Unleashing Digital Trade Potentials: How <scp>DEPA</scp> Modular Requirements Can Boost China's Digital Services Trade Efficiency With Its Trading Partners

ABSTRACT Digital services trade has emerged as a global growth engine and regional trade agreements have received increased attention for addressing digital trade issues. The Digital Economic Partnership Agreement (DEPA) stands as the pioneering international agreement exclusively dedicated to digital trade. It has established a high benchmark, with numerous countries indicating their willingness to become signatories. However, the empirical investigation of international regulations and standards' impact on digital trade remains understudied. This paper employs a time‐varying stochastic frontier gravity model and a trade inefficiency model to conduct an analysis of how complying with the provisions of DEPA Modules can affects the efficiency and potential of digital services trade between China and its 30 trading partners, using data from the years 2014 to 2019. The results indicate that fulfilling the provisions of DEPA Modules could significantly improve trade efficiency. Specifically, high tariff rates, a closed environment for e‐payment systems, and weaker protection of intellectual property rights can impede digital services trade. In contrast, higher penetration rates of secure internet servers and mobile cellular networks, and enhanced government effectiveness can promote trade efficiency. Therefore, complying with the DEPA Modular requirements yields benefits for digital services trade between China and its trading partners.