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Digital World Trade - Ecosystems of Trust

The record number of regulatory documents submitted for a single consignment to be shipped across international borders is thought to be 650.

The company, Nomad Foods, was cited by Jens Munch Lund-Nielsen, the head of global trade & supply chains at the IOTA Foundation, during a panel discussion about the need to digitalise trade documentation that took place during an Institute of Export & International Trade (IOE&IT) event earlier this year.

Talking to the IOE&IT Daily Update, Lund-Nielsen argues that the digitalisation of trade processes and documentation could lead to substantial time and cost savings for companies like Nomad Foods.

“Take those 650 documents,” he explains. “If you can input the information digitally, you potentially have to only input that data once, rather than 650 times. That’s a massive reduction in administration and that’s the first impact.”

He estimates that firms, more generally, could reduce the time and costs of transporting goods internationally by 30% by streamlining border processes and documentation in this way. The impact this could have on global trade and productivity is huge, he argues.

Ecosystem of Trust pilots

IOTA Foundation, alongside IOE&IT, is part of one of six consortia currently running ‘Ecosystem of Trust’ pilots in the UK. The pilots have been set up to assess the use of technology, data and trusted trader relationships to reduce administrative burden and cost for traders.

The pilots involving IOE&IT and Iota Foundation are ongoing and will involve the shipments of tea bags, coffee and cut flowers from Kenya to the UK. They are built on the technology created by consortium members for the Trade Logistics Information Pipeline (TLIP) initiative that was launched in 2021 to develop ‘digital trade corridors’ between the UK and Kenya.

Lund-Nielsen explains that IOTA Foundation’s “best in class” distributed ledger technology has an important role to play in these pilots because it makes the data submitted for the consignments “immutable”. He explains:

“It’s really important that the data is immutable so that you can trust that it hasn’t been altered or manipulated. When you have 30 organisations collaborating on or within different supply chains, businesses can become concerned about who sees their data.

“The technology we provide allows each owner to manage their own data and control exactly who sees and can alter it.”

Lund-Nielsen also argues that submitting information digitally should make the impact of data entry mistakes less severe. He says:

“Mistakes will always happen, but if there’s a mistake on any one of those 650 documents, that can hold things up – the truck carrying the goods might need to go back. If these documents are digitalised, the mistake can be corrected at source and quickly.”

An age-old problem

Why now? Why not 20 years ago when we started listening to mp3s online, when Amazon started to become the behemoth it is today and our relationships with families and friends started to be carried out digitally?

Jens Munch Lund-Nielsen - IOTA foundation

[Pictured: Jens Munch Lund-Nielsen, head of global trade & supply chains, IOTA Foundation]

Lund-Nielsen argues that part of the reason is the number of actors involved in supply chains, from trading businesses to customs intermediaries, logistics providers to financial institutions. But he also argues that concerns about copying and falsifying data related to cross-border trade has been a significant barrier. He explains:

“When we started to digitalise things, we learnt that we could share digital versions with all our friends for free – whether that was music or films. This means digitalisation allows you to copy things.

“That's not what we wanted in trade. We wanted to make sure that this data was immutable, that it couldn’t be falsified.

“So you could say that for historical reasons the digitisation of trade has been a little bit slow because we weren’t sure if the digital solutions would actually help with these problems.”

He explains that the development of blockchain technology over the last 10-to-15 years has changed the game for trade. He says:

“A blockchain can make sure that the digital version is singular or unique. This means we now have a powerful tool that can make all these documents digital and unique, ensuring they’re immutable.

“That's the transition that we’ve gone through from a technology point of view.”

Regulatory hurdle

The trade digitalisation process is slow in many places, but the UK took a significant leap forwards earlier this autumn when introducing the Electronic Trade Documents Bill. Lund-Nielsen argues that things are now coming together in the UK for digitalisation to accelerate, and says this could be a game-changer for global trade more broadly. He explains:

“We’re in an interesting place in the UK where everything's coming together now. We have the Ecosystem Trust pilots, as well as solutions like TLIP.

“We have the technology, but we also have the traders who are interested, industry which is interested and parliamentarians who are progressing things from a regulatory perspective.

“The UK is definitely among the first movers alongside countries like Singapore and Australia that are also pretty advanced. And with UK law being foundational and replicated in many Commonwealth countries, this should make it easier to cascade the same kind of regulation in these countries.”

He also praises the leap Kenya has taken in its engagement and partnership with the UK.

“It also shows that this technology is not just the privilege of developed economies. There are no obstacles for Kenya to get on board – it faces the same challenges as the UK.”

Testing ground

Lund-Nielsen is confident that the Ecosystem of Trust pilots will pave the way for greater digitalisation in UK trade and beyond. He also argues that the Cabinet Office has shown a “huge commitment” to it.

“The pilots will help them to prove points on process, on technology and on legislation.

“It’s important we take the right next steps for both traders and for the UK economy. We can then start to have digital trade corridors with other countries. This will improve access to markets without even needing to negotiate things like tariffs.

“This is the process that we are enabling – the reduction of non-tariff barriers.”