This year, Barclays and ICC United Kingdom established a new trade digitisation task force to accelerate the adoption and implementation of digital trade in the UK, building on Barclays’ partnership agreement with the Department for Business and Trade. The UK’s minister for exports, Malcolm Offord, officially launched the group at the House of Lords in mid-July.
In this roundtable, GTR and Barclays gathered industry leaders to discuss the objectives of the task force, the broader implications of the recent establishment of a legal framework for electronic trade documents in the UK, and the importance of collaboration and standardisation to maximise the benefits of digitalisation. The discussion also turned to how these efforts can support SME growth, enhance access to trade finance and contribute to a more efficient and cost-effective trading environment.
- William Bain, head of trade policy, British Chambers of Commerce
- James Binns, global head of trade and working capital, Barclays
- Chris Southworth, secretary general, ICC United Kingdom
- Shannon Manders, editorial director, GTR (moderator)
GTR: What are the objectives and focus areas of the task force, and why is this work being prioritised at this time?
Binns: A major impetus for this initiative is the Electronic Trade Documents Act (ETDA), which became law in July and took effect in the UK in late September. The Act presents a significant opportunity, and the time is right to bring together stakeholders to harness its benefits. In doing so, we’re also able to consider other elements of trade associated with being able to digitise trade documents and address the obstacles that are holding the industry back from being able to provide finance more deeply into supply chains.
We assembled this task force with a view to making recommendations to the UK government on specific areas where we think it can help make trade easier, more efficient and more cost-effective, and therefore not only help UK exports but also drive benefits globally to trade.
Our focus areas include steps towards commercialising the ETDA; optimising digital documentation for smoother anti-money laundering and know-your-customer processes; combatting trade fraud to lower risk premiums; advocating for favourable Basel capital rules that recognise the low-risk nature of trade; and fostering international collaboration with trading hub governments, such as Singapore.
Southworth: The ultimate goal of this initiative is to increase access to trade finance, which plays a really vital role in driving trade and economic prosperity and the desired growth at the SME level. Unfortunately, despite its importance, trade finance often gets disconnected in the way that it’s dealt with by governments worldwide.
To date, banks have grappled with regulatory burdens arising from anti-money laundering, counterterrorism and economic stability efforts, which has impacted their ability to provide trade finance to SMEs.
But there’s now a real opportunity to change the situation with the advancements in technology and digitisation, which can enable smarter regulation, cost reduction and improved access to finance. The regulatory frameworks that banks adhere to came in a long time ago, and we’re living in a very different world today.
The task force is a real breakthrough. It’s the first time under the current UK government that we’ve had a trade minister at the table in our discussions about digital trade who is genuinely interested in trying to help us find solutions to drive the trade agenda. That’s really important to us when we’re talking to the Treasury, and the economics ministry about economic growth: we need that connection from the trade department to lean in on the issue.
If we can’t finance the SMEs, they can’t grow; it’s really that simple. Therefore, it’s in all our interests to make access to capital easier, so that these companies can get on and trade as we all want them to.
GTR: What were your main takeaways from the initial meeting of the task force in July?
Southworth: We had a good number of in-person experts as well as several international participants dialling in, which aligns with James’ point on the importance of global collaboration.
The engagement on the day from all these participants was really good, and it was an insightful discussion. Lord Offord was attentive and posed relevant questions, indicating high-level commitment, which provides a really strong foundation going forward. Now the challenge is over to us to work with the minister to improve the environment for trade finance. It’s game on.
Binns: I agree. What struck me was the diverse range of industry participants, including several banks. While ICC and Barclays lead this initiative, it’s important to emphasise that it’s a collaborative effort among all industry stakeholders. It’s about collective progress, not a competitive advantage for one party.
GTR: How do the objectives of the task force align with the British Chambers of Commerce (BCC) network’s perspective on the significance of trade finance and the measures necessary to enhance trade?
Bain: Regarding trade more broadly, the BCC recently released our updated trade manifesto, which calls on government to prioritise growing services exports, advanced manufacturing, and green and digital trade in order to meet its £1tn a year exports target by 2030.
The BCC welcomes UK Export Finance’s budget allocation of being able to support UK exports worth up to £50bn. We’d now like to see the agency allocate more funds for green exports. This involves directing resources towards climate-friendly technologies like turbines and heat pumps, enhancing UK exporters’ capabilities.
Our outlook for digital trade encompasses four key areas.
The first, as proposed in our manifesto, is that we have set government and businesses a target of raising the proportion of UK exports done digitally from 50% to 60% by the end of the decade.
Secondly, we’ve now specifically said that we recommend the adoption of the UNCITRAL rules for digital trade and the expansion of their application through bilateral, plurilateral and digital economy agreements. The UK should also be pushing these principles at e-commerce discussions at the World Trade Organization (WTO) level.
