The International Chamber of Commerce has estimated that digitalizing trade documents could generate £25 billion in new economic growth by 2024, and free up £224 billion in efficiency savings..
While Electronic Trade Documentation or digitalization of trade documentation has its fair share of skeptics, naysayers, and doubting Thomases, over the past decade, the development of various technologies has made global trade based on electronic documents increasingly feasible..
However, it has also been identified that without legal reforms, the adoption of electronic trade documents and their associated benefits will lag behind..
Shipping and Freight Resource caught up with Chris Southworth, Secretary General of ICC United Kingdom and Co-chair of the Legal Reform Advisory Board for ICC’s Digital Standards Initiative as part of the Executive Insights series to discuss the issues surrounding digitalization of trade documents and the important role that the United Kingdom is playing to make this a reality..
Key points from the interview with Chris Southworth
- The emergence of blockchain and new technologies that allow us to handle particularly commercial trade documents is now readily available in the market which has changed the possibilities. Technology is not the problem here, the lack of legal reform is now the problem.
- The creation of the ICC Digital Standards Initiative along with the publication of the ICC Digital Trade road map was actually the tool that suddenly put structure on the conversation and changed the game entirely.
- Suddenly there’s a real possibility that the digitalization of trade documentation is going to happen. We’re not talking about it anymore. We’re actually doing it.
- There are three pillars of work to be done for digitalization
- Legal reform is a government-led initiative where we need some help.
- Standardisation, connecting systems and platforms which is led by ICC with the international standards community,
- Implementation of a paperless system where information can flow in standardized formats which will be led by the ICC Digital Standards Initiative
- The Digital Standards Initiative and the publication of the WTO ICC Standards Toolkit set out which standard is the foundational standard. It puts structure and order to the whole conversation, and that’s incredibly liberating and allows us to move at a much faster pace with much more clarity.
- The UK, to their credit, secured a G7 ministerial commitment to getting the big economies on board as it represents about 40% of global trade
- On a practical level, in trade, 80% of bills of lading all operate on English law and therefore legal systems in the UK or English law had to be right up there on the priority list and when this comes into force it’s going to breathe some oxygen and put some rocket boosters under the digitalization of trade.
- Digitalization is not going to happen in a day and there will be a hybrid world for some time. The ICC has set a very ambitious target to cover 60 to 80% of the world’s trading environment in the enabling legislation of the MLETR. 40-50% are currently working on it and with only another 10%, that objective will be met in the short to medium term.
- Digitalization is a mindset change and a cultural change. It starts really by getting the legal environment right, getting the big high value, high-volume corridors moving in the right direction and then eventually working through the different sectors and down to the small companies who feel the pain of paperwork the most, more than the big companies.
- Europe’s situation is a lot more complicated because there’s no central mechanism to mandate legal reform at the national level. The EU as part of the G7 working group is acutely aware that due to their fragmentation, there is a risk of them moving at a different pace to everybody else in the G7 seeking a pan-EU solution.
- Banks in almost every single country have really been at the vanguard of arguing for legal reforms partly because they feel the pain more than most as there’s just an incredible amount of bureaucracy sitting on the banks because of varying regulatory requirements.
- There’s a terrific amount of support from the banks and banks are key partners in the call to action and very much at the forefront of making the case for digitalization and supporting corporates and the wider trade community to also digitalize operations.
- The next big country to adopt the digitalization route will be Germany which is expected to have the legislation in place in 2023 or early 2024. China is now engaged with the Asia Development Bank working through identifying where the legal barriers are in Chinese law. The Japanese are also working on the same.
Listen to the full interview here