Fast-tracked pace of digitization will boost global trade
WHILE the pandemic has caused so much disruption, one good thing that may come out of it is digitization which could improve the efficiency of global trade, according to an expert from the Asian Development Bank (ADB).
In an Asian Development Blog, ADB Trade and Supply Chain Finance Head Steven Beck said paper-based trade has been dragging the efficiency of the global trading system.
With the pandemic and the need to impose mobility restrictions, Beck said efforts to digitize trade transactions were fast-tracked. These efforts, he said, should be continued to make trade systems more efficient.
“From here, we need to maintain momentum. The efforts made thus far to digitize trade need to spread throughout the global trading system, with the somewhat scattershot range of approaches being tried narrowed to the point that we have digital tools that everyone can use,” Beck said.
Beck said distributed ledger technology is one of the ways that are being used to keep trade transactions up to date.
He explained that distributed ledger technology can cut the time, risk, and effort involved in financing trade.
Through this, a trade transaction can happen in real time and is confirmed simultaneously to each participant, replacing face-to-face exchanges of multiple documents over a number of days.
In September, this technology was used to finance a $50,000 shipment from Thailand to Vietnam. The transaction was confirmed to all parties in real time instead of taking days.
Apart from this, Beck said the ADB is also working with the government of Singapore and International Chamber of Commerce to create digital standards and protocols for trade by launching the Digital Standards Initiative.
“The Digital Standards Initiative is tasked with advocating the reconciliation of a myriad of rules and regulations. Trade is global, but many of the rules and regulations that govern it are not. Those local rules often stipulate the use of paper document delivery and need to be updated to reflect current digitization efforts,” Beck explained.
Earlier, the United Nations Economic and Social Commission for Asia and the Pacific (Unescap) said the region’s prominence in merchandise trade is expected to rise to an all-time high this year accounting for 41.8 percent of the world’s exports and 38.2 percent of global imports. In 2021, merchandise trade volumes are expected to rebound by 5.8 percent and 6.2 percent of real exports and imports respectively.
“The path towards full trade recovery remains highly uncertain. Macroeconomic conditions remain unfavorable for many Asia-Pacific economies with high unemployment rates, deflation, indebtedness and geopolitical tensions among the structural factors hindering the recovery of countries,” Unescap said.
To address these challenges, Unescap underscores the necessity of complementary policies on social protection and education, as well as in other areas covering new issues such as data protection and privacy, cyber security, e-commerce and other electronic transaction tax.
This will be vital to allowing Asia-Pacific economies to fully capture the benefits from inclusive and sustainable digital trade and digital foreign direct investment growth.