APEC has an opportunity to realise the significant benefits arising from paperless trade in the region. APEC wide adoption of the UNCITRAL Model Law on Electronic Transferable Records (MLETR), or equivalent arrangements, can help to achieve this. The benefits of moving along this path to paperless trade are significant – estimated to be as high as USD2.0 trillion across the APEC region.
Some APEC economies are already leading the way, adopting MLETR or equivalent arrangements. For those yet to do so, several legal and practical constraints will need to be overcome. There are various legal approaches, combined with coordinated and cooperative action across APEC, that can be taken.
This report explores the benefits of MLETR adoption across APEC, assesses the legal constraints to doing so, and maps out a recommended path forward for APEC to advance paperless trade.
The role of MLETR and paperless trade
International trade operates with vast volumes of paper. The International Chamber of Commerce (ICC) estimates that four billion documents move through the global trade system daily. Despite advancements in the digitalisation of the trade ecosystem, most jurisdictions globally still require that transferable records, that is, documents transferring the ownership of goods, be presented in physical paper form. These documents could be digitised, dramatically reducing the need for such large volumes of paper, and its associated costs, in international trade.
MLETR provides a legislative template for electronic (‘paperless’) versions of transferable documents or instruments. These include bills of lading, bills of exchange, promissory notes, and warehouse receipts which are crucial documents for the conduct of international trade, often regarded as documents of title.
Legislative reform moving the international trading ecosystem away from outdated paper-based systems and their legal frameworks towards more reliance on paperless systems and a legal environment supportive of electronic transferable records will significantly enhance efficiencies in international trade facilitation. Aligning domestic laws with MLETR, or equivalent arrangements, is a way to do this. MLETR’s uniform adoption, or of equivalent arrangements, by APEC economies would facilitate the use of paperless trade in international commerce across the region.
The economic benefits of MLETR and paperless trade
Paperless trade can increase efficiency, reduce costs and enhance trade. Adoption of MLETR or equivalent arrangements across APEC provides an opportunity to realise these benefits.
Recent economic modelling2 on the impact of adopting MLETR and measures to move toward paperless trade across APEC finds that GDP gains are potentially large – as high as US$2.0 trillion over 2024-2033. APEC economies would also potentially experience increases in trade volumes, employment and real wages from adoption of paperless trade measures. This work builds on earlier studies that have noted the considerable efficiency gains from economies moving their trading systems away from physical paper documents to electronic records.
There are also wide, non-quantifiable impacts from the adoption of digitalised trade systems, including reduced friction costs, improved data quality, more streamlined movement of both goods and associated documents.
Adoption of MLETR across APEC
APEC has an opportunity to realise the benefits of paperless trade through region-wide adoption of the MLETR or equivalent arrangements. Some economies are already leading the way. Mexico; Papua New Guinea; Singapore; and the United States have already embraced the approach that the MLETR provides. Others are at various stages of MLETR readiness.
While some economies have adopted MLETR in full, and others have chosen to transpose the MLETR into domestic legislation for specific instruments, all APEC economies have in place electronic transactions laws, which is a necessary first step for MLETR adoption.
Most APEC economies are also party to trade and digital economy agreements which include commitments to facilitate paperless trade and already require the parties to maintain legal frameworks for electronic transactions. The recently stabilised text of the Agreement on Ecommerce, negotiated under the WTO Joint Statement Initiative on E-commerce to which almost all APEC economies are participants, requires its members to endeavour to adopt or maintain a legal framework that takes into account the MLETR.
In APEC, Leaders and Ministers have also affirmed their wish to see further progress on paperless trade, including in the 2021 APEC Economic Leaders’ and Ministers’ Declarations, which endorsed the Guidelines for Paperless Trade, in the Aotearoa Plan of Action, in the 2022 and 2023 APEC Ministerial Meeting statements. APEC Business Advisory Council (ABAC) has also made strong calls for APEC economies to adopt the MLETR, including in their 2023 recommendations to APEC Economic Leaders.
Legal constraints and challenges to APEC-wide adoption
For those economies yet to embrace MLETR or equivalent arrangements, there are few legal constraints preventing them from taking measures to legislate for the adoption of MLETR. Every economy has the necessary legal framework for electronic commerce that supports adoption to varying degrees.
However, there are several legal constraints to the achievement of wider and uniform adoption of MLETR across APEC. The scope of existing legislation governing electronic transferable records is not uniform across APEC economies, and in some cases potentially conflicts with MLETR. Notably, commitments in trade agreements and international initiatives, while supportive of paperless trade, are generally weak and do not provide strong impetus for legislative reform to enable it.
Whether economies legislate to adopt MLETR depends on actions by both policy makers and legislators. The implementation of the law once adopted, and the practice of commercial parties can be more difficult, largely because it requires further consideration of commercial risk.
Wider and consistent adoption of MLETR across APEC economies, in a transparent and coordinated way, would not only help reduce the costs of trade, but also minimise the perceived risks involved. Considered this way, these constraints provide a strong motivation to proceed.
Pathways forward
How can APEC move forward on its path to paperless trade? An improved understanding of these constraints and then addressing them is key to advancing paperless trade and the adoption of MLETR or equivalent across APEC.
Various legal approaches can be tailored each economy’s needs. Beyond legal adoption, operationalising a digitised document system is also dependent on political-level leadership, consultation, buy-in from key stakeholders across the public and private sectors, and uptake by private-sector stakeholders. This requires both awareness-raising among the business community and capacity-building to transition business systems and operations to digitalised models.
To advance region-wide MLETR adoption, APEC economies can make important contributions in several areas. They can: provide the necessary political impetus for change; support the efforts of individual economies in adopting MLETR; leverage the synergies of work taking place in parallel across the region to drive interoperability across jurisdictions; and support capacity-building for policymakers and business stakeholders. Recommended actions are set out below.
- Build on existing political support for reforms relating to paperless trade, including by including statements of support and encouragement for accelerated progress in the relevant APEC Ministerial Declarations.
- Adopt a more coordinated and strategic approach to paperless trade within APEC. The Committee on Trade and Investment (CTI) could serve as the coordinating body.
- Give profile to paperless trade as part of ongoing work on the FTAAP agenda.
- Develop tailored roadmaps for individual economies to advance reform measures toward paperless trade, including a specific goal on MLETR adoption and implementation.
- Prepare a MLETR Readiness Assessment and Adoption Guide for APEC.
- Establish a dashboard or monitoring mechanism to assess economy readiness and progress.
- Task the APEC Policy Support Unit to prepare a selection of economic impact studies on adoption of MLETR, as well as other materials including case studies.
- Undertake capacity-building work through workshops, and potentially also APEC pilot projects.
- Consider practical steps and options to support implementation for each economy, developed in partnership with APEC bodies and international fora.
Source: APEC Committee on Trade and Investmentent (CTI)