Chris Southworth is secretary general of the International Chamber of Commerce, United Kingdom
We think of the world today as a digital one. But right now the global trading system is suffocating under a mountain of billions of paper documents. It doesn’t need to be that way.
A recent Trade Barometer survey by Santander UK found 35 per cent of UK companies trading internationally say bureaucracy is a barrier to their business overseas. At the same time, 65 per cent said they will remove paper as soon as laws enable them to do so.
Currently, a trade transaction can require up to 40 different paper-based trade documents, many of which ask for the same information over and over again. The process is slow and costly and can take up to two to three months to complete.
As Commonwealth trade ministers gather in London this week, it is a golden moment to reform laws and digitalise trade across the Commonwealth. According to the Commonwealth’s own business case, this would deliver $1.2tn in economic growth by 2026. It would also reduce trade transaction costs by 80 per cent and enable more SMEs to participate. If combined with customs digitalisation, this number increases to $2tn, the equivalent to the Commonwealth’s trade target by 2030.
Globally, 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 the duplicative information requirements, there is real potential to remove swaths of paperwork completely.
After years of advocacy by the International Chamber of Commerce, alongside organisations such as the Bankers Association for Finance and Trade, the UN, WTO, as well the UK government and others such as Singapore, we are seeing progress. Paper is falling out of use everywhere.
In the UK, the electronic trade documents bill, currently completing its legislative journey, will remove all requirements to use paper trade documentation from this autumn. This includes 80 per cent of bills of lading worldwide.
Legal barriers are being removed across 50 per cent of world trade. France, Germany, the US and UK will have removed all legal barriers by the end of this year. The ICC is expecting 90 per cent of world trade to be on a path to digitalisation from February 2024. This is too good an opportunity to pass up for the Commonwealth, who all share the same trade laws.
We have significantly underestimated just how many companies want to ditch paper. Several test projects over the past 12 months have delivered between 40 per cent and 90 per cent efficiency gains and cost savings, enabling companies to increase the speed and flow of their international trade.
This matters for all trading companies, but for some, such as those trading in perishable goods or just in time delivery systems, it really matters. In both examples, goods need to cross borders swiftly and without delay.
It’s not just about trade, either. The electronic trade documents bill will enable new financial instruments such as electronic promissory notes (ePNs) to exchange money in far shorter timeframes to help drive local enterprise and growth. A recent Lloyds Bank pilot testing the use of these ePNs on a domestic land sale delivered an 88 per cent efficiency gain and all the associated cost reductions this brings.
While free trade agreements win headlines and are important to enabling barrier-free trade, the economic gains they offer are dwarfed by the opportunity presented by removing paper and digitalising trade. This is our chance to radically upgrade how the UK trades with her international partners, all at once.
This week we expect Commonwealth trade ministers to launch a programme of reforming laws and digitalise trade. We are truly on the cusp of a new trade revolution.