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The House of Commons recently released a research summary of the Electronic Trade Documents Bill (ETDB), marking yet another step towards the bill becoming an enshrined law in the summer of 2023.

According to the House of Commons, “The Bill was introduced into the House of Lords and received cross-party support. It was not amended. The Bill follows a special procedure for Law Commission Bills.”

The House of Commons research briefing provides a summary of the ETDB details, benefits, and costs, as well as the parliamentary debate surrounding the bill. Trade Finance Global was quoted by the UK Government as supporting evidence for the necessity of electronic trade documents.

The report says, “The Government also quotes figures from Trade Finance Global showing a fall in trade contract processing times from several days to a matter of seconds.”

According to the House of Commons, the purpose of the Bill is to eliminate the existing legal barrier that prevents electronic documents from being recognised on par with paper documents, given they fulfil specific criteria. These electronic documents are referred to as “electronic trade documents” within the Bill. The introduction of this Bill aligns with the recommendations provided by the Law Commission.

The Government anticipates several benefits arising from the implementation of this Bill. Electronic trade documents are expected to be more cost-effective, user-friendly, efficient, and secure compared to their paper counterparts. Their usage would lead to reduced trade expenses, accelerated transactions, minimised errors, and positive environmental outcomes. Overall, stakeholders have expressed favourable reception towards the Bill.

This House of Commons research briefing is yet another milestone in legitimising digital trade. While the ETDB goes through the legal process, many jurisdictions across the globe are keeping a watchful eye on this process. Though there is not a single legal system that unifies the international trade world, Common Law is the most widely followed, making the ETDB even more vital for the future of trade.

To read the entire report, click here.

Courtesy: tradefinanceglobal.com

Mr Guterres was speaking on the final day of the annual Africa Dialogue Series in New York, where the focus this year was on accelerating the implementation of the African Continental Free Trade Area (AfCFTA) – set to be the largest in the world. 

Harness the potential 

He said the pandemic brought high food and energy prices, made worse by the Russian invasion of Ukraine, exacerbating poverty, inequalities, and food insecurity.  

Governments have also faced rising interest rates, increasing the potential for debt, while climate change has created deadly floods and droughts, contributing to the risk of hunger. 

“Guided by the 2030 Agenda for Sustainable Development and the African Union’s Agenda 2063, we must ramp up our efforts and harness the full potential of trade and industrialization to advance sustainable, inclusive growth,” the UN chief told participants. 

Millions could escape poverty 

He said the AfCFTA is set to be an engine of that growth. 

“Its full implementation could generate income gains of up to nine per cent by 2035, according to the latest estimates.  This would lift up to 50 million people out of extreme poverty and reduce income inequalities,” he added. 

The Secretary-General stressed that realizing the AfCFTA promise calls for action across four critical areas, starting with boosting access to financial resources and investment. 

“We need a fundamental reform of the global financial system so that Africa is represented at the highest level,” he said.   

Barriers that hold back intra-African trade and production capacities must also be broken down, including through eliminating tariffs, building “made in Africa” supply chains, and harmonizing regulations that would enable investment.  

Leverage technology 

His third point focused on energy and digital infrastructure, which are vital for African countries to build their manufacturing capacities and harness the full potential of innovation and entrepreneurship.  

“We need to power Africa’s industrialization and leverage technology to leapfrog outdated infrastructure and head straight towards the fourth Industrial Revolution,” said Mr Guterres. 

The continent is also blessed with resources that could make it a leader in clean energy, he added, and the sector could generate more than six million jobs by mid-century.  Yet Africa has received just two per cent of global investment in renewables over the past decade. 

Invest in people 

His final point underscored investing in “human capital”, with Africa’s vibrant, young and innovative population representing both a dynamic workforce and a massive market. 

“Creating decent jobs, particularly for women, and promoting education, training and lifelong learning is the best way to ensure Africa’s people fully contribute to the continent’s digital revolution and sustainable growth,” he said. 

Annual Dialogue 

The African Dialogue Series brings together policy and decision-makers, experts, academics, civil society representatives, young people and other stakeholders to examine challenges and opportunities impacting the continent. 

It is organized by the UN Office of the Special Adviser on Africa (OSAA) and partners. 

Courtesy: news.un.org

Semiconductor fabrication lays the foundation for microchip production and therefore helps to make our world go round in many ways, as chips do not only power computers, smartphones and other consumer electronics, but are also a mainstay of the automotive industry, control medical devices and keep network infrastructures running.

