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UN digital trade pact seen to accelerate PH cross-digital trade

  • The Philippines is expected to benefit from the entry into force of a UN treaty that aims to accelerate cross-border digital trade in Asia-Pacific
  • The UN Framework Agreement on Facilitation of Cross-border Paperless Trade in Asia and the Pacific entered into force last February 20, 2021
  • The framework will provide the Philippines the opportunity to promote and leverage electronic data exchange with both ASEAN and non-ASEAN trade partners

The Philippines is set to reap benefits with the entry into force of a United Nations (UN) treaty to accelerate cross-border digital trade in the Asia-Pacific region, according to the Bureau of Customs (BOC).

The treaty—UN Economic and Social Commission for Asia and the Pacific (UNESCAP) Framework Agreement on Facilitation of Cross-border Paperless Trade in Asia and the Pacific—entered into force last February 20, BOC said in a statement.

“The Philippines will benefit from the Framework Agreement in further developing national and cross-border activities on exchanging electronic data and documents,” BOC said.

Cross-border electronic data exchange is part of the country’s commitments, made through bilateral and plurilateral trade agreements, to pursue electronic data exchange, including developing its own National Single Window as part of the Association of Southeast Asian Nations (ASEAN) Single Window (ASW) Agreement.

The framework agreement will also provide the Philippines the “opportunity to promote and leverage the cross-border paperless trade solutions it has adopted as part of ASW implementation in electronic data exchange with non-ASEAN trade partners,” BOC continued.

The ASW is the regional initiative to speed up cargo clearance and promote regional economic integration by enabling the electronic exchange of border documents among the 10 ASEAN member states.

BOC noted that even before the COVID-19 pandemic “brought digital solutions into the limelight,” the agency has prioritized and implemented the automation of its operations and processes to facilitate trade and minimize physical interaction.

“Through the framework agreement, the paperless trade will provide more seamless, inclusive and resilient trade connectivity for Asia and the Pacific, thereby contributing to building back economy better,” BOC noted.

Designed as an inclusive instrument for developing countries to increase their capacity for cross-border paperless trade, the final treaty text was adopted by UNESCAP in May 2016 and is deposited with the secretary general of the UN in New York.

Gains from the treaty

The framework is expected to provide countries in Asia and the Pacific with a new tool and “digital” complement to better implement the World Trade Organization (WTO) Trade Facilitation Agreement (TFA) and develop cross-border e-commerce.

Full implementation of cross-border paperless trade is expected to reduce existing transactions costs by about 10% to 30%, depending on the current state of paperless trade in the participating countries. Significant benefits in terms of trade compliance are also expected.

In the case of the Philippines, implementing cross-border paperless trade is expected to help cut its trade costs by at least 10%, boosting its competitiveness, according to the UNESCAP report titled “Digital and Sustainable Trade Facilitation in ASEAN.” Trade cost savings could increase further should the Philippines’ trade partners join in the initiative.

Other benefits from the framework agreement include ready access to potential counterpart countries with whom the Philippines can negotiate on cross-border data exchange. This will avoid having to take numerous bilateral approaches and reduce the work involved in preparing bilateral or sub-regional arrangements.

The pact will also improve the country’s paperless trade readiness at the national level and make paperless trade practices interoperable. It can also better prepare the country to engage in cross-border trade data exchange, in particular through structured and regular sharing of lessons.

Another benefit is direct participation in developing pragmatic solutions for the cross-border exchange of trade documents, which can increase the possibility of becoming an early adopter/implementer and boost trade competitiveness.

The framework agreement can also reduce overall investment costs and trade transaction time, while improving levels of compliance by traders to regulatory requirements in international trade.

Going paperless takes time

Asked if, with the framework entering into force, BOC would move into a completely paperless environment without the need for hard copies of documents, Customs Commissioner Rey Leonardo Guerrero told PortCalls, “The direction is for BOC to go paperless.”

“However, this will take some time to accomplish,” Guerrero acknowledged.

He noted that paperless trade would be realized when the Philippine Customs Modernization Project and the national single window (NSW) are fully implemented. The customs modernization project, which got a loan approval from the World Bank last year, is expected to improve the country’s customs administration through streamlining, automation, and development of a world-class customs processing system.

READ: World Bank approves $88M loan for BOC modernization project

The NSW, on the other hand, is a requisite to join the ASW. The government is currently working on implementing TradeNet, the country’s new NSW and an online platform for processing applications for import and export permits.

READ: Draft memo eyes April onboarding of trade regulators to TradeNet

The Philippines acceded to the UN framework on December 23, 2019 in New York, the first Southeast Asian nation to make the accession.

READ: First in ASEAN, PH accedes to UN treaty on digital trade

Other countries that have acceded include Azerbaijan in March 2018, while Iran, Bangladesh, and China ratified in 2020. In addition, Armenia and Cambodia signed it in 2017. Several other ESCAP member states are currently completing their domestic processes for accession.

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