In the rapidly evolving landscape of global trade, the integration of trade digitalization has emerged as a revolutionary force, harnessing information and communication technologies (ICT) and digital solutions to transform traditional trade processes. This paradigm shift is pivotal in optimizing border controls and trade administration, thereby reducing costs and bolstering the resilience of global supply chains.
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The UN Global Survey on Digital and Sustainable Trade Facilitation (UNTF) delineates trade digitalization into two interconnected realms: ‘paperless trade’ and ‘cross-border paperless trade’. The first one involves transitioning from traditional paper-based trade documentation to electronic formats within individual countries, streamlining processes and reducing costs. Conversely, cross-border paperless trade focuses on enabling the electronic recognition and exchange of trade-related data and documents across national borders with partner countries.
ESCAP’s Efforts to Streamline Regional Trade
For the past eight years, the UN Economic and Social Commission for Asia and the Pacific (ESCAP) has led efforts to shift from paper-based customs processes to electronic documentation systems through the Framework Agreement on Facilitation of Cross-border Paperless Trade in Asia and the Pacific (CPTA). Launched on May 19, 2016, this initiative aimed to modernize international trade by improving customs efficiency and facilitating smoother cross-border movement of goods.
Framework Agreement on Cross-border Paperless Trade (CPTA)
- Launched: May 19, 2016
- Aim: Modernize international trade by improving customs efficiency and facilitating smoother cross-border movement of goods.
- Status: Entered into force on February 20, 2021.
As of today, despite the treaty entering into force on February 20, 2021, progress has been slower than anticipated. Only a limited number of countries, including Bangladesh, have ratified the treaty—just 13 out of the broader regional community. This underscores the complexity of aligning diverse national interests and navigating intricate technical challenges across borders.
Against the backdrop of these developments, ESCAP hosted the inaugural Paperless Trade Week in Bangkok during the first week of this month, aimed at deepening cooperation among regional stakeholders—both public and private—to embrace and operationalize the CPTA.
With 53 member countries and nine associate members, including nations like the United Kingdom and the United States, ESCAP champions the establishment of robust foundations for national and cross-border paperless trade.
The framework agreement stands as a complement to the World Trade Organization’s Trade Facilitation Agreement (TFA). While the TFA addresses some aspects of electronic trade, such as single window systems at the national level, it has limitations in facilitating seamless cross-border paperless trade.
Ratification and Membership
- Countries Ratified: 13
- Member Countries: 53
- Associate Members: 9 (including the UK and US)
In contrast, the CPTA focuses exclusively on enhancing interoperability and mutual recognition of electronic trade documents across borders, tailored to regional needs. Analysts debate whether the CPTA supplements or merely complements the TFA, highlighting differing perspectives on their roles in shaping global trade frameworks.
A Debate on Global vs. Regional Approaches to Paperless Trade
Critically, the TFA mandates electronic data exchange, submission of trade documents, e-payment systems, and sets international standards for paperless trade. However, it allows member states flexibility in developing their digital trade frameworks. This flexibility, while advantageous, has prompted some to argue for regional agreements like the CPTA, which specifically address cross-border challenges in paperless trade.
Comparison with WTO’s Trade Facilitation Agreement (TFA)
- TFA: Addresses single window systems at the national level.
- CPTA: Focuses on enhancing interoperability and mutual recognition of electronic trade documents across borders.
- Debate: Whether CPTA supplements or complements TFA in shaping global trade frameworks.
Capturing a visual snapshot of a paper document, whether scanned or in PDF format, forms a basic component of paperless trade processing. However, this method is fraught with limitations, including the time-intensive task of scanning large volumes of documents. A more effective solution lies in the use of a Data-Trader Interface (DTI) and fully electronic messages through Electronic Data Interchange (EDI), which typically include application-programming interfaces (API) to streamline database interactions.
