By Christiaan van der Valk
Governments should embrace the digital revolution of international trade. Simplifying lengthy paper processes and cutting red tape by going digital means sustainable, faster, and more efficient trade.
That was the resounding message at the United Nations Economic Commission Global Trade Facilitation Conference, which concluded late last year. Speakers from intergovernmental and trade organizations urged for better cooperation between regions to reap the global trade benefits of cross-border, paperless supply chains. But, in reality, much is still needed to tackle the current barriers to digital trade and, for now, a truly global, paperless trade environment remains somewhere in the distant future. By working together, different government and business actors can lift the costly, heavy, and increasingly outdated burden of paper transactions to better facilitate international trade.
Contrary to popular perception, paperless trade can significantly cut risks to global trade by using data more effectively. It also raises operational efficiency, while cutting costs. The risks of using the Internet and associated technologies are not higher than those inherent in the paper-based environment.
Naturally, the same features that make information and communication technologies so attractive for legitimate businesses, also make them appealing for fraudsters, criminals, and terrorists. But if all parties across global value chains integrated seamlessly, based on common technology and process standards, the resulting ecosystems could build unprecedented defense mechanisms and growth platforms for global trade.
The Government Perspective
In looking at e-commerce initiatives, a number of governments have historically focused on the risks, giving rise to risk assessment frameworks for e-services. This has led to the emergence of ‘e-government’ initiatives aimed at implementing smarter systems for government processes – the creation of a paperless environment, for example, for customs and trade in the European Community.
When implemented correctly, e-government initiatives can make public services and law enforcement better and cheaper – and can pave the way for innovative trade-enhancing services. In some Latin American countries, Mexico for example, the mandatory ‘clearance’ of electronic invoices by the tax administration, or an accredited private sector agent on its behalf, has allowed a trusted infrastructure to emerge – based on which a multitude of new invoice financing services could materialize.
But such attempts to streamline public services and boost trade are not without their limitations. When public authorities design these new systems, they primarily design them according to their own priorities and needs, leaving little scope for thinking proactively about compatibility with local and global business practice.
This undoubtedly is the root cause of the disconnection between government and business and is the single greatest obstacle to the adoption of a unified, global system for paperless trade.
While e-government systems may help governments to manage their own processes, in many cases they don’t take account of tried and tested business practices. Why? There is no such thing as an ‘off the shelf’ solution for e-government. Each system is tailor-made for specific tasks and built from the ground-up to fit the intended purpose and the socio-political environment. Not only is this expensive, it also often means that streamlining these systems is complex and different in every case.
To add to the complexity, dealing with just one country can involve multiple steps at federal, state and municipal level. A good example of this is VAT (value-added tax)-compliant electronic invoicing in Brazil where invoices for goods must be cleared in real-time with state-level authorities, while individual invoices for services are submitted for registration by municipal authorities. As a result, enterprises that previously only had to worry about integrating with the IT systems of their trading partners must now manage tax requirements on multiple levels.
This growing disconnect between business and e-government initiatives could ultimately impact global trade negatively. New government-controlled platforms for electronic document clearance, such as Turkey’s recently introduced electronic invoicing, are slowly creating a complete technical and process separation between business-to-business and tax control versions of the same document.
So while businesses constantly strive to consolidate processes and simplify operational structure, government requirements are the polar opposite, prescribing constant adaptation to local, irregular processes.
Next Steps to Success
There is a great potential for streamlining both government and business operations to the benefit of the world economy. But in order to achieve successful paperless trade, all actors across different levels must adhere to rules in order to coordinate approaches. Greater cooperation between government and business is fundamental to driving the adoption and success of globally seamless processes for paperless trade.
To build a common understanding of how digital trade should operate across these two core groups, it is vital to establish a collaborative model of governance that addresses all requirements and achieves a consensus approach, or ‘digital reconciliation’, for paperless trade.
The International Chamber of Commerce’s forthcoming conference, 8-9th April in Geneva, Switzerland, which is focused on facilitating paperless interaction between business and government, offers the perfect platform to initiate this proactive discussion. This is a fresh opportunity where the business world can be encouraged to interact with government to resolve some of the issues that are affecting the paperless trade landscape today.
There is now the chance to have a central discussion between government, business and other stakeholders in order to map the future in digital trade. Going paperless is a key way to ensure the creation of innovative trading platforms that make economic sense for all parties, equally.
Christiaan van der Valk is the President of Trustweaver and co-chair of the ICC Task Force on Security and Authentication.
[Photo courtsey of John Weise via Flickr]