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Digital trade pivotal in unlocking economic benefits for NZ, report finds

By Catherine Knowles, Mon 13 Dec 2021

Digital trade solutions have the potential to drive significant changes in supply chains, and unlock economic benefits equivalent to a major trade agreement for every country pairing that adopts digital trade.

This is according to a new report from the New Zealand Institute of Economic Research (NZIER) titled ‘Digital Trade is the way forward for New Zealand', commissioned by TradeWindow.

The aim of the report was to quantify the possible economic benefits from increased adoption of digital trade.

The study found that a further NZ$9-18 billion of value could be unlocked over 10 years by trade between New Zealand and its APEC trading partners if digital trade is more fully adopted.

NZIER’s Chris Nixon says the New Zealand Government is making positive strides towards operationalising digital trade initiatives.

He says, “Our report highlights there is a long way to go to realise the full benefits of digital trade globally, however more trade agreements are starting to take account of international digital transactions, with a number including binding commitments on data flows.

"Emerging international agreements, such as the Digital Economic Partnership Agreement - DEPA - which includes NZ, Chile, Singapore and hopefully soon South Korea and Canada are among the pace-setters on this.”

The report notes that China has recently formally requested to join the other members and applicants of DEPA, and that the economic case is strong for it to do so.

NZIER quantifies possible economic gains of NZ$405 million - $1,584 million per year in the New Zealand-China trade lane alone through the adoption of digital trade.

The report identifies an array of gains from the increased adoption of digital trade. These include:

  • Productivity gains from moving away from paper-based systems.
  • Connectivity gains as digital systems for building trust break down long standing cultural and regulatory barriers.
  • Predictive gains from being able to ‘foresee’ supply and demand with greater accuracy and plan accordingly.
  • Visibility gains – enhancing security and certainty of provenance.
  • Inclusiveness gains – enabling smaller and less sophisticated exporters and importers to get started sooner, easier and more safely in global trade.

Nixon says, “It comes as no surprise to those working in the supply chain that the cost reductions are significant. Recent examples showed that a single shipment could pass through 30 different organisations, with up to 200 communications about that shipment.

"These communications are impeded if they use systems that do not talk to each other, e.g. pieces of paper. If a form is missing or there is a problem with some information, then delays are inevitable.”

According to Nixon, the benefits of digital trade have been particularly apparent during the pandemic and this has increased the openness of exporters, large and small, to adopt digital solutions for trade documentation.

He says, “The benefits of digital trade solutions have been brought into stark contrast during the pandemic when it has not been possible to deliver the right paper (with wet signatures and stamps) to the right ports in the appropriate time frame.

“If we can increase understanding through outreach programmes to MSMEs and SMEs and demonstrate the value of digital trade, we will begin to realise that the cost reductions are truly significant.”

The report was commissioned by TradeWindow, a trade-tech company focused on helping importers, exporters, freight forwarders and customs brokers working on the frontline of global trade.

TradeWindow CEO AJ Smith welcomed the report. Smith says, “These positive findings come at a time when the New Zealand Government is playing an active leadership role with the other APEC economies to encourage the adoption of digital trade.

"It is helpful to see the economic benefits quantified and also to appreciate that these benefits are shared across the supply chain with the producer, transport companies, regulatory agencies and customer and consumer. Everyone benefits when trade flows more efficiently, and trade begets more trade.”

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