By Nicola Rowan
This article was first published by EY in its TradeWatch publication and is re-published with permission.
The Australian government recently reaffirmed its commitment to Australia’s trade modernisation journey by increasing investments to key agencies to implement several trade reform initiatives. This article provides an overview of these investments and how the digitalisation of trade processes and documentation is increasingly seen as a new driver for enhancing the productivity of Australia’s trade ecosystem, with substantial sustainability and supply chain benefits.
Australia’s actions follow recent successes in the digitalisation of trade documentation in the UK and Singapore. The Australian government will now explore domestic implementation of the United Nations’ Model Law on Electronic Transferable Records (MLETR) to provide the legal framework for promoting trade digitalisation and paperless trade.
Recent disruptions to the global trading landscape have revealed the importance — and the fragility — of trade as a driver for global economic prosperity. The COVID-19 pandemic placed unprecedented pressures on supply chains, which, along with the conflation of economics and security, have seen a rise in economic decoupling, the resurfacing of interventionist industrial policy agendas and greater friction at our borders. We are also seeing governments and consumers become more discerning, with stringent product specifications and regulations challenging global traders and regulators alike. In the face of a more dynamic risk environment, digitalising trade processes and documents has the potential to be the next leap in the productivity of Australia’s trade ecosystem and drive sustainable growth.
Australia has been steadily making progress toward modernising its trade systems, led by the Australian government’s Simplified Trade System Implementation Taskforce (STS Taskforce), which has a “whole-of-government” mandate, and bipartisan support, to lead regulatory reform efforts. The STS Taskforce was established in July 2021 under the former government as part of a suite of economic reforms to enhance productivity of Australia’s post-pandemic recovery. Its work has recently been boosted through additional investments announced by the Australian government in its 2023–24 Mid-Year Economic and Fiscal Outlook (MYEFO) in December 2023.
As part of this, the government allocated AUD53.5 million over four years beginning in 2023–24 to digitalise trade procedures, support paperless trade, reduce regulatory burdens, trial new cargo inspection technologies and procedures, and streamline business-to-business interactions. Specifically, the STS Taskforce has committed to exploring options to implement the MLETR in Australia as a means of accelerating the adoption and exchange of electronic trade documents and moving away from paper-based systems and processes.
Adoption of MLETR and introduction of legislative amendments to modernise and strengthen existing customs regimes and digitalising processes would bring Australia in-step with its trading partners, including the UK and Singapore. This additional funding will also build on existing initiatives being implemented by Australian’s key border agencies, including the Australian Border Force and the Department of Agriculture, Fisheries and Forestry, to upgrade their legacy systems, improve data-sharing, and strengthen border and biosecurity protection.
Challenges of the paper-based system
Paperless trade refers to the digitalisation of information flows that are used to support and facilitate cross-border transactions. While not a new initiative, there continues to be a strong reliance globally on paper-based trade documentation by regulators and businesses alike. There are currently over 4 billion documents circulating in the trade system , with an inadequate degree of standardised information, processes and systems, along with outdated national laws. Paper-based trade in the current environment creates inefficiencies and delays across the supply chain, hindering the efficiency and cost-effectiveness of global commerce. It also limits the ability to respond swiftly to market demands, quality issues or safety concerns. The value of costs incurred can be claimed back through the digitization of global trade processes, which is estimated to bring total benefits to nearly USD1.2 trillion by 2026.
Reliance on paper also increases the risks of errors, fraud and loss of valuable information. These issues are often seen in the provision of trade finance, a critical enabler of global trade and an area that stands to benefit most from trade digitalisation. In the Australian context, there are still several regulatory obligations that impose strict requirements to produce and retain paper documents. For example, the Australian Transaction Reports and Analysis Centre (AUSTRAC) requires all reporting entities to create, store and manage transaction records for seven years as part of its core anti-money laundering obligations. While such requirements play an important part in broader anti-money laundering and counter-terrorism financing prevention efforts, they are some of the few remaining obligations preventing companies from fully transitioning to paperless systems. There is an emerging consensus that the commercial and regulatory risks such paper-based measures seek to address could be effectively managed through an agreed and trusted approach to the use of electronic data exchange and e-documentation.
