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Trade Facilitation and the use of technology

Trade Facilitation Digitalisation

Image source: https://pixabay.com/photos/hamburg-port-ship-container-6849995/ 

The international logistics performance of a nation is contingent on the scope, digital resilience, and modernity of its trade facilitation reform. National trade facilitation committees (NTFCs) are an institutional requirement for World Trade Organization (WTO) members since they provide multi-agency collaboration platforms. These collaborations establish consensus via “national roadmaps” to customize a nation’s approach for updating its domestic interface with global markets by implementing the WTO Trade Facilitation Agreement (TFA).

Incorporating digital technology into trade facilitation reform is not simply a requirement for the majority of nations, but a necessity. Indeed, a product’s data can have as much to do with the cost-effective and quick transportation of commodities as the product itself. This is increasingly the case as the transition toward paperless trade hinges on digital policy distribution and compliance. In addition, contemporary supply chain models establish links between data entities in international sales/transport contracts and necessitate a reformulation of measures per the expanding breadth of channels (such as cross-border e-commerce) and modalities of policy distribution (e.g., the internet).

Currently, implementation of the TFA is hampered by pressures that compound conventional political-economic complications — policy formulation must incorporate stakeholder agreement and the capacity to procure or implement technology-enabled solutions. The transition to policy delivery and compliance via digital means is necessitated by ICTs, yet access to technology may not be equitable or economically viable due to the price of licencing “off-the-shelf” solutions or developing in-house solutions.

Principles And Benefits Of Trade Facilitation

The basic objective of trade facilitation is to make international trade (imports and exports) more efficient, affordable, and predictable while ensuring its safety and security. The focus is on streamlining and unifying formalities, procedures, and the accompanying interchange of information and documentation among the many supply chain partners. Trade facilitation is, according to the UNECE and the UN Centre for Trade Facilitation and Electronic Business (UN/CEFACT), “the simplification, standardisation, and harmonisation of procedures and associated information flows required to transport commodities from seller to buyer and make payment.” Such a definition suggests that not only the physical transportation of items but also the associated information flows are significant in a supply chain. In addition, it includes all government agencies that intervene in the transit of commodities, as well as the many commercial companies that conduct business and transfer the items. This is consistent with the WTO discussions on trade facilitation.

The potential benefits of trade facilitation are substantial for both governments and the business community. Public entities will benefit from higher trade tax collection, improved resource utilisation, and increased trader compliance. More efficient and transparent delivery of public services will enable the administration to maintain a high degree of security and effective government oversight while reducing corruption opportunities. Increased predictability and speed of operations, as well as reduced transaction costs, will benefit traders, resulting in more competitive exports on global markets. Reducing unnecessary delays and expenses encourages investment, growth, and job creation for countries as a whole. Trade facilitation measures can be especially advantageous for underdeveloped nations since exporting commodities usually takes three times as long as in developed nations.

The Digitalization Of Trade

On the supply side, new data networks, digital tools, and platforms enable service providers to revolutionise service delivery modalities and grow their customer bases beyond national borders. Using online marketplace platforms like Amazon, Alibaba, and eBay, businesses of all sizes can access potential customers and suppliers around the globe.

On the demand side, digital technology enables cheaper access to a greater range and selection of services. It also offers convenience and customised or individualised services. Having fewer intermediaries may also expedite the delivery of services to consumers. 

Trade Digitalization Efficiency Gains

Digitalization is altering the production and exchange of goods, bringing previously unrealized efficiency improvements. The majority of international trade relies on inefficient analogue processes, including the exchange of redundant data, and the use of manual labour for inspecting and clearing documents and items. 

Already, digital technologies have had a substantial impact on the execution of agrifood trade operations. E-commerce and digital trade finance can now operate on a single platform for all parties to communicate and exchange trade information electronically, decreasing costs and payment times and expanding access to trade finance for micro, small, and medium-sized businesses.

The Pandemic’s Impact On Trade Volume

The Covid-19 pandemic has had a devastating impact on human lives and livelihoods. In doing so, it has also disrupted economic operations across the globe. Particularly, global merchandise trade declined by seven percent in 2020. Several facets of the pandemic are likely to have an impact on international trade, including its direct health impact and accompanying behavioural changes, as well as the repercussions of governments’ efforts to limit the spread of the virus.

The Future Of Trade Facilitation

Increasing inequality among industrialised nations has contributed to the creation of a receptive, if not actively demanding, atmosphere for protectionism. In addition, long-standing dissatisfaction with the current multilateral trading system has led to calls for its reform or even dismantlement. 

One source of discontent is the application and interpretation of rules. Divergent opinions exist on the efficacy of the current dispute settlement procedure, the scope of subsidy disciplines, and the appropriate treatment of state-owned firms. Moreover, the traditional all-or-nothing policy of the World Trade Organization (WTO), in which all WTO members must agree on all issues, has become a straitjacket. The Kennedy Round lasted four years, whereas the Doha Round, which began in 2001, is essentially dead. Ironically, the WTO’s success, which has resulted in near-global membership and influence, is proving to be its greatest obstacle, since it makes consensus-building increasingly difficult.

DNeX is a leading service provider in Malaysia’s trade facilitation and energy sector with two core offerings: IT & eServices and Energy.

Learn more at: https://www.dnex.com.my/


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