Chris Southworth is Secretary General of the International Chamber of Commerce, United Kingdom
We see today’s world 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 that way.
A recent Trade Barometer survey by Santander UK found that 35 per cent of UK companies trading internationally say bureaucracy is an obstacle to doing business abroad. At the same time, 65 percent said they will remove the paper as soon as legislation allows.
Currently, a trade transaction may require up to 40 different paper trade documents, many of which ask for the same information over and over again. The process is slow and costly and can take two to three months.
With Commonwealth trade ministers meeting in London this week, it’s a golden time to reform the laws and digitize commerce across the Commonwealth. According to the Commonwealth’s own business case, this would generate $1.2 trillion in economic growth by 2026. It would also reduce the cost of trade transactions by 80 percent and allow more SMEs to participate. Combined with digitalisation of customs, this number rises to $2 trillion, the equivalent of the Commonwealth’s trade target by 2030.
Globally, we need to stop thinking about documents and start thinking about how we can use data and technology more effectively. By simplifying the system and removing all duplicate information requirements, there is real potential to completely remove a lot of paperwork.
After years of advocacy by the International Chamber of Commerce, along with organizations such as the Bankers Association for Finance and Trade, the UN, WTO, as well as the UK Government and others such as Singapore, we are seeing progress. Paper is becoming obsolete everywhere.
In the UK, the Electronic Commercial Documents Act, which is currently completing its legislative process, will remove all requirements for the use of paper commercial documentation from this autumn. This includes 80 percent of the waybills worldwide.
Legal obstacles are removed in 50 percent of world trade. France, Germany, the US and the UK will have all legal barriers removed by the end of this year. The ICC expects that 90 percent of world trade will be moving towards digitization by February 2024. This is too good an opportunity to pass up for the Commonwealth, which all share the same trade laws.
We have significantly underestimated how many companies want to do away with paper. Several pilot projects over the past 12 months have delivered between 40 and 90 percent efficiencies and cost savings, enabling companies to increase the speed and flow of their international trade.
This is important for all trading companies, but for some, such as companies dealing in perishable goods or just-in-time delivery systems, it really matters. In both examples, goods must cross the border quickly and without delay.
It’s not just about trading either. The Electronic Commercial Documents Act will enable new financial instruments such as electronic promissory notes (ePNs) to exchange money in a much shorter time to encourage local business and growth. A recent Lloyds Bank pilot testing the use of these ePNs on a domestic land sale yielded an 88 percent efficiency gain, along with cost savings.
While free trade agreements make headlines and are important in enabling trade without barriers, the economic benefits they provide dwarf the opportunities presented by stripping paper and digitizing trade. This is our chance to radically improve the way the UK trades with its international partners in one fell swoop.
This week, we expect Commonwealth Trade Ministers to launch a program to reform laws and digitize trade. We are truly on the verge of a new trading revolution.
