Reducing Trade Costs in Asia and the Pacific: Estimating the Benefits of Cross-Border Paperless Trade

Reducing Trade Costs in Asia and the Pacific: Estimating the Benefits of Cross-Border Paperless Trade

Wednesday, June 17, 2015
Public information and advocacy materials

Cross-border paperless trade has significant potential to reduce trade costs and boost trade in the Asia-Pacific region. Cross-border paperless trade refers to “international trade taking place on the basis of electronic communications, including exchange of trade-related data and documents in electronic form between relevant stakeholders across borders”. As evidenced by ESCAP Resolution 68/3 adopted in 2012 , the implementation of cross-border paperless trade has emerged as a key regional policy issue on the trade facilitation agenda in the Asia-Pacific region.

Research undertaken by ESCAP estimates the possible economic benefits – export gains and cost savings – of implementing cross-border paperless trade reforms. The methodology used for this analysis assesses the potential impacts of cross-border paperless trade using the current reality of cross-border paperless trade implementation compared with the outcomes under a series of possible reform scenarios. As the specific measures implemented in cross-border paperless trade facilitation can vary by country, the analysis uses six representative measures of cross-border paperless trade reforms based on the ESCAP Trade Facilitation Survey questionnaire , including the existence of a recognized certification authority to issue e-signatures to traders; electronic exchange of Certificate of Origin; electronic exchange of Sanitary & Phyto-Sanitary certificates; and the possibility for banks and insurers to retrieve letters of credit electronically without lodging paper-based documents. The two reforms scenarios considered in the analysis are: (1) all countries in the region achieve at least partial implementation of cross-border paperless trade; (2) all countries in the region achieve full implementation of cross-border paperless trade.

The analysis found that partial implementation of cross-border paperless trade measures was associated with an export increase of $36bn annually. For full region-wide implementation of cross border paperless trade the export gain would be in the order of $257bn annually. The time required to export would fall by 24% to 44%, and the direct costs by 17% to 31%, depending on the reform scenario considered. Furthermore, the total direct cost savings across all trade in the Asia-Pacific region would be approximately $1bn annually for partial reform, and $7bn annually for full implementation.

There is reason to believe that these are on the lower end of the range of potential economic gains. This is because the estimates are based on the implementation of cross-border measures only. Moreover, the model is based on unilateral reform by each country and does not take into account the dynamic gains for trading partners when reform is implemented multilaterally. In reality, paperless trade is typically implemented on a broader basis and would hence be associated with an increased the level of export gains and cost savings.
A key policy recommendation from this analysis is that cross-border paperless trade reform measures have as much potential to reduce trade costs and increase intra-regional and extra-regional trade as more traditional trade facilitation measures. Furthermore, it is apparent that the benefits from comprehensive trade facilitation reform have not yet been reaped. Even the strong performers in trade facilitation have areas in which improvements can be made. Countries which are weaker performers need to make more fundamental reform and progress in a wide range of areas in order to catch up with the rest of the region, and improve their trade integration. For these countries it is important to first implement general paperless initiatives, such as customs automation, and an electronic Single Window. It is necessary that these systems are fully in place before the cross-border aspect can be effectively dealt with. However, it is possible, and indeed beneficial, for countries to build paperless trading systems with the view of later cross-border expansion. By getting involved in regional cooperation on cross-border paperless trade at an early stage, countries which require more fundamental reform at present can avoid having to re-engineer processes at a later point, and thereby enjoy considerable overall implementation cost savings.
As the recent WTO Trade Facilitation Agreement makes clear, the costs of implementing trade facilitation can sometimes be significant. This is also the case for implementation of cross-border paperless trade. In this regard, Aid for Trade and capacity building to support reform processes have an integral part to play. For policymakers it is important to match the reformist will with adequate human, technical, and financial resources. A strong regional arrangement on cross-border paperless trade facilitation would certainly help in this regard.

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