Manufacturing & Supply Chain

Digitalisation of trade: new report identifies the £25 billion prize for UK

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Digitalisation of trade: new report identifies the £25 billion prize for UK

Digitalisation of trade: new report identifies the £25 billion prize for UK
March 30
10:30 2022
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The Institute of Export & International Trade (IOE&IT) has launched a new report setting out the opportunities and challenges of digitalising trade. The report, Trade Data and Digitalisation (available to download here), takes a comprehensive look at the benefits of adopting full digitalisation of trade. It crystallises some of that thinking by setting out the areas where trade is changing and what that will mean for the wider economy.

Marco Forgione (pictured), director general of the IOE&IT, said: “Digitalisation of trade is the most significant issue in international trade today. This report sets out a clarion call for governments, intergovernmental organisations and businesses to really seize the opportunities of the digitalisation of trade information.”

“When we talk about the digitalisation of trade, we are not referring to a scanning and emailing PDFs; it is about a proper integration of trade and customs data. This will mean the speed at which goods are transported and processed will increase and there will be fewer delays at borders. The flows of documentation involved in the transportation of goods and services haven’t really been impacted by the digital revolution yet.

He concluded: “Globally over 2.5 quintillion bytes of data are produced each day. To give a sense of scale, the Milky Way is a quintillion metres wide. Any change which speeds up the transfer of data has the potential to make a huge impact. In the UK alone, the full digitalisation of trade data, stands to add over 1%, some £25bn, to UK GDP.”

The Minister for Exports, Mike Freer MP welcomed the IOE&IT report saying that adopting digital processes will be “faster …and cheaper” leading to increased exports and return on investment.

Mike Freer continued: “In 2020, the UK exported almost a quarter of a trillion pounds worth of digitally delivered services, but we can go further. As rightly highlighted in the IOE&IT report, advances in technology in the future will be paperless. The documents required to navigate customs can be transmitted in the blink of an eye from one side of the world to another. Digitalisation can make border processing up to 90% faster, and 60% cheaper, increasing exports and returns on investments.”

What trade digitalisation is – and what it is not

‘Digital’, ‘digitisation’ and ‘digitalisation’ mean different things to different people. In the context of international trade, common coherent definitions are elusive. That said, it is clear what digitalisation is not. For example, the ability simply to scan in a hand-filled-in form into PDF format and email it does not constitute true digitalisation.

True, or full, digitalisation in the context of international trade involves the digitalisation of all trade-related information flows. Full digitalisation will enable the exchange of trade-related data, documents and electronic authorisations between relevant parties in the supply chain.

This has ramifications for a wide and growing range of related aspects of electronic commerce and trade management, from cybersecurity, privacy, and consumer protection, to legal, regulatory, and taxation requirements.

Benefits of trade digitalisation

Digitalising international trade is a big undertaking, but the potential benefits are commensurately sized. This is particularly the case for the UK, where exports (two-thirds of which are goods, and one-third services) account for around one-third of GDP (with imports similarly large); digitalisation plays into a number of key areas of UK strength.

Firms, sectors, and government stand to benefit from increases in efficiency; ‘doing existing things better’ as well as from the many opportunities that arise for new goods, services, and markets that will evolve alongside the technology-based backbone of digitalised trade.

Steps to going digital

The report highlights 10 key areas which would improve as a direct result of the digitalisation of international trade. They include:

1. Lower costs of trade, including reduced delays at borders

2. New combinations of goods and services and ‘servitisation’

3. Lower barriers to entry

4. Economies of scale

5. Wider supply of finance and insurance

6. Reduced carbon footprints and improved sustainability

7. Greater resilience to shocks

8. Reduced theft, fraud, and tax evasion

9. Growth in coverage and visibility of supply chains

10. Better and speedier trade data

Moving Forward

The report also gives a comprehensive list of recommendations to government and businesses to prepare to adopt digital trading practices which are explained in detail within the report.

Marco Forgione, director general, IOE&IT, added: “The size of the prize for the UK and the whole world is huge and we stand ready to help businesses and governments adapt to these new trading practices. We know that digitalisation is not just about increasing GDP, but creating a fairer, more sustainable future for the whole world and by embracing the digitalisation of trade we can achieve just that.”

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