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  • Home
  • About
  • Podcast
    • Summaries
    • Articles
  • Invoice Finance
    • Basics
      • What is Invoice Finance?
      • What is Reverse Factoring?
      • What are Trade Receivables?
      • What is the Cash Conversion Cycle?
      • What is Days Inventory Outstanding?
      • What is Days Sales Outstanding?
      • What is Days Payable Outstanding?
    • Advanced
      • Invoice Validation and Fraud Detection
      • Reasons Why Invoice Finance is Better than a Bank Loan
      • How to Choose the Right Factoring Firm for Your Business
      • A Closer Look at Factoring Agreements
      • What is Trade Receivables Securitisation?
      • Breakdown of the Costs for Factoring
    • Factoring
      • Why Companies Use Invoice Factoring
      • What Companies are Suitable for Invoice Factoring?
      • Factoring and Invoice Discounting
      • How Factoring Works
      • Asset Based Lending
      • Is Factoring Right for Your Company?
      • Accounting for Factoring
      • How a Company Enters into a Factoring Agreement
      • The Costs Involved in Factoring
      • Changing Factoring Company
      • The Relationship Between the Factoring Company and the Debtor
      • Legal Aspects of a Factoring Company Pursuing Payment Through the Courts
      • Factoring in the Construction Industry
    • Fraud
      • Types of Invoice Fraud
      • How to Combat Invoice Fraud
    • E-Invoicing
      • Legal Status of Electronic Invoicing
      • The Benefits of E-Invoicing
      • Implementing an E-Invoice System
      • E-Invoicing Adoption in Mexico and The Rest of the World
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      • Transforming Trade Finance: The Role of AI
      • The Different Programming Languages Used in Fintech Companies and Financial Institutions
      • UK and US Authorities Intervene in AI Sector
      • Web3 Applications and the Future of Trade Finance
      • What is Web 3?
      • What Can Fintech do for You?
      • What is Fintech?
      • Tokenisation of Finance
      • Payment Services in the Invoice Finance Sector
      • What is ChatGPT and Why the Fuss?
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      • Risk Mitigation for Trade Receivables Securitisation
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      • Credit Suisse Bailout
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Home Fintech Hi-Tech

The Rise of Digital Trade Facilitation

John Goodden by John Goodden
July 11, 2023
in E-Invoicing, Hi-Tech, Trade Finance
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digital trade facilitation
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Digital Trade Facilitation
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The Rise of Digital Trade Facilitation
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Download file | Play in new window | Duration: 7:42 | Recorded on July 10, 2023

Digital trade facilitation refers to the application of modern information and communication technologies (ICTs) to simplify and automate international trade procedures. It is becoming essential to maintaining trade competitiveness and enabling effective participation in cross-border e-commerce. Digital trade facilitation can also help reduce the time and cost of trading across borders, enhance transparency and accountability, and improve the resilience of supply chains in times of crisis.

Digital Trade Facilitation in Regional Trade Agreements

Regional trade agreements (RTAs) are increasingly incorporating provisions on digital trade facilitation, reflecting the growing importance of this issue for trade integration and cooperation. According to a study by the Asian Development Bank (ADB), out of 93 RTAs signed by Asia-Pacific economies between 2005 and 2019, 58 included at least one provision on digital trade facilitation. These provisions cover various aspects of digital trade facilitation, such as:

  • Electronic exchange of information and documents
  • Electronic authentication and signatures
  • Electronic payment systems
  • Paperless customs procedures
  • Single window systems
  • Data protection and privacy
  • Cooperation on ICT standards and interoperability

The study also found that the depth and scope of digital trade facilitation provisions vary across RTAs, depending on the level of development, digital readiness, and policy priorities of the parties involved. Some RTAs have more comprehensive and ambitious provisions than others, such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the Regional Comprehensive Economic Partnership (RCEP), which aim to establish a seamless digital environment for trade in the region.

Digital Trade Facilitation in Global Initiatives

Digital trade facilitation is also a key component of global initiatives on trade facilitation, such as the World Trade Organization’s (WTO) Trade Facilitation Agreement (TFA) and the UN Framework Agreement on Facilitation of Cross-Border Paperless Trade in Asia and the Pacific (CPTA). The TFA, which entered into force in 2017, contains several provisions that encourage the use of ICTs for trade facilitation, such as:

  • Publication and availability of information through the internet
  • Acceptance of electronic copies of supporting documents
  • Use of electronic single window systems
  • Establishment of a national committee on trade facilitation
  • Technical assistance and capacity building for developing countries

The TFA also allows for special and differential treatment for developing and least developed countries, giving them more time and flexibility to implement their commitments according to their capacities. The CPTA, which was adopted in 2016 by UNESCAP members, is a regional initiative that aims to enable paperless trade across borders by:

  • Harmonizing legal frameworks for electronic transactions
  • Enhancing mutual recognition of electronic data and documents
  • Developing common standards and technical specifications for data exchange
  • Establishing regional mechanisms for cooperation and coordination

The CPTA is open for accession by all UN members, but so far only nine countries have signed it and only four have ratified it. The CPTA also provides for technical assistance and capacity building for its parties, especially developing countries.

Digital Trade Facilitation in Different Regions

The level of implementation of digital trade facilitation measures varies across different regions and countries, depending on their economic development, digital infrastructure, institutional capacity, and policy orientation. According to the UN Global Survey on Digital and Sustainable Trade Facilitation 2021, which covers 143 economies around the world, the global average implementation rate of digital trade facilitation measures is 65%, with significant gaps between regions. The survey measures the implementation of 58 indicators related to the TFA, the CPTA, and other emerging initiatives on digital trade.

