New Zealand Institute of Economic Research (Inc)
Media Release, 20 December 2024
For immediate release
Paperless trade works on all aspects of efficiency
“Trade is the lifeblood of the New Zealand economy. Anything that makes trade more efficient is likely to have a major positive impact on the economy,” commented Chris Nixon, Principal Economist at NZIER.
The real worth of paperless trade is that it speeds up trade, improves connectivity, and increases transparency, predictability, and inclusivity of trade. “It does this by improving all aspects of efficiency, it reduces cost per unit, it allows scarce specialist resources within a firm to move to more productive activities, and allows for further innovation,” said Mr Nixon. In the first instance, it will reduce logistics costs by between 15% and 45%, depending on the degree of automation already completed. “But this is only the start of the benefits since it is more than likely that paperless trade will increase trade and reduce barriers to trade further”, added Mr Nixon.
This paper is the fourth in a series of four papers that look at trade policy and what we can do about the challenges New Zealand faces.
The first paper looked at the US elections and its likely negative impact on world trade. The second looked at CER. The third paper looks at how we can project parts of CER into third markets (ASEAN and beyond), and this paper examines how we might get “more bang for our buck” from existing trade agreements by adopting paperless trade.
What is paperless trade, and why is it slow to get off the ground?
“What paperless trade does is eliminate the need for paper documents and physical signatures: so-called ‘wet’ documents and signatures. What electronic commerce takes place and how it occurs is viewed differently by different parties depending on the capabilities of the parties involved and the ambition of those parties, e.g. it spans, at a basic level, the emailing of PDF documents to the electronic transfer of data,” said Mr Nixon.
There are many non-trivial challenges to the use of paperless trade. This is why, currently, all we see is ‘digital islands’. Importantly, New Zealand will need to partner with a country or countries that are willing to go on the paperless trade journey with New Zealand. “It takes two to tango”, Mr Nixon said.
It also requires the reorganisation of a firm’s back office and some capital investment. For small and medium-sized firms, this is a large cost. The government will also be required to reconfigure its approach since it will require a new legal basis for cross-border operations.
“In both Government and business, it will also require the reorganisation of the way they go about their business”, commented Mr Nixon. Successful implementation will not only require a willing international partner but also a high degree of internal government coordination and business willingness.
“There is also a warning. After some halting steps, the advent of COVID has spurred international logistics companies to get their logistical act together. Major shippers have created an independent organisation to drive paperless trade. As part of this process, they aim to have 50% of the Bills of Lading (the critical trade document needed for goods to be moved) in electronic form within five years. In 10 years, they aim to have 100% of Bills of Lading in electronic form. New Zealand will need to be able to connect to this electronic infrastructure seamlessly without it adding to costs for New Zealand entities”, said Mr Nixon.
For further information, please contact:
Chris Nixon
Principal Economist
021 633 127
Chris.nixon@nzier.org.nz
