Competitive markets

Drop the “e” – let’s think about the future of digitally enabled trade

  • 28 June 2021

Speech by ICC Secretary General John W.H. Denton AO to the World Customs Organization's 2nd Global Online Conference on Cross-border E-commerce.

Customs united effort on Recovery, Renewal and Resilience for a sustainable e-commerce supply chain

Distinguished guests; ladies and gentlemen…

It is truly a great honor to have the opportunity to join you today.

Let me say at the outset: we view our relationship with the World Customs of Organization as being of paramount importance to deliver on our vision of “making business work for everyone, everywhere, every day”.

As I recently mentioned to the Secretary General – with whom I’m delighted to share the stage today – we are deeply committed to elevating our constructive engagement with the WCO across a range of areas.

And I hope that my involvement in today’s conference will represent that start of a new chapter in our institutional relationship.

I believe we owe it to our respective stakeholders to do all we can to maximize the benefits of cross-border commerce for the businesses, workers and families looking for relief in the wake of the Covid-19 pandemic.

Governments and business need to meet this challenge together. And, I can tell you, the International Chamber of Commerce is committed to work hand-in-hand with the World Customs Organization

Drop the “e” – let’s think about the future of digitally enabled trade

I want to start by placing my speech today in the context of what we see happening more broadly in the global trading system.

In my view, the rapid digitalization presaged by the Covid-19 pandemic means that it’s highly likely that we won’t talk of e-commerce in 2030. Perhaps not even by 2025.

That’s to say, we won’t talk of digital trade – just trade.

The lines between cross-border transactions conducted between electronic platforms and through more traditional means have already become so blurred that differentiating between the two feels highly artificial.

Ultimately, what we all need to prepare for – and this will be the core theme of my talk today – is a fully digitally-enabled trading system.

In other words, an ecosystem that can finally deliver on the promise of digital technologies to fully “democratise” trade – and, moreover, capitalise on the potential economic and social gains that this would bring.

Let’s not waste what’s been achieved through the pandemic – let’s keep “back to the future” in Hollywood…  

One thing that’s immensely promising in this regard is the remarkable steps we’ve seen customs agencies make to secure cross-border trade in the face of the unprecedented shock created by the spread of the coronavirus.

From an economic perspective, you are the true heroes of the pandemic: keeping trade in goods flowing at a time when many so-called experts said that global commerce would likely grind to a halt.

But it’s vital that we don’t lose the gains that we’ve made through your emergency actions.

In short, what’s good for the pandemic will be essential in an era defined by the adoption of digital technologies at scale.

To this end, we urge all agencies to make permanent the temporary COVID facilitations that they’ve implemented at the border in recent months – from advanced electronic information systems to paperless trade processes.

Despite what the famous Hollywood movie may suggest, there can be going back if we want to move to the future.

It’s time to make a concerted effort to fully digitalise trade processes

On that note, I want to emphasise the vital importance that the global business community places – after two decades of talk – on finally ridding the global trading system of the scourge of paper documents.

We’ve seen some progress on this front in recent months but – simply put – not enough.

To put this in context: digital transformation has occurred at a staggering pace in response to the Covid-19 pandemic, but we haven’t seen comparable digitization in international merchandise trade.

By way of example: while US e-commerce saw user growth of around 40% last year, 99.9% of key trade documents – such as bills of landing – remain in paper format.

There is much work to be done to scale technical frameworks and customs infrastructure to increase this number.

We must invest in digital customs systems, electronic Single Window facilities and e-port management systems.

But, perhaps surprisingly, the greatest enabler of digital negotiable instruments is legislative reform.

Antiquated legal frameworks too often hold back adoption of digital trade solutions.

With most jurisdictions requiring negotiable instruments to be presented in paper form – traders are forced to rely on cumbersome and costly paper-based processes.

Indeed, outdated laws render global trade immune to the rapid digitisation effected by the pandemic…

This is one type of immunity that we cannot afford to be lasting.

Which is why we are calling on all governments to create an enabling legal environment for the use of electronic trade documents – most fundamentally by adopting the UNCITRAL Model Law on Electronic Transferable Records or “MLETR”.

ICC is at the forefront of advocacy to create this enabling legal environment.

Partnering with UNCITRAL, we’ve facilitated stakeholder engagement in several jurisdictions around the world and championed MLETR reform at the WTO, in the G7, and with the G20.

Last month, we were delighted to see G7 economies agree to a new “Framework for Collaboration on Electronic Transferable Records”, which champions the MLETR, because they recognise that it is a fit-for-purpose solution in the creation of an enabling legal environment for paperless trade.

