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Multilateral Agreement on Cross-border Paperless Trade in Asia and the Pacific enters into force

On 20 February 2021, the Framework Agreement on Facilitation of Cross-border Paperless Trade in Asia and the Pacific (the “Agreement”) entered into force.  The Agreement, a UN treaty adopted by the United Nations Economic and Social Commission for Asia and the Pacific (the “UNESCAP”), aims to promote cross-border paperless trade with a view to making “international trade transactions more efficient and transparent while improving regulatory compliance.”

 

Background

The Agreement was initiated by the UNESCAP member States as a manifestation of their political will to improve regional co-operation in the area of cross-border paperless trade measures.  Developed through a four-year process with the involvement of over 30 countries, the Agreement was finalised and adopted by the UNESCAP in March 2016.

To date, seven countries have signed the Agreement and five countries have ratified it.  Ratification by China in November 2020, as the fifth member State to do so, paved the way for its entry into force as per Article 19 of the Agreement.

 

Overview

The Agreement, containing a preamble and 25 articles, lays down the general principles to promote cross-border paperless trade and provides for creation of technical infrastructure and a dedicated intergovernmental platform to facilitate the cross-border exchange of trade-related data in electronic form.

Presently, there is disparity in the advancement of paperless trade in the Asia-Pacific countries, with certain countries having already developed national and regional systems for paperless trade, including the ASEAN single window system.  The Agreement enjoins States to adopt national legislations and policies that reflect a common set of general principles and international standards, thus harmonising the legal regulatory environment for paperless trade.  Additionally, by providing for a multilateral platform for collaboration on technical infrastructure and capacity building, the Agreement seeks to be an inclusive opportunity for States at different levels of development to build solutions that are suitable to them.

 

Trade Implications

The entry into force of the Agreement confirms the commitment of Asia-Pacific countries towards trade digitalisation and is a pathbreaking step in unification of trade laws and regulations across the region.  The Agreement facilitates mutual recognition and exchange of trade-related data and documents in electronic form and has the potential to significantly reduce transit time and costs.  According to the UNESCAP, full implementation of cross-border paperless trade could lead to trade cost reductions estimated at 10-30% of existing transaction costs, depending on the current state of paperless trade development in participating countries.

Moving to an ecosystem of paperless trade would also increase the efficiency and transparency of international trade transactions and would lead to creation of new trade in the region.  The World Trade Organization Trade Facilitation Agreement Facility (the “Facility”) estimates the potential increase in Asia-Pacific exports from the implementation of cross-border paperless trade to be between USD 36 billion and USD 257 billion annually.

The Under-Secretary-General of the United Nations and Executive Secretary of UNESCAP, Armida Salsiah Alisjahbana, believes that the Agreement assumes higher significance in a pandemic stricken world in which paperless trade has proven to be a resourceful and effective way to minimise trade disruptions during the pandemic.  According to her, accelerating the paperless trade initiatives that have emerged in the Asia-Pacific region could help to build “truly seamless and resilient supply chains” as the economies recover in the post-COVID-19 era.

 

Conclusion

Several UNESCAP member States are currently in the process of completing their domestic approval procedure for accession.  Since the Agreement is based on the principles of mutual recognition and interoperability of electronic data, the participation of more countries would make it increasingly attractive through multiplication of the benefits of paperless trade.  While it is unclear how long the transition to complete paperless cross-border trade could take, the Agreement is definitely a positive endeavour by the countries to achieve regional integration in this field.