Going Paperless: The Digital Revolution in Trade
The global trading system is in dire need of reform, and the key to solving the system’s bureaucratic bottleneck lies in going paperless. Chris Southworth, the Secretary-General of the International Chamber of Commerce in the UK, believes that the current system’s dependence on billions of paper documents is slow, expensive, and ultimately unsustainable. In fact, a Santander UK survey found that 35% of UK businesses trading internationally are impeded by bureaucracy, with 65% ready to move to a paperless trading system if the law permits it.
The Commonwealth of Nations has identified the potential of digitized trade, with a business case that expects $1.2 billion growth in economic value by 2026. An 80% reduction in transaction costs and the creation of opportunities for more small and medium-sized enterprises (SMEs) is also possible. Furthermore, paired with the digitization of customs, the projected economic benefits rise to $2 billion, equivalent to the Commonwealth’s trade target by 2030.
Digitizing trade will help eliminate the chunks of paperwork associated with trade transactions, mainly due to the current system’s duplicate information requirements. To achieve this, we need to prioritize using data and technology more effectively. The International Chamber of Commerce, together with the United Nations, the World Trade Organization (WTO), the UK government, and Singaporean organizations such as the Bankers Association for Finance and Trade have all been advocating for a paperless trading system, and progress is being made.
The UK is currently enacting the Electronic Business Documents Bill, which will make the use of paper business documents unnecessary from the autumn of 2021. Bills of lading, which account for 80% of all such documents worldwide, are covered by this legislation. France, Germany, the United States, and the United Kingdom are all expected to remove legal obstacles by the end of this year, clearing the way for 90% of all global trade to be on a digital path by February 2024.
Several trials have shown that businesses can achieve efficiency and cost savings of between 40% and 90% by going paperless, making it appealing to trading companies. Perishables, just-in-time delivery systems, and other firms that need goods to cross borders quickly all stand to benefit. Going paperless and digitizing trade will also enable new financial instruments, such as electronic promissory notes (ePNs), to facilitate the rapid exchange of money and drive local business growth.
Despite the economic gains offered by free trade agreements for unfettered trade, the benefits are still overshadowed by the opportunities presented by going paperless. An agenda for reforming trade laws and digitizing trade is expected to be launched at the Commonwealth Trade Ministers meeting this week. This presents a fantastic opportunity to radically improve the UK’s trading relationships with its international partners all at once.
Going Paperless: The Digital Revolution in Trade Summary
Chris Southworth, the Secretary-General of the International Chamber of Commerce, UK, suggests that the current system’s dependence on paper documents is unsustainable. A Santander UK survey discovered that 35% of UK businesses that trade internationally are hindered by bureaucracy, and 65% are willing to adopt a paperless trading system if the law allows it. The Commonwealth of Nations has recognized the potential of digitizing trade, leading to a business case that expects a $1.2 billion growth in economic value by 2026. An 80% decrease in transaction costs and opportunities for more SMEs can also result from this change. Bills of lading, documents that account for 80% of all such documents, will be obviated as the UK enacts the Electronic Business Documents Bill. By eliminating redundancies in data requirements, going paperless will help simplify trade.
Additional Piece
Digitization is important because it reduces manual labor and allows for more organized work processes. Companies recognize that digital banking can paradoxically improve traceability, provide anti-fraud measures, and save money in the long term. There are various benefits of digitizing trade, including, but not limited to, cost and efficiency savings, greater efficiency in international trade transactions, and opportunities to eliminate errors, bypassing human error resulting in costly and difficult-to-fix issues. Digital platforms – and technologies such as blockchain, artificial intelligence, and machine learning – have the potential to facilitate this process and change the face of trade.
Blockchain is a distributed ledger system that allows parties to hold the same copy of information on a decentralized network and add to the data once all the network members agree to join it. Blockchain can provide digital proof of agreement where all stakeholders voluntarily accept the same message without the need for a trusted third-party intermediary. There is enormous potential in blockchain to improve international trade as it requires better-standardized data and addresses the integration and interoperability of private interoperable networks.
Artificial intelligence and machine learning have the potential to improve trade flows by categorizing invoice information, facilitating customs clearance, detecting and preventing fraud, and analyzing vast amounts of data to provide more enhanced insights that make business practices more effective and efficient. These fields have the potential to change trade by streamlining compliance processes and accelerating trade documents, making them more visible and secure in the process.