Bangladesh is Well-positioned to Deal with Paperless Trade
Bangladesh stands out as one of the pioneering signatories of the CPTA, having ratified the treaty ahead of many others. Thanks to significant advancements in digital infrastructure, Bangladesh is now well-positioned to engage in paperless trade with its partners, provided there is mutual cooperation. The country has already made notable strides in this domain, implementing automated customs systems, electronic application and issuance of import and export permits, and e-payment of customs duties and fees.
In his budget speech earlier this month, Finance Minister Abul Hassan Mahmood Ali highlighted several initiatives aimed at fostering paperless customs and enhancing the Ease of Doing Business. These include the National Single Window (NSW) for expedited clearance and processing of imports and exports, Automation of Bond Management, introduction of the Authorized Economic Operator (AEO) program, non-intrusive inspection, Advance Ruling, Pre-Arrival Processing of consignments, and an E-auction program.
Furthermore, the establishment of the Customs Risk Management Commissionerate aims to introduce an automated risk management system. However, according to the fifth United Nations Global Survey on Digital and Sustainable Trade Facilitation, Bangladesh still lags in cross-border paperless trade.
Key Initiatives Highlighted by Finance Minister
- National Single Window (NSW) for expedited clearance
- Automation of Bond Management
- Authorized Economic Operator (AEO) program
- Non-intrusive inspection, Advance Ruling, Pre-Arrival Processing, E-auction program
- Establishment of Customs Risk Management Commissionerate for automated risk management.
Challenges and Opportunities in Cross-Border Paperless Trade
While the country has partially implemented electronic commerce laws and regulations, it has yet to achieve full electronic exchange of certificates of origin and sanitary and phytosanitary (SPS) certificates. Additionally, critical measures such as recognized certification authorities, electronic exchange of customs declarations, and paperless collection of payments from documentary letters of credit remain in the planning stages.
In the landscape of trade digitalization as of 2023, the average implementation rates across regionsreveal significant disparities with a 53-percentage-point range. Leading the charge are countries like the Netherlands and New Zealand, alongside Australia, Belgium, the Republic of Korea, and Singapore, showcasing high rates of digital trade facilitation implementation. In developing regions, standout performers include Singapore and the Republic of Korea in South-East and East Asia, Brazil and Peru in Latin America and the Caribbean, and Saudi Arabia in the Middle East and North Africa.
Globally, there has been an 8-percentage-point increase in implementation rates among surveyed countries, with Sub-Saharan Africa and the Middle East and North Africa regions leading the growth charge with impressive gains. However, regions like the Pacific Islands and South-East and East Asia show slower growth rates, pointing to persistent challenges and the urgent need for tailored strategies to accelerate digital trade facilitation.
The Trade Digitalization Index (TDI) findings highlight significant disparities among countries and regions, indicating substantial room for improvement in achieving fully digitalized trade and seamless electronic data and document flow across international supply chains. Implementing cross-border paperless trade presents practical challenges that underscore the imperative for collaborative efforts beyond national borders.
Global Landscape of Trade Digitalization (2023)
- Average Implementation Rates:
- Shows a 53-percentage-point range across regions
- Leading Countries:
- Netherlands, New Zealand, Australia, Belgium, Republic of Korea, Singapore
- Standout Performers in Developing Regions:
- Singapore, Republic of Korea (South-East and East Asia)
- Brazil, Peru (Latin America and the Caribbean)
- Saudi Arabia (Middle East and North Africa)
Effective coordination across multiple nations demands a pragmatic approach bolstered by robust political commitments. Intergovernmental agreements at bilateral, regional, and multilateral levels play a crucial role in ensuring sustained progress and fostering collaboration over time. Examples include bilateral agreements facilitating the electronic exchange of specific documents, initiatives such as the ASEAN Single Window Agreement, and the Framework Agreement on Facilitation of Cross-Border Paperless Trade in Asia and the Pacific. These frameworks provide structured platforms for enhancing digital trade cooperation, acknowledging the necessity of collective action in navigating the complexities inherent in cross-border transactions.