The survey results show that Europe has the highest average implementation rate (82%), followed by North America (78%), Asia-Pacific (66%), Latin America (63%), Africa (54%), and Western Asia (53%). Within each region, there are also variations among sub-regions and individual countries. For example, in Asia-Pacific, East Asia has an average implementation rate of 77%, while South Asia has only 49%.

Similarly, in Africa, North Africa has an average implementation rate of 67%, while Central Africa has only 40%.

Some of the factors that influence the implementation of digital trade facilitation measures include:

  • The availability and affordability of ICT infrastructure and services
  • The legal framework and institutional arrangements for electronic transactions
  • The human capital and skills development for digital literacy
  • The political will and leadership for digital transformation
  • The regional and international cooperation and coordination for harmonization and interoperability

Conclusion

Digital trade facilitation is a key enabler of trade competitiveness and integration in the digital era. It can help reduce trade costs, increase efficiency, improve transparency, and enhance resilience. However, there are still significant challenges and gaps in the implementation of digital trade facilitation measures across regions and countries, especially in developing and least developed countries. To address these challenges and gaps, there is a need for:

  • Investing in digital infrastructure and services
  • Developing legal and regulatory frameworks for electronic transactions
  • Building human capital and skills for digital literacy
  • Strengthening political will and leadership for digital transformation
  • Enhancing regional and international cooperation and coordination for harmonization and interoperability

By doing so, countries can harness the potential of digital trade facilitation to boost their trade performance and contribute to the 2030 Agenda for Sustainable Development.

Tags: CPTACPTPPdigital trade facilitationRegional Comprehensive Economic Partnershipregional trade agreemenrsRTAsTrade Facilitation Agreement
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  • Home
  • About
  • Podcast
    • Summaries
    • Articles
  • Invoice Finance
    • Basics
      • What is Invoice Finance?
      • What is Reverse Factoring?
      • What are Trade Receivables?
      • What is the Cash Conversion Cycle?
      • What is Days Inventory Outstanding?
      • What is Days Sales Outstanding?
      • What is Days Payable Outstanding?
    • Advanced
      • Invoice Validation and Fraud Detection
      • Reasons Why Invoice Finance is Better than a Bank Loan
      • How to Choose the Right Factoring Firm for Your Business
      • A Closer Look at Factoring Agreements
      • What is Trade Receivables Securitisation?
      • Breakdown of the Costs for Factoring
    • Factoring
      • Why Companies Use Invoice Factoring
      • What Companies are Suitable for Invoice Factoring?
      • Factoring and Invoice Discounting
      • How Factoring Works
      • Asset Based Lending
      • Is Factoring Right for Your Company?
      • Accounting for Factoring
      • How a Company Enters into a Factoring Agreement
      • The Costs Involved in Factoring
      • Changing Factoring Company
      • The Relationship Between the Factoring Company and the Debtor
      • Legal Aspects of a Factoring Company Pursuing Payment Through the Courts
      • Factoring in the Construction Industry
    • Fraud
      • Types of Invoice Fraud
      • How to Combat Invoice Fraud
    • E-Invoicing
      • Legal Status of Electronic Invoicing
      • The Benefits of E-Invoicing
      • Implementing an E-Invoice System
      • E-Invoicing Adoption in Mexico and The Rest of the World
  • Brokers
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  • Factoring Firms
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      • The 7 Types of AI and Their Implications for the Future
      • Transforming Trade Finance: The Role of AI
      • The Different Programming Languages Used in Fintech Companies and Financial Institutions
      • UK and US Authorities Intervene in AI Sector
      • Web3 Applications and the Future of Trade Finance
      • What is Web 3?
      • What Can Fintech do for You?
      • What is Fintech?
      • Tokenisation of Finance
      • Payment Services in the Invoice Finance Sector
      • What is ChatGPT and Why the Fuss?
  • Rating Agencies
  • Securitisation
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    • Book Runners
    • Articles
      • The Roles of Deal Arrangers and Book Runners in Securitization
      • What is Trade Receivables Securitisation?
      • The Appeal of Trade Receivables Securitisation
      • Risk Mitigation for Trade Receivables Securitisation
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      • A Guide to Accounts Receivable Purchase Agreements and Invoice Discounting Agreements
      • The Challenges of KYC and AML Checks
      • What is The Model Law on Electronic Transferable Records (MLETR)?
      • Snapshot of Factoring Legal Schemes in England and Wales
      • How are UK Factoring Firms Regulated?
      • What is ISO20022 and Why is it Important?
  • Rates
  • Economy
    • Economic Indicators
    • Articles
      • The Collapse of the Russian Rouble: An Historical Analysis and Current Implications
      • The Current State of the UK Economy
      • Economic Forecast for the UK in 2023
      • Economic News for 2022
      • Financial Crisis or Not?
      • Credit Suisse Bailout
  • Credit Insurers
    • Credit Insurers
    • Articles
      • Credit Insurance Legal Aspects
      • Credit Insurance in Trade Receivables Financing
      • The Benefits of Credit Insurance in Invoice Finance
      • Eligibility Requirements for Capital Relief by Using Credit Insurance
      • What are Export Credits and Country Risk Classifications?
      • How the War in Ukraine Affects the Price of Credit Insurance for Trade Finance
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    • UK Passes Financial Services and Markets Act 2023
    • Latest about the UK Regulatory Proposal for Crypto Assets
    • How will MiCA (Markets in Crypto Assets) Regulation Affect Trade Finance and the Banking System?
    • Markets in Crypto Act (MiCA) Becomes EU Law
    • An Introduction to EU’s Markets in Crypto-Assets (MiCA) Law 
    • Supply Chains and Blockchain Technology
    • The DeFi Revolution
    • How DeFi Fulfils the Functions of Finance
    • Taxonomy of Crypto Assets
    • Crypto Currencies
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