The center of global economic gravity is shifting from the holders of physical assets to owners of digital networks and distribution. The benefits from digitization are transformational. Yet the trade ecosystem lags other industries: players are digitizing only gradually, and do not interoperate optimally. Paper-based, manual processes remain common, perpetuating duplication of efforts, curtailing scale economies, and causing unnecessary delays in trade transactions – and impeding development gains, such as inclusion of small businesses in world trade. Even players that do use electronic documents such as e-Bills of Lading or that experiment with blockchain are often locked into their respective network’s “walled garden”.
The status quo of digital islands arrests the potential for 21st century technology-powered trade to generate growth, propel private sector development, and create jobs, including in emerging markets and developing economies.
One reason for the limited interoperability in the trade ecosystem is a lack of common standards and other solutions that would enable the various players to better communicate and share data with each other. The Digital Standards for Trade (DST) initiative built by Nextrade for MasterCard and launched in January 2018 in Singapore will drive digitization and greater interoperability in the trade ecosystem through the adoption of common minimum standards among key players in trade – trade finance entities, customs, logistics companies, and exporters and importers. DST’s goal is fully digitized and seamless end-to-end trade worldwide, for the benefit of all.
Current efforts at digitization and interoperability are exciting and encouraging, but they are also limited and fragmented. DST seeks to change that, working across the different players and experiments and aiming to connect them through common standards. For example, unlike industry groups such as banking, shipping, or freight forwarders that tend to focus on standardizing documents and processes in their “vertical”, DST’s approach is horizontal, covering the entire trade transaction end-to-end.
The standards and solutions DST contemplates do not need to be created from scratch; many standards exist. Of those that do, DST aims to select the optimal ones and accelerate their commercial adoption. In 2018, DST will focus on digitizing three sectors and drive at measurable results.
Launched under the auspices of the World Trade Board, DST is led by a Steering Committee of leaders from the World Trade Board, MasterCard, and Nextrade Group that sets its direction and work plan. DST’s Technical Secretariat based in Singapore analyses frictions to interoperability in the trade ecosystem, and develops standards and other solutions to them. The standards are considered and adopted by industry working groups consisting of private and public sector stakeholders across all areas of trade, such as banks, shippers, and customs.
Digitization and interoperability in the trade ecosystem are expected to create significant efficiencies and lower the costs and barriers especially for small businesses to engage in trade. Digitization will also enable the creation of so-called metadata, or data from which other data can be derived, and on the basis of which it is efficient to carry out financial due diligence on businesses of all sizes. This capability will further SMEs’ access to finance, engagement in trade, and growth and employment.