Another area of interest concerns border operations. The forthcoming rollout of the single trade window project, led by Deloitte, is anticipated to commence in the autumn of next year. This platform’s phased implementation for safety and security certificates, eventually covering a range of interfaces, holds the potential to streamline trade processes, making them more efficient and cost-effective. Our recommendation is to rapidly transition to online border processes.
Finally, in terms of services exports, which are already predominantly digital, we believe that the UK should be at the vanguard of trying to ensure the preservation of the moratorium on customs duties on electronic transmission of products. It should also pursue a comprehensive strategy that facilitates the greater digital delivery of services, particularly into key markets.
We have been engaging on all of our manifesto’s recommendations with various government departments, including minister Nigel Huddleston and minister Offord, as well as members of the opposition party.
There is a good sense that the political community recognises the need for action and understands our proposals. Public commitment to these recommendations is the next crucial step, and we anticipate that our manifesto will aid in achieving that in the coming months.
Southworth: It’s important to note that the task force is part of a broader collaborative effort with government, the BCC and related organisations concerning a range of issues, such as borders, single trade windows, free trade agreements and digital economy agreements, as well as wider multilateral dialogue at the G7, G20, WTO and so on. Ultimately, this is about adopting the same interoperable standards, removing legal barriers and enhancing regulatory frameworks; they’re all interconnected aspects of modern digital trade.
Another crucial aspect is understanding the convergence of finance, paperwork and physical goods movement in current trade. As paper transitions to data, and finance integrates into transactions, the timeline for operations drastically shortens, from months to minutes. Although this transformation is already underway, it’s not yet widespread.
We stand at a unique juncture, capable of achieving unprecedented changes in making trade simpler, faster and cheaper. The technologies are in the market, and there are more being developed by the day. The mission now is to harness these possibilities across the ecosystem. So, whether it’s the Barclays task force, the Centre for Digital Trade and Innovation (C4DTI), or the work with other organisations on single trade windows, it’s all one system. We’re collectively shaping the future of trade for the next century.
GTR: Small businesses are understood to be vital to the health of the British economy. How can digital trade – and the efforts of the task force – contribute to a more supportive environment for SME growth, exports and access to trade finance?
Southworth: According to a recent survey of about 1,000 businesses, roughly 35% of respondents, notably SMEs, cite paper and bureaucracy as major trade barriers. This is a recurring issue: paper is acting as a disincentive to trade. At the same time, 45% of companies express interest in digitising documents, specifically electronic bills of lading, with 65% aiming to do so upon legal changes. These kinds of findings underscore the burdens on trade imposed by outdated processes, which have remained unchanged for centuries.
Binns: The beauty of trade, whether in documentary or open account form, is that everything we do is connected to the underlying exchange of goods and services. This linkage significantly mitigates risks, spanning credit, fraud and ESG considerations.
However, the challenge arises from trade’s paper-intensive nature, rendering it costly for banks to provide trade finance to small companies. As a result, these businesses are unable to efficiently access this funding, which leads to a cycle where riskier debt financing becomes the only option, further dampening banks’ appetite.
Digitising trade processes and solutions, including open account options, can break this cycle. It will enable banks to offer more SME funding, alleviating risk and cost barriers. This transformation holds the potential to truly revolutionise the trade landscape.
Bain: It’s worth remembering that there are processes that are already digital, which for some of the smallest companies remain challenging due to resource constraints. While digitalisation helps, we’ve also got to look at how we can simplify processes across the board, whether they’re digital or via paper.
The strains caused by the EU-UK Trade and Cooperation Agreement still affect many smaller BCC member companies, although it seems from the insights we gleaned over the last year that there’s no escalating difficulty reported in trading goods or services with the EU. Nevertheless, our ongoing efforts aim to alleviate any negative impacts, working in collaboration with the Domestic Advisory Group and civil society, recognising that some issues are here to stay.
Resource limitations remain a significant hurdle for SMEs transitioning from being interested in exports to actual engagement in international trade. Despite the forthcoming benefits of the ETDA, addressing such issues remains crucial to support SMEs.
Southworth: To James and William’s points, trade is inefficient and costlier than necessary. But it’s not broken.
The challenge lies in educating and creating awareness about what can be done differently, particularly for SMEs, which have limited capabilities.
Where it gets really exciting, especially from an SME perspective, is that we’re not talking about digitalising the existing process. Over the last 200 years, the trade industry has been adding layer upon layer of paper documents, whether it’s customs declarations, phytosanitary requirements and so on. We’re not suggesting that we digitalise all of that, but rather that we move into a data system where a lot of those documents won’t be necessary in the first place.
GTR: What practical steps should companies take as they prepare for the transition to digital trade? How can they best leverage the opportunities provided by the ETDA?
Binns: When I talk to companies about this topic, I encourage them to proactively engage with counterparties including banks like Barclays, trade bodies – such as the International Chamber of Commerce and BCC – and the Department for Business and Trade. There’s a robust support network for UK businesses.
