Estimated reading time: 4 minutes
- International trade is characterised by disruption, volatility, and uncertainty.
- But the industry demands transparency, security, and sustainability.
- Digitalising trade is a priority as the only means to this end.
Traditional paper-based systems are not helping us meet the challenges of the present or future. Trade digitalisation is not an end in itself. It is an enabler, a stepping stone to ensuring that the future trading system is fit for the 21st century.
A roadmap—a structured, goal-oriented strategy—is a critical tool to help industry and governments chart a path through the challenges of today towards a future where paperless, data-driven and sustainable trade is the norm. UK businesses alone could unlock £25 billion in economic growth and £224 billion in efficiency savings including a 35% efficiency gain for SMEs. Globally, these figures scale up to $10 trillion-plus in economic opportunity. Everyone benefits from digitalisation but SMEs and small economies are the largest beneficiaries because they are disproportionately impacted by bureaucracy and cost.
These figures should not be a surprise. They reflect the scale of inefficiency in the current system, which, for the most part, operates on infrastructure and processes dating back to the 1800s. Inefficiency, bureaucracy, and the lack of digitalisation are estimated to be approximately 50% of the problems in solving the $2.7 trillion global trade finance gap and unlocking SME trade growth.
Roadmaps catalyse inclusive growth
Striving for ‘progress’ can be difficult because of the term’s vagueness. Often, metrics and timelines for progress can be unclear, rendering the concept itself immeasurable. But when looking back 20 years, you realise how far the industry has come. This is what roadmaps can help with. Providing a unifying framework, aligning diverse public and private stakeholders around common objectives, yes. But more than that, they provide clear accountability which in a complex stakeholder environment is vital.
The UK’s Electronic Trade Documents Act 2023 has enabled 80% of bills of lading and 60% of trade finance, marine insurance, shipping and commodity transactions to be digitalised worldwide. Benefits extend beyond efficiency. Companies leveraging the ETDA report up to 15% higher profitability, 67% workforce productivity gains, 80% reduction in transaction costs and cross-border processing times. However, the challenge remains to scale these benefits universally, particularly to SMEs and smaller economies disproportionately burdened by traditional trade systems. For small and medium-sized enterprises (SMEs), the projected efficiency gains are 35%.
With English and Singapore laws and the US Uniform Commercial Code aligned to the UNCITRAL Model Law on Electronic Transferable Records, 80–90% of all trade transactions can be digitalised. The 2024 WTO E-commerce Agreement has committed governments representing 80% of world trade to reforming laws to digitalise trade. The ASEAN Digital Economy Framework Agreement will do the same with many of the G20 economies, the Commonwealth is already in the process of legal reform.
Driving collaboration across trade corridors
The Model Law on Electronic Transferable Records (MLETR) provides a blueprint for addressing the legal barriers. Countries like Bahrain, Belize, France, Papua New Guinea, Singapore, the UK, and the US have successfully aligned their legal frameworks with MLETR, demonstrating that economies of varying sizes and structures can achieve meaningful progress. The Commonwealth’s Model Legal Framework, currently under development, aims to provide a comprehensive, adaptable guide for both civil and common law jurisdictions.
The ripple effects of digitalisation are already evident. In Europe, the UK’s reforms have influenced France and Germany, with additional EU nations making strides. Interestingly, Singapore’s leadership in adopting MLETR has inspired similar efforts across ASEAN, with Thailand and other member nations following suit. A similar pattern is emerging in the Middle East, where Bahrain’s early adoption has instigated action in the UAE, Qatar, and Saudi Arabia.
So, what’s the hold-up to the benefits now scaling to all businesses? Barriers include:
- Inadequate education and information: more awareness raising and sharing of best practice is required on the benefits and possibilities of digitalisation, especially for SMEs. Vital in this regard is the transparency of problems, with fraud, inefficiency, and bureaucracy running rampant. In smaller economies, trade digitalisation represents an opportunity to enhance global competitiveness by reducing bureaucracy and costs: but only with technical assistance and capacity-building.
- Inertia in mindset: resistance to technology from fears of redundancy poses a significant problem.
- Siloed systems and lack of integrated thinking: despite evidence pointing towards digitalising the ecosystem, there has been a fixation on digitalising customs.
- Individual tailoring: each economy ID is different, and each company is different.
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Collaboration, not competition, is key to unlocking the full potential of digital trade. Strategic roadmaps provide a vital mechanism for clarifying objectives between disparate stakeholders so that investment can be more focused.
The evidence from international MLETR alignment is that even smaller economies and nations can instigate domino effects. The hope with roadmaps is similar: a useful roadmap to digitalisation in one country should provide a template for others.
