The United Kingdom government is reportedly exploring ways of accelerating trade digitalisation after concluding an extensive research effort that made recommendations like making digital processes mandatory, establishing a central identity registry and ensuring bilateral trade agreements facilitate a move away from paper.
In a series of papers published on Monday (July 6), the Department for Business and Trade (DBT) said its research demonstrated that digitalising processes, financing and documents can reduce cost, time spent and manual errors for companies trading across borders.
“But in practice, adoption remains low, particularly among SMEs, and firms face a range of difficulties, including patchy customs acceptance, platform interoperability and identity infrastructure,” DBT commented, while adding that the findings would help shape the approach of the Labour government, awaiting PM-designate Andy Burnham to take over the proceedings at 10 Downing Street, to build SME capability in trade digitalisation that will make the exchange of goods simpler, faster and more digital.
“The DBT examined several pilot projects, including digital trade corridors between the UK and France, Germany, Japan, New Zealand and Taiwan, commissioning reports from industry partners such as Boex, LogChain and Ipsos,” the department said.
One of the DBT’s papers gave the example of UK-based UniSim, an SME that exports healthcare training technology to mainland Europe, which was able to reduce the number of paper trade documents it produced by 90%, cut administration time per shipment by 50% and reduce overall costs by 2%.
Another research document cited a pilot into trade finance interoperability, which found that Lloyds in the UK and MUFG in Japan were able to save costs and limit risk by carrying out a documentary credit transaction digitally, using Enigio’s trace:original platform.
“The transaction was delivered by the Teesside University Digital Trade Testbed, alongside the International Centre for Digital Trade and Innovation (iC4DTI) and the International Chamber of Commerce UK, which have long advocated for moving away from paper,” the document mentioned.
However, as per the DBT, barriers to wider adoption go beyond technical challenges.
SMEs often lack time, resources and specialist knowledge to support a transition to fully digitalised processes and tend to be unaware of digital trade provisions within existing trade agreements. Though many companies were comfortable with basic digitalisation, such as emailing PDF invoices and uploading data to third-party couriers, the use of more complex documents such as electronic bills of lading remained rare,” the department said.
The study papers also discovered a “misalignment on trade finance”, where the promise of improved access to credit “did not resonate with small businesses”.
As per the DBT, “Trade finance lenders often struggle to offer SMEs a fully digital solution because different technology platforms are not connected. Even if a bank can accept an electronic bill of lading from several different providers, it may face further difficulties if customs authorities in destination countries do not recognise the particular platform being used.”
“Businesses will be more likely to move away from hybrid processes when digital documents become consistently accepted by intermediaries and regulatory authorities across the whole corridor, not just inside one firm or platform,” one of the digital trade corridor pilots found.
The research papers also contained a range of recommendations for the UK government and Burnham to consider.
‘Intermediaries from both logistics and finance noted that for [electronic trade documents] to be adopted widely, the government needed to act as a central actor to connect different systems, such as establishing a centralised digital identity registry and a unified trade portal. A digital identity registry would allow banks to verify small businesses immediately and process electronic documents with confidence,” it said.
The report also advised the DBT to make digital processes mandatory, such as requiring certain customs documents to be provided electronically by default.
“Enforcing a shift towards digitalisation would help overcome a widespread reluctance to change, particularly among SMEs. Voluntary adoption is slow partly due to cultural resistance and a prevailing ‘if it isn’t broken, do not fix it’ mentality. Intermediaries noted that rapid change only occurs when it is required, such as global shipping lines demanding electronic bills of lading. It suggested this,” it added further.
“The DBT should also continue to explore further trade agreements, including digital and free trade agreements, as evidence suggests that, even with low awareness, digital trade provisions are helping to facilitate greater use of digital tools and practices,” another study paper commented.