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International Trade – Building Trust with eIDAS (Part 2 of 2)

Picture of Gaurav Sharma (guest) Gaurav Sharma (guest) : 29. January 2019

eIDAS
International Trade – Building Trust with eIDAS (Part 2 of 2)

We looked at how eIDAS has the potential to enhance trust and thus reduce costs when it comes to international trade transactions in our previous article. This article continues on a similar theme, exploring the role that something like eIDAS can play in the digitalization of global trade, and also in the trade of digital goods.

The impact of eIDAS in the digitization of global trade is captured brilliantly in this quote by Andrea Servida, Head of eGovernment and Trust, European Commission: “We are confident in the progress made to date in pursuit of the Digital Single Market in Europe and anticipate recognition of its benefits globally as regulators outside the EU seek alignment with our model. And if that comes to pass, we can anticipate striking changes in the digital trade routes of the world taken into account that jurisdictions prioritising trust find increasingly efficient to trade with one another.”

That quote touches on a few key aspects of international trade:

  • The first is obviously the establishment of trust between international trading partners. Having electronic identification and trust guidelines which are consistent with each other can go a long way in establishing trust. Having more trust directly translates to a reduced cost for every international trade transaction. Currently, the system for establishing trust relies on interventions form third parties like banks. So rather than trusting the supplier directly, the buyer places his