The UK’s Electronic Trade Document Bill offers an opportunity to accelerate trade digitisation. But global adoption, scale and interoperability are also key to success.
It’s not difficult to come across tales of woe regarding paper-heavy trade processes. International trade documents are still exchanged in paper form, resulting in hefty and enduring environmental and financial costs. An estimated four billion paper documents are circulated through the trade system at any given moment; a single trade transaction can require up to 40 different paper-based trade documents – many of which are asking for the same information – and it can take up three months to process a single transaction.
But the International Chamber of Commerce, ICC, the world’s largest business organisation representing 45 million companies, employing one billion people in over 100 countries, points to key reasons why trade digitisation is set to improve. Estimating that US$1trn extra trade revenue would be possible in five years if electronic trade documents are adopted, the ICC says new laws and trade groupings signpost change ahead.
Electronic Trade Document Bill
Perhaps most significantly, the UK is on track to pass the Electronic Trade Documents Bill in law this year which would make digital trade documents legally valid. Given areas where the international community conducts international trade according to the same English legal framework that Parliament is updating, it would be simple to adopt these changes internationally.
“The Electronic Trade Document Bill is the most significant piece of trade legislation in a generation,” explains Chris Southworth, Secretary General of the ICC. “It will enable not just UK trade to go paperless but will also benefit a large swathe of international trade as English law is used by many companies all over the world. Businesses are ready for these new opportunities to access new markets. It’s simply not fair to let outdated and cumbersome systems get in the way of hard-working SMEs seeking to boost their growth.”
He continues: “With Parliament set to pass the Bill into law this summer, this is the golden moment to reform laws and digitalise trade across the whole Commonwealth. The opportunity is to stop thinking about documents, and to start thinking about data and technology. Together, we can bring international trade into the 21st century.”
With this in mind, the ICC is calling on Commonwealth trade ministers to agree to adopt electronic trade documents to make international trade faster, cheaper, simpler and more sustainable.
Other opportunities for progress include the UK’s new trade deals with Australia and New Zealand, just coming into force. Both include agreements to facilitate the use of electronic trade documents and take paper out of trade in a process that could be mirrored to accelerate digital trade adoption through the Commonwealth.
The UK’s Electronic Trade Document Bill could herald the holy grail of cooperation between different providers and stakeholders required to digitise trade. But treasury and trade experts still flag enduring challenges around scale, adoption and interoperability. Technology needs to connect with other networks to process transactions.
In a recent interview, Christian Bauwens, Senior VP, Treasury, at Flex, pointed out the need for scale when approaching trade digitisation.
“To be truly successful, digitisation tools need to be used by a majority of your customer base. The same vision must be coordinated and shared between governments and institutions in charge of global governance, central banks and the banking community,” he said.
To advance the revolution in trade promised by proposals like the UK bill, other jurisdictions will need to adapt their operational practices and reform their legal frameworks in order to recognise digital documents, conclude lawyers at commercial law firm Hill Dickinson.
“If such documents are not accepted ‘globally’ this rather mothballs an otherwise progressive and highly desirable mechanism. The government will need time to liaise with other jurisdictions in respect of cooperation agreements, as there seems little to be gained by individual countries introducing their own legislation in a piecemeal uncoordinated fashion where no reciprocity exists,” say Hill Dickinson Partner, Richard Allingham and Associate, Elizabeth Elliot.