We all went through a similar scenario during Brexit, tapping into various resources to understand the changing requirements and facilitate dialogue and understanding.
Communication and leveraging available expertise are crucial for navigating topics like trade digitisation.
Southworth: Working together, through the task force, through the C4DTI and every other mechanism, there’s a very important message for all of us to send to the market, which is that we are on the path to digitalisation. We then need to be very clear about what companies can do at each stage, offering guidance and shifting the narrative from complex high-level jargon to the plain communication of growth prospects and simplified processes to bring them on that transformative journey. It’s not instantaneous; it’s about fostering gradual adoption through a compelling business case, spurred by the recent legal changes.
The ability to enact change varies with company size and level of readiness. The overarching message to companies is that it’s time to go digital, regardless of their starting point. For those more technologically advanced, we emphasise eliminating paper, which is applicable to companies under English law globally. With 80% of bills of lading and 60% of trade finance operating on English law, we’re creating a globally scalable legal environment to eradicate paper across supply chains. Larger firms are our current focus, concentrating on key sectors to build momentum and create case studies for smaller companies.
There are some remarkable examples: a melon importer from Brazil saw a 15% profit increase through using electronic transferrable records. Pilots consistently show 50-90% efficiency gains. If we can get the word out, we’ll start to see real transformation.
Binns: I agree, and one of the topics we discussed at length during the task force meeting, and subsequently as well, is digital identities, which are crucial for enabling many of the goals we’re talking about today.
It’s one thing being able to exchange electronic trade documentation, but if companies don’t have digital identities, or there isn’t a broader, more applicable digital identity standard, we’re simply not going to realise the same level of benefit. That’s one of the fundamental elements that collectively we need to be working on understanding much better.
GTR: Given the establishment of a legal framework that recognises and facilitates the use of electronic trade documents, what new tools and innovations are we likely to see emerge from the financial services space?
Binns: Updating core technologies for better connectivity is a priority, and Barclays is actively working on this in our trade business. It’s probably another 12 months before we’ve completed that process, but already, this year, it will make a huge difference in terms of being able to connect to different systems and platforms, which will then enable us to exchange that electronic documentation.
A big part of that is a much greater level of standardisation around API calls. It’s all very well having legal interoperability, but you can’t exchange electronic documentation unless you have technical interoperability as well. For me, being able to standardise API calls globally is a way of solving that.
As a banking industry, we can then start offering our clients solutions for traditional services like documentary trade, for example, which will no longer involve physical documents. It’ll enable us to reduce the costs and the processing times around those instruments and therefore time to money for our clients and their supply chains.
I believe our clients are already experiencing – and will continue to experience – a higher level of digital interaction with Barclays. Hopefully, they are seeing the same trend across other banks as well.
Southworth: The ETDA is somewhat a victim of its own success, with the name’s focus on trade documents overshadowing its broader financial innovation potential. There are a number of other applications. As an industry, we may need to engage in some blue-sky thinking to generate ideas for future innovations.
GTR: Considering the international nature of trade, how can the UK align its digital trade efforts with global stakeholders and initiatives? What are the key areas where international co-operation is crucial to maximise the benefits of digitalisation?
Bain: We must collaborate to ensure our positive progress in digital trade is not offset by other areas. One concern I’m currently focused on is the impact of regulations on trade in goods and services.
A notable achievement in 2021 was the WTO Joint Statement Initiative on Services Domestic Regulation, negotiated in Geneva. This has the potential to significantly reduce the cost of services exports by around 70%, benefiting multiple countries. It’s imperative that we ensure its effective implementation across the 70-plus participating nations and prevent any backsliding. There’s also promising momentum towards achieving a facilitative agreement on e-commerce, which could particularly benefit developing countries by providing access to established trade routes.
Recently, we’ve observed the introduction of new regulations in the EU and the US that affect imported goods. I’ve been reviewing the European Commission’s extensive guidance on the Carbon Border Adjustment Mechanism compliance for businesses outside the union, which has raised concerns. There are some issues that could negatively impact the entry of UK goods into the single market and add to trade-related bureaucratic requirements. Additionally, the adoption of supply chain legislation, initiated by the EU and replicated elsewhere, warrants our careful attention.
While digitising documentation holds promise for global trade, these new regulatory demands could potentially counteract its positive effects.
Southworth: The transformation of trade, which as we know is an international activity, is a joint effort. This is not a competitive task, it’s a collaborative task. It’s in all our interests that we work together, particularly for low to middle-income nations. We must do this collectively; only then will we really bring trade into the 21st century.
Binns: Trade is inherently complex, with multi-layered supply chains crossing borders. Each shipment involves numerous parties: buyers, sellers, banks, customs, shipping, inspection companies, and so on. To digitise effectively, we need standardisation of various aspects of that ecosystem, including APIs and legal frameworks. Collaboration among these parties is crucial to tackle the complexities of trade and achieve successful digitalisation. It’s only when we come together that we’ll be able to achieve that.
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