategic and geopolitical battleground. This agreement signed by the EU and South Korea contains important elements that may affect global digital competition. The EU is trying to strengthen its digital sovereignty policies in order to balance the dominance of US-based technology giants (such as Google, Meta, Amazon) in the European market. With regulations such as the Digital Services Act (DSA) and the Digital Markets Act (DMA), the EU has tended to strengthen its own digital ecosystem by subjecting large technology companies to strict rules. This agreement with South Korea has the potential to accelerate the process of developing the EU’s own digital infrastructure and increase alternative co-operation.
The US and China are the two dominant actors in the digital economy and technology on a global scale. While US tech giants dominate global markets, China has built its own digital ecosystem and developed alternative models to Western platforms (e.g. WeChat, Alibaba and TikTok).
Cooperation between the EU and South Korea could create an alternative digital trade model outside these two power centers. South Korea’s advanced technology infrastructure, competence in 5G, artificial intelligence and semiconductor manufacturing, combined with the EU’s digital transformation projects, could create a new pole in global competition.
In recent years, the EU has been trying to strengthen its economic and trade relations in the region by emphasizing its Indo-Pacific strategy. This agreement with South Korea will contribute to increasing the EU’s influence in the Asia-Pacific region in general, not only between the two parties. In particular, the inclusion of countries active in digital trade such as Japan, Taiwan, Singapore and Australia in this process through similar agreements may lead to a more integrated digital infrastructure of Asia and Europe. Thus, a new regional alliance that contributes to the regulation of digital trade outside the US and China may emerge.
Today, data security and cyber threats have become a matter of national security for states. This co-operation between the EU and South Korea will not only bring economic benefits but also encourage the parties to take joint measures on cyber security.
For example, China’s influence on global digital infrastructure through companies such as Huawei and various US technology export controls (especially on chip technologies) may lead the EU and South Korea to strengthen their technological independence. In the long run, this could lead to changes in global supply chains and pave the way for the development of new co-production models.
In conclusion, the EU-South Korea Digital Trade Agreement is an important step in the development of global digital trade. In the long run, this agreement is expected to set an example for similar co-operation with other countries. A sustainable co-operation between the parties in the field of digital trade is a critical step to support both economic growth and technological progress.
