The G7 countries, an intergovernmental organization consisting of Italy, Japan, the UK, the US, Germany, France, and Canada, agreed to a framework in May that champions the work of UNCITRAL (United Nations Commission on International Trade) and promotes the adoption of its MLETR (Model Law on Electronic Transferable Records). This gives electronic trade documents like the eBL (electronic bill of lading) the same legal standing as their physical paper-based counterparts.
In the next five years, as per the new report released by the International Chamber of Commerce (ICC), trade across the G7 is meant to increase by around US$9tn if the trade industry reaches full digitalization. As per the report, if the G7 countries can achieve standardization, legal reform, and adoption of digital records that have been committed to in 2021, the trade would climb by around 43% on 2019 values in the next five years.
ICC states, a typical trade transaction involves around 27 documents, out of which nine relate to the transfer of possession. This can ultimately cost $80,000 per transaction and take up to three months to process. At any given time, 4 billion documents move across the trade ecosystem and thus create inefficiencies that ultimately hamper innovation and growth, slowing trade down.
Enabling digital information, as per ICC, to move data seamlessly between stakeholders and across borders (inclusive of buyers, sellers, insurers, logistics, customs, shippers, and financiers) will not just cut the cost of doing trade but also allow greater access to trade finance solutions. This will help close the US$1.7tn trade finance gap and ensure the smooth entry of exporters to the new markets.
In a joint statement released by the G7 the ministers state that by enabling businesses to use electronic transferable records, they would be able to generate greater economic savings and efficiencies. This is meant to strengthen the resilience of the global economic system, thereby playing a crucial role in trade recovery all over the G7 countries.
The governments are expected to, by 2021, provide a status report on the domestic legal barriers of using electronic transferable records, establish actions to address the barriers, review regulatory issues, and consider further legal issues that might require collaboration internationally to establish actions for cooperation.
Three studies as per a new research, commissioned by ICC United Kingdom in partnership with ICC France and Germany and the Digital Standards Initiative (DSI) have been produced in this regard – the first looks at G7 as a whole and talks about paperless trade facilitation alone. This refers to the digitisation of customs documents envisaged by the WTO trade facilitation agreement programme cutting costs as a share of total trade across the countries by 76% to create US$267bn of additional exports compared to the base forecast. The other two studies focus individually on Germany and the UK cases because they are the key battlegrounds for trade digitalization.
As per ICC, if Germany aligns fully with MLETR, the trading costs could be cut to business by 81% and add almost €1.1tn to the trade figures in 5 years, as compared to the near-flat growth projected currently. In the UK, on the other hand, the Law Commission of England and Wales is at present working on a proposed legislative reform that lets the barriers to the growth of digital trade remain. This slow take-up of digital identities would enable the industry to capitalize on the fully digitalized trade ecosystem benefits.
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