Electronic trade documents are a colossal opportunity for the UK
This week (on 20th September 2023) an incredibly important piece of legislation - the Electronic Trade Documents Act - came into force. This new law updates legislation from the 1800s and allows shipping containers to be traded using digital (rather than paper) documents. A small sounding statute, it is nonetheless one that will have a colossal impact. This change has the potential to transform trade, an industry worth £1.266 trillion to the UK, and also demonstrates how the UK can be at the fore of ground-breaking, tech-enabling legislation.
We live in disruptive and uncertain times. New technologies such as AI, blockchain/distributed ledger technology (DLT), crypto, IoT, smart contracts and so much more are changing the way we do things. This tech revolution, the 4th industrial revolution, is well underway and I have long called on the government to act to make the most of the opportunity. We need to seize the initiative, to invest and innovate, to lead and ultimately to ensure this potentially infinite value is realised for both citizen and state not merely a small number of global, corporate monoliths.
One of the most significant problems we all became suddenly and powerfully aware of during the Covid pandemic was the fragile nature of our current global supply chains. Add this to the post-Brexit trade challenge and there is an absolute need to improve the efficiency, cost, security, reliability, and sustainability of getting our food and goods across borders and into our businesses, schools, hospitals, and homes.
It is shocking to learn that in this digital age, where Amazon provides almost anything you want to your door the next day at a single swipe of your finger, with payment information integrated to an app on your mobile phone, when that the same company provides cloud computing to GCHQ, that until this week, commercial trade documents have had to be paper. Millions and millions of pieces of paper, endless hours of burdensome bureaucracy, delays, inefficiencies, and significant environmental costs.
This new law is an elegant and succinct piece of legislation, drafted by the most distinguished legal experts and designed to make it easier, cheaper, faster, and more secure for businesses to trade internationally. Key benefits include the increased efficiency and reduced trade administration costs of processing electronic documents, which is much faster and cheaper than processing their paper equivalents. There will also be improved security and compliance thanks to the transparency and traceability benefits of electronic documents and most importantly there would be significant environmental benefits from a reduction in the use of paper and courier emissions.
Putting those benefits into numbers, the government estimates that the new law could generate a net benefit of £1.14 billion for the British economy over the next decade for UK businesses trading across the world. Globally, the Digital Container Shipping Association estimates that if 50 per cent of the container shipping industry were to adopt electronic bills of lading, savings would be in the region of £3 billion. Estimates from the World Economic Forum when considering the environmental impact is that this has the potential to reduce global carbon emissions from logistics by as much as 10 to 12 per cent.
The Electronic Trade Documents Act is based on a model law on electronic transfer records (MLETR) passed in 2017 by the UN International Trade group. This model provides a framework that governments then align with their national legal systems. Although many countries have accepted the principle -including the G7- few have yet incorporated it into domestic law.
Germany is expected to have full legislation later this year and France by 2025, probably 2024. China and the US are on similar timeframes. Singapore has already passed legislation and we are the first G7 country to do so. Our Electronic Trade Documents Act could become a model law for how to adopt the UN model law.
The great risk now is that because the law is permissive, you can go digital of you want but you do not have to, it may not get the uptake that is needed to make the most of the opportunity.
I am particularly concerned that small businesses get the information and support they need to enable this shift and have raised this in Parliament. 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 and the world.
Lord Holmes of Richmond is a current member of the House of Lords.
