Business and Economics

The digitization of trade’s paper trail may be at hand 3-24-18

Source: "Pulp Friction"       

The World Economics Forum estimates that 20% of the cost of transporting trade goods goes towards administratuve and paperwork expenses. Simplifying administrative procedures and reducing paperework could save more money in international trade than eliminating all tariffs. The UN says full digitization of trade paperwork could increase trade by $250 billion in the Asia-Pacific region alone. Sadly, not much progress has been made in this area prior to this year. A 2008 UN convention on the standardization of electronic trade documents only had 4 countries sign on. One source of resistance might be major banks, who currently employ thousands (and charge millions) to review paper documents looking for errors or discrepancies. Technology has also been a problem - how to update and share digital documents in a safe, secure way is a significant challenge.

IBM and Maersk are partnering on a paperless trade document system that will be open-source and based on blockchain technology. A blockchain is a continuously growing list of records, called blocks, which are linked and secured using cryptography. Each block typically contains a coded version of the previous block, a timestamp and transaction data. By design, a blockchain is inherently resistant to modification of the data. It is an open, distributed ledger that can record transactions between two parties efficiently and in a verifiable and permanent way. For trade documents, it means that each party in the process could access all the relevant paperwork and update it in real time.