Data published by Boston Consulting Group shows just how concentrated in one place the production of semiconductor slices – so-called wafers – for the most advanced types of computing and processing chips is. Taiwan is home to 92 percent of the production of logic semiconductors whose components are smaller than 10 nanometers (fitting more processing capacity onto a smaller area while also being faster and more energy-efficient).

Semiconductor processes smaller than 10 nanometers were pioneered in Taiwan and South Korea. Other production centers failed to follow suit in producing this type of advanced wafer for logic chips, as the graphic with data from 2019 shows. While the type made up only 2 percent of global semiconductor production capacity that year, its share is expected to grow as part of the ongoing innovation in the sector and it is already instrumental in cutting-edge technology, for example in smartphones.

Over the course of the pandemic, not much changed concerning production locations, but governments are now beginning to act. After chip shortages following Covid-19 supply chain upheavals and geopolitical tensions between China and Taiwan also running high in 2022, the government of the United States as well as the European Union, both dependent on state-of-the-art microchips, have started initiatives to challenge the status quo. Looking at the giant global disparities in semiconductor production, however, it might be a long way until real change can be achieved. For example, U.S. chipmaker Intel is just now rolling out its first below 10 nanometer product, while the Taiwan Semiconductor Manufacturing Companyhad done so in 2016.

Both Europe and the U.S. used to hold larger parts of global semiconductor production capacity and were also once quicker to adapt to innovations in the sector. In 1995, Europe and the U.S. had a combined global production capacity share of 36 percent, compared to less than 20 percent today. Including only larger wafer slices of eight inch diameters or above – an innovation of the early 1990s – their combined production capacity stood at more than 80% as early as 1990.

Courtesy: statista.com

US semiconductor imports grew 13% in value during the start of 2023, highlighting the country’s lasting reliance on foreign chip needs.

Though efforts have been made to shift supply lines closer to shore, Asia continues to be a key source of semiconductors.

Thailand doubled their input of direct exports to the US, and India increased their exports by 39 times, reaching $497.1 million, while Malaysia lost nearly 33% of their exports.

Since the start of 2023, the US has imported $15.4 billion worth of chips, underscoring the scale of the challenge for its chipmaking domestication project.

Washington’s Chips and Science Act provides subsidies for international chip fabrication specialists to set up facilities on US soil, but this project will take years to become effective.

Taiwan, whose Taiwan Semiconductor Manufacturing Co (TSMC) is building an Arizona facility with two chipmaking fabs, retained its ranking as second on the list of exports by value.

The island’s role in the chip supply chain is, in reality far larger, as many of the parts exported from other Asian nations are first fabricated in Taiwan or nearby South Korea, home to memory-making leaders Samsung Electronics Co and SK Hynix Inc.

Vietnam and Thailand together now account for a fifth of US imports.

The two nations are benefiting from US firms looking for greater geographic diversity of supply to help offset the risk of China-US relations deteriorating further.

Semiconductors, essential to everything from computers and smartphones to electric vehicle batteries and large-scale data centres, are now a point of focus for US lawmakers.

Last year’s legislation to encourage TSMC and Samsung to increase their investment on American soil is just one part of its broader contest with economic rival China, whose semiconductor shipments to the United States dropped nearly 11%, according to Bloomberg. 

Courtesy: tradefinanceglobal.com

Indian goods and services exports have crossed the USD 750 bn-mark for the first time, news agency ANI reported Union Commerce & Industry Minister Piyush Goyal as saying at an event on Tuesday. In 2021-22, the country’s goods and services exports touched an all-time high of USD 422 billion and USD 254 billion respectively, taking the total shipments to USD 676 billion.

“There’s obviously much faster growth in services, but growth in both (merchandise and services exports) is good … Probably we will end the year with about USD 760 bln (in exports), if not more,” Goyal told reporters.

Exports fell 8.82 per cent in February from a year ago, while imports dropped 8.21 percent — the biggest decline in more than two years. Experts in the past few months have expressed concerns around slowing exports owing to recessionary worries and weak global demand.

Exports were down by 8.8 per cent at USD 33.88 billion in February 2023 compared to USD 37.15 billion in the same month last year. Imports also declined for a third month on the trot in February at USD 51.31 billion, down by 8.21 per cent compared to USD 55.9 billion a year ago.

“Slowing core exports and imports indicate softening global and domestic demand,” said Madhavi Arora, economist with Emkay Global Financial Services Ltd. However, Arora lowered her current account deficit forecast for the fiscal year ending March to 2.5% of the gross domestic product, from 2.6% earlier on robust services exports in the last few months.

