A ‘once in a generation opportunity’ to modernise international trade transactions
A ‘ONCE IN A GENERATION OPPORTUNITY’ TO MODERNISE INTERNATIONAL TRADE TRANSACTIONS
Today, the Electronic Trade Documents Act comes into force, enabling all companies using English law when trading internationally to remove paper and transition to fully paperless system.
Prior to the commencement of the Act, trade suffocated under antiquated laws which required key international trade documents to be exchanged in paper form. This has led to a mountain of 4 billion paper documents within the global trade system, with all the associated bureaucracy. Moving to paperless systems will now make international trade cheaper, faster, simpler and more sustainable for companies of all shapes and sizes. Businesses using English law will be able to harness the resulting data flows to more effectively enable supply chain transparent, making ESG reporting more accurate while reducing the risk of fraud.
The business community knows how important this change will be for boosting growth with international trade. A recent Santander Trade Barometer survey stated that 35% of UK companies trading internationally say red tape and bureaucracy are barriers to access. 65% of respondents said they aspire to switch from paper to data sometime in the future, with 45% saying they are already prepared to go digital when trading overseas. In a recent test case, fruit traders Melon & Co became 15% more profitable importing melons from Brazil to the UK by using technology not paper, which is a clear sign of the potential to trade more efficiently using data.
The Act is the most significant milestone to date in the drive to modernise the global trading system. Internationally, English law is often the law of choice for trading companies and plays a dominant role in the trading system. 56 Commonwealth countries share trading frameworks based in English law. 60% of global trade finance, marine insurance, shipping and commodity flows operate under English law, as do 80% of bills of lading. That means the Act will play a significant role in mobilising other countries to also remove legal barriers. Thanks to UK government leadership, G7 countries and China, representing 50% of world trade, are all removing legal barriers to trade digitalisation, the G20 are also committed and 90% of world trade is expected to be on a path to digitalisation once the WTO Ecommerce Agreement is signed.
This isn’t just about trade, either. The law change will unlock new ways of financing domestic transactions and new ways of raising funds to drive local enterprise and growth. Lloyds Bank recently financed a domestic land transaction that was completed in just one day compared to the current average of eight days.
Chris Southworth, secretary general of the International Chamber of Commerce United Kingdom, said: “Thanks to the Electronic Trade Documents Act, many of the processes and requirements we associate with trade will, in time, no longer exist. The system will be much simpler, with data flowing freely between public and private sectors. Trade and finance will integrate, and transactions will take place instantly, in real time. This is a once in a generation opportunity to unlock £25 billion in UK SME trade growth, £1 billion in additional trade finance, reduce trade transaction costs by 80% and deliver £224 billion in efficiency savings. If we want economic growth, this must be a top of the list of trade priorities for government and industry.”
Lord Holmes of Richmond MBE said: “The Electronic Trade Documents Act is the most important law you’ve never heard of. With this new law we are the first G7 nation to implement the UN model law on electronic trade records and demonstrate not just leadership on international trade but on legislating for a technologically advanced future. I have long argued that the benefits of emerging technologies must be utilised for public good and here is an opportunity to unlock such incredible economic and environmental benefits for all. We must ensure we all do everything we can to support this exciting and genuinely transformational change for the UK.”