One significant issue with the current trade system is that it is too slow. In most cases, it takes over a month to complete a single trade. The cost of this delay is significant to businesses and economies. With technology’s help, data can flow more quickly, improving the speed of trade transactions. The digital revolution in trade could catalyze changes in numerous professions globally – from logistics professionals to economists, from suppliers to financiers, from auditors to lawyers.
Going Paperless: The Digital Revolution in Trade is the Future of Commerce
Chris Southworth proposes a radical change in the global trade system, replacing manual paperwork with digital technology. The current system’s dependence on papers is expensive, slow, and unsustainable and feeds bureaucracy. Going paperless will simplify the trading system by eliminating redundancy in information requirements, reducing transaction costs, and driving economic growth. By leveraging technological advances like blockchain, AI, and machine learning, the move to digitize trade presents a revolutionary opportunity for businesses to streamline compliance processes and accelerate trade documents to achieve the speed of trade transactions ideal. Indeed this change could catalyze transformation across numerous professions – and fundamentally alter the future of commerce.
References
Narang, S., Goyal, M., Singh, S., & Sanjay, M. (2021). Impact of Digitisation in Trade Facilitation. Journal of Contemporary Research in Management, 16(2).
Oakland, J. S. (2019). Total Quality Management and Operational Excellence : Text with Cases, 5th Edition. Routledge.
Parthasarathy, P. (2019). The Dawn of the Digital Revolution: A Guide to Building Smart Industries. Business Expert Press.
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Chris Southworth is Secretary General of the International Chamber of Commerce, UK
We view the world today as a digital world. But right now, the global trading system is suffocating under a mountain of billions of paper documents. It doesn’t have to be like that.
A recent Trade Barometer survey conducted by Santander UK found that 35% of UK businesses trading internationally say bureaucracy is a barrier to doing business overseas. At the same time, 65% said they would go paperless as soon as the law allowed them to do so.
Today, a business transaction may require up to 40 different paper-based business documents, many of which request the same information over and over again. The process is slow and expensive and can take up to two to three months.
As Commonwealth Trade Ministers meet in London this week, it is a golden time to reform laws and digitize trade across the Commonwealth. According to the Commonwealth’s business case, this would generate $1.2 billion in economic growth by 2026. It would also reduce trade transaction costs by 80% and enable more SMEs to participate. Combined with the digitization of customs, this rises to $2 billion, equivalent to the Commonwealth’s trade target by 2030.
Overall, we need to stop thinking about documents and start thinking about how to use data and technology more effectively. By simplifying the system and removing all duplicate information requirements, there is real potential to eliminate chunks of paperwork altogether.
After years of advocacy by the International Chamber of Commerce, alongside organizations such as the Bankers Association for Finance and Trade, the UN, the WTO, as well as the UK government and others like Singapore , we are seeing progress. Paper is falling into disuse everywhere.
In the UK, the Electronic Business Documents Bill, which is now completing its legislative journey, will remove all requirements for the use of paper business documents from this autumn. This includes 80% of bills of lading worldwide.
Legal barriers are removed in 50% of world trade. France, Germany, the United States and the United Kingdom will have removed all legal obstacles by the end of this year. The ICC expects 90% of global trade to be on a digital path from February 2024. This is too good an opportunity for the Commonwealth, which all shares the same trade laws.
We’ve dramatically underestimated the number of businesses that want to go paperless. Several pilots over the past 12 months have delivered between 40-90% efficiency gains and cost savings, enabling businesses to increase the speed and flow of their international trade.
It matters to all trading companies, but to some, like those trading perishables or just-in-time delivery systems, it really matters. In both examples, goods must cross borders quickly and without delay.
It’s not just a matter of trade either. The Electronic Commercial Documents Bill will allow new financial instruments such as electronic promissory notes (ePNs) to exchange money in much shorter time frames to help drive local business and growth. A recent Lloyds Bank pilot project testing the use of these ePNs in a domestic land sale resulted in an 88% efficiency gain and all the associated cost reductions that entails.
While free trade agreements grab headlines and are important for enabling unfettered trade, the economic gains they offer are overshadowed by the opportunity presented by going paperless and digitizing trade. This is our chance to radically improve the way the UK trades with its international partners, all at once.
This week, we expect Commonwealth trade ministers to launch an agenda to reform laws and digitize trade. We are truly on the cusp of a new commercial revolution.
https://www.ft.com/content/fd543197-ba17-4acb-b060-b4514231c0ba
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