International consensus on trade digitalisation
The MLETR offers a practical mechanism for accelerating the pace of digitalisation in Australia — at a modest cost for government and using a proven reform path that is gaining traction globally. The MLETR creates an enabling legal framework for paperless trade, providing an international benchmark to align national laws and enable the legal use of electronic transferrable records, both domestically and across borders. By being technology and systems neutral, the MLETR allows users to comply as they see fit (through the use of tools such as registries, tokens and distributed ledgers), enabling digital information to move seamlessly across borders. There are some powerful examples among our international peers, including the UK and Singapore, that have successfully amended their domestic legal regimes to implement the MLETR. The UK’s Electronic Trade Documents Act (EDT Act), implemented in September 2023, made the UK the first G7 country to place electronic trade documents on an equal footing with their paper counterparts. The UK government has estimated that domestic implementation would add GBP1.14 billion to the British economy over the next decade. On 15 November 2023, the EY Global Trade Advisory team in Sydney, Australia, co-hosted a trade digitalisation event with the British Consulate General and the Business Council of Australia.
The event brought together public and private sector representatives from Australia and the UK to share their views and exchange experiences on progressing reform agendas and best-practice industry-led initiatives to address regulatory and commercial barriers to paperless trade adoption. This event highlighted the need for continued dialogue and cooperation between Australia and the UK on paperless trade and demonstrated a strong appetite among regulators and businesses to cooperate on paperless trade. There was strong interest in exploring opportunities around trial shipments of completely paperless exchanges to help identify barriers to adoption and accelerate the transition. In addition to the UK and Singapore, the MLETR has now been implemented by seven countries and three more countries are in the process of domestic implementation. This progress is set to continue off the back of senior political-level endorsement, including by G20 Trade Ministers, who last year issued their High Level Principles on Digitalisation of Trade Documents, which highlighted the centrality of MLETR as a means of promoting neutrality, collaboration, security, reliability and trust.
Opportunities for collaboration between Australia’s private sector and international partners
While there are many barriers to overcome, accelerating Australia’s transition to paperless trade is not only a necessity but also an opportunity that could deliver an estimated $1.7 billion in economic benefits. Therefore, it is no surprise that the private sector and trading community have signalled strong support for the government’s efforts. Businesses should be positioned to embrace opportunities and positively contribute to trade digitalisation and the reform agenda by sharing their own operational experiences and what they have learned. There are rich lessons from business attempts at adopting existing paperless trade solutions already in market, in particular the challenges associated with cultivating the required change across the end-to-end supply chain. Sharing these insights with government stakeholders, participating in pilots of trial shipments and shifting toward paperless systems wherever possible will support the Australian government’s efforts to implement the MLETR domestically and deliver its broader trade modernisation agenda.
For additional information, please contact:
Nicola Rowan | + 61 424 252 580 | ni**********@***ey.com
Peira Shannon | + 61 423 649 780 | pe***********@***ey.com
Cam Tran | + 61 430 597 880 | ca******@***ey.com
Luke Branson | + 61 3 9288 8369 | lu**********@***ey.com
REFERENCES
[1] “Simplifying trade for Australia,” Australian government website. Find it here
[2] “Budget 2023-24: Mid-Year Economic and Fiscal Outlook,” Australian government website. Find it here
[3] “UNCITRAL Model Law on Electronic Transferable Records (2017),” United Nations website. Find it here
[4] United Kingdom | Creating a Modern Digital Trade Ecosystem, International Chamber of Commerce website. Find it here
[5] Quantitative Analysis of the Move to Paperless Trade, The Commonwealth Website, Quantitative Analysis of the Move to Paperless Trade. Find it here
[6] ‘UK: An overview of the Electronic Trade Documents Act,’ TradeWatch Issue 3 2023, page 37. Find it here
[7] US, Belize, Paraguay, France, UK, Germany, and Papua New Guinea.
[8] Thailand, Mexico and Japan.
[9] ‘MLTER Tracker’ United Nations Economic and Social Commission for Asia and the Pacific Website, MLETR Tracker | Cross-Border Paperless Trade Database (digitalizetrade.org)
[10] “Annex-C High Level Principles on Digitalization of Trade Documents,” G20 website. Find it here
[11] Trade simplification aims to save $4.3 billion in regulatory costs, Australian Financial Review website. Find it here