Commenting on the data, Sanjay Budhia Chairman – CII National Committee on EXIM and MD- PATTON Group said that although India’s exports have slightly dipped in February owing to the turbulent global scenario, it is encouraging to note that merchandise exports saw a rise in the April-February period in spite of an adverse business environment.

“CII and the Indian industry has utmost faith in the reforms introduced by the government to improve the trading environment for inducing a rise in the overall Indian exports,” he said.

Federation of Indian Export Organisations (FIEO) President A Sakthivel said that they expect 2022-23 to end up with export of USD 770-780 billion, which will be over USD 100 billion as compared to aggregate export of USD 672 billion recorded in 2021-22, exhibiting a high growth of 15-16 per cent.

Courtesy: Economic Times – India Times

Environmentally friendly products are proving to be a bright spot in global trade as overall growth remains weak, according to the United Nations Conference on Trade and Development (UNCTAD).

Although global trade increased to a record US$32tn in 2022, UNCTAD’s March 2023 update finds that the second half of 2022 saw lacklustre growth.

Trade in goods declined by around US$250bn in Q4 compared to Q3 2022, with all major economies seeing a substantial drop in levels, aside from Russian imports. Volumes, however, continued to grow in Q4 and are expected to rise in Q1 2023.

The decrease in global trade during Q4 2022 hit lower-income countries harder, with south-south trade between developing countries around 6% lower than in Q3 2022, driven largely by negative trade growth in East Asia.

Yet the trade of environmental goods remained robust in 2022, outperforming global trade overall and totalling US$1.9tn, which represents 10.7% of trade in manufactured goods.

According to UNCTAD’s Technology and Innovation Report 2023, “frontier technologies” – such as artificial intelligence and green hydrogen – represented US$1.5tn in market value in 2020, with the report predicting that this could grow to over US$9.5tn by 2030.

In terms of green exports like biofuels and solar photovoltaic energy, some developing countries are making good progress, according to UNCTAD’s readiness index, which ranks countries according to how prepared they are to capture the economic benefits of new technologies, based on indicators such as research and development, industrial capacity and finance.

While high-income economies dominate the index, Brazil, China and India appear in the top 50.

Overall, though, developing countries are not increasing their green exports as quickly as developed nations, despite starting from a similar point.

In developed countries, total exports of green technology rose from US$60bn in 2018 to over US$156bn in 2021, while exports from developing nations increased from US$57bn to around US$75bn.

The report adds that there is a limited window of opportunity for developing countries to take advantage of renewable energy products. Otherwise, they risk being “firmly locked into fossil-fuel pathways, leaving the markets entirely to foreign investors”.

UNCTAD says that few developing countries have the capacity required to adopt and adapt to these technologies, suggesting that one solution would be to review trade rules so as to allow developing countries “to protect infant green industries through tariffs, subsidies and public procurement”.

The report also points out potential export opportunities, including bioethanol from Brazil and green hydrogen from solar- and wind-rich countries, like those in Africa, Southern Asia and South America.

Courtesy: Global Trade Review

The MLETR (Model Law on Electronic Transferable Records) is a revolutionary solution that aims to transform the trade finance industry by providing an open framework for digitising trade documentation. 

MLETR enables a seamless exchange of digital originals through existing mediums. This is unlike other blockchain-based trade digitisation solutions, which operate within a ‘closed user group’ concept. This allows MLETR-compliant solutions to work alongside other platforms and systems with or without integration, creating an interoperable framework that can streamline trade finance processes. Once a digital original is created, it can be shared easily with other parties involved in the transaction. 

Here is what a simple trade transaction would look like with MLETR-compliant solutions:

• Shipping companies can digitally share the original ‘Bill of Lading with the shipper via email
• Suppliers can generate their own documents (invoice, etc.) and submit the same, along with the ‘Bill of Lading’ to their Bank via Internet Banking 
• The supplier’s Bank can relay the document to the Buyer’s Bank via the SWIFT file act 
• Buyer’s Bank can further share the documents with their client using their own Internet Banking platform 
• Lastly, the buyer can submit the ‘Bill of Lading’ to the shipping company via email or any other channel.

MLETR-compliant solutions also ensure that only one party (i.e. the possessor in the physical instance) is in control of the document and only this party can electronically transfer possession to another (for example – from shipper to Bank to buyer to the shipping company).

A closed user group blockchain-based solution, on other hand, would require all parties involved in the transaction to be part of the same closed group with the same blockchain platform, limiting the interoperability and flexibility of the solution. 