At ICC, our commitment to the creation of enabling regulation with respect to negotiable instruments spans more than a century.

At its very first Congress held in London in 1921, ICC asked delegations to gauge reactions from their respective governments to a proposal to revitalise the Hague Conventions – in the pursuit of unification of laws on bills of exchange and promissory notes.

ICC was decisive then in creating the political will for the 1930 First Geneva Conference, which resulted in the Convention Providing a Uniform Law for Bills of Exchange and Promissory Notes.

Almost a century later, we are united once again in the push for an enabling legal environment for the digitisation of these instruments.

Back then the vision was to unify the approaches to negotiable instruments in Roman Dutch civil law and Anglo-American common law.

We now recognise that the proper goal of our efforts is not unification, but rather harmonisation, recognising the sovereign prerogatives of nation states to draft their own substantive law.

The commercial value of consistent regulation across countries still holds, and the focus has shifted to the pursuit of harmonisation of laws that will enable the use of electronic transferable records.

In conclusion, we urge you to do all you can with your respective capitals to drive adoption of MLETR-consistent laws to cosign the burden paper documents place on the global trading system to history.

There can be no talk of “building back better” from the pandemic unless this finally happens.

Think small to deliver the biggest returns

We understand that that the transition to a fully digitalised system for merchandise trade comes with many complexities.

But we believe the best way to approach these necessary reforms is to “think small” in the design of the necessary reforms.

Micro, small, and medium enterprises – or MSMEs – are increasingly able to find new customers and markets thanks to e-commerce platforms.

But to realise the potential of a truly global marketplace, they also need to understand and navigate often complex customs and border requirements to get their goods abroad, or to bring in inputs they need to produce their own items.

In short, the red tape in customs and border controls can still choke off business opportunities, even in today’s high-tech world.

Common sense reforms can make all the difference – and, make no mistake, business is ready to assist where it can.

ICC is playing its role in supporting small businesses pursuing e-commerce opportunities as part of our leadership role in the Global Alliance for Trade Facilitation – whose mission is to make trade simpler, faster, and less costly.

In Cambodia, to give one example, the Alliance is supporting the government in making it easier and cheaper for MSMEs to send goods abroad through Cambodia Post by connecting the Post’s customs declaration process with the Customs authority’s own electronic clearance system.

The Alliance is also helping a women’s entrepreneurs’ association create a new web portal for MSMEs that will allow them to learn how to use this improved electronic Customs clearance process and also better understand how to access international markets.

In this way, smaller businesses will finally be able to realise the potential of e-commerce in connecting them to foreign markets – while having the information and capabilities they need to actually make it happen.

The e-commerce moratorium…

Finally, I want to mention what is perhaps the most concerning of all issues at the confluence between the digital world and customs practices…

As customs agencies improve their digital capabilities, some may even suggest a newfound ability to impose duties on electronic transmissions.

Leaving aside the very real question of whether duties on data are technologically feasible, the debate on the role of customs agencies here is a classic case of “Just because you can, doesn’t mean you should.”

The World Trade Organization moratorium on customs duties on electronic transmissions has become an indispensable aspect of the modern trading system. And a central piece in the 70+ year long-term trend towards an international trading system as free as possible form barriers to the global exchange of goods and services.

Not only has it been renewed at every Ministerial Conference since 1998, but some 90 jurisdictions have now signed regional trade agreements that include a provision stating the permanency of the moratorium.

In the intervening 20 years since the moratorium was proposed it has enabled digital trade to flourish, helped consumers access new products and services, and empowered businesses – in particular, MSMEs – to access new markets.

In short, it enabled the digital ecosystems that allowed countless MSMEs to remain afloat throughout the pandemic.

Consider for a moment the millions of workers and their families whose livelihoods were safeguarded by the digital economy in 2020 and this year.

Our emphatic view, and what we have consistently advocated, is that the moratorium should be made permanent.

We can’t let customs duties “break the Internet”.

We call on you to lend your full support to achieving a permanent prohibition to the application of customs duties at this November’s World Trade Organization Ministerial Conference.

My thanks again for the invitation today.

In conclusion, my key message is that digitally enabled commerce is the future of trade.

Let’s drop the “e” and get to work on configuring the ecosystems needed to make 21st Century trade work for everyone, everywhere, every day.

Together we can deliver on the promise of a digitalised trading system that genuinely drives inclusion and creates opportunity for all.

I hope you will see the International Chamber of Commerce as your partner of choice in this journey.

Together, we can set the necessary foundations for the political promises to “build back better”.

Something we owe to the millions of businesses, workers and families impacted by the Covid-19 pandemic.

Thank you.