Under MLETR, no party is required to use a mandated technology. In fact, closed user group solutions could operate as communication platforms, where MLETR digital originals can be exchanged. 

The only requirement is the adoption of a legal framework enabling electronic transferrable records by the relevant jurisdiction.

MLETR use cases

Some countries, including Bahrain, Singapore and Abu Dhabi Global Market, have adopted MLETR. The Financial Services Regulatory Authority (FSRA) of Abu Dhabi Global Market (ADGM), in collaboration with commercial partners Emirates NBD, DBS Bank and Standard Chartered, successfully completed the world’s first cross-border POC digital trade financing transaction. This action proved that interoperability, with the right legal framework, can be achieved. 

We are also witnessing major developments in the G7 countries. In fact, the UK is on the cusp of passing the Electronic Trade Documents Bill, which will serve as an important stepping-stone to the widespread adoption of MLETR.      

Notably, English common law is the most widespread legal system in the world, with 30% of the world’s jurisdictions using it and an even greater percentage have reciprocal agreements. 

The passing of the UK trade bill, expected in June 2023, would create momentum that would hopefully encourage a host of countries to adopt their own versions. Given the volume of cross-border trade already conducted based on English Law, this will likely accelerate the digitisation of trade instruments.  

Financial instruments such as Bills of Exchange (BoE) and Promissory Notes or Irrevocable Payment Undertakings could benefit the most.  For example, a BoE auto-embedded within a supply chain payable workflow could potentially replace proprietary payment service agreements.     

Germany and France are also making progress in adopting a law that would enable electronic transferable records. As they are home to two of the four largest containerised shipping companies in the world, their adoption of an electronic trade law would be key to the acceleration of trade digitisation 

While these are welcome developments and will likely have a cascading effect; the need for countries to create their own laws around electronic transferrable records is imminent. Not all parties in a trade finance transaction, especially domestic ones, would benefit from foreign laws and the respective reciprocal arrangements. 

Understandably, the decision for policymakers to prioritise the adoption of MLETR can be a challenging one, especially given the number of stakeholders involved in a trade finance-related transaction. To fast-track the work on this front, institutions and governments could focus on other local or regional applications. 

For example, in 2021, the Bahrainian Central Bank introduced e-cheques. Bahrain’s own adoption of MLETR, in the form of the Electronic Transferable Records Law and the Electronic Communications and Transactions Law, came into force in 2018 and gave the required legal basis for this initiative. 

The adoption of MLETR by governments in the MENA region could replace post-dated cheques – which underpins most of the rental market in the region – with a combination of an electronic promissory note and direct debit. 

This would reduce paperwork while still allowing landlords to act against tardy tenants under the negotiable instruments’ legal framework. Such initiatives could provide immediate benefits and develop the ecosystem for digitising cross-border trade as it progresses. 

As legal adoption progress, it is pertinent that technology solutions evolve for mass adoption. For trade digitisation to have a meaningful impact on narrowing the working capital trade gap of about $1.8 trillion globally, tech solutions must address the problem of ‘identity’ and ‘authorisation’.

Trusted Digital Identities: Final building block

A final block in the MLETR ecosystem would be ‘Trusted Digital Identities’. These are crucial for the transformation of trade. They enable a smoother user journey on the path to adoption, as well as provide the much-needed confidence for Banks when lending to SMEs. 

It is well-known that the longest journey in any corporate transaction is the completion of KYC checks, sometimes even more arduous than finding a lending facility. An open network where corporates can create their own identities, which can then be verified by their respective Bank(s) who act as ‘verifiers’ by leveraging on the corporate KYC that already exists, can offer a ready solution.      

Digital Identities can further act as extended wallets, where documents in possession of the owner can be held safely, and support extensions for eSignatures of various geographies in which they operate. It can also enable corporates to be ‘verified issuers’ of authorisation tokens for their own personnel that can be exchanged with Banks and/or are embedded into digital documents instead of the traditional account operating mandates. 

The potential of electronic transferrable records is extremely promising. Governments, financial institutions, and fintech around the world must intensify efforts to accelerate adoption. This is especially the case at a time when economic headwinds around the world are mounting, and measures to support growth are urgently needed.  

The good news is that we are pulling in the right direction. 

Source: Trade Finance Global

The US has emerged as India’s biggest trading partner in 2022-23 on account of increasing economic ties between the two countries.

The Commerce Ministry data shows that the bilateral trade between India and the United States has increased by 7.65% in 2022-23.

Source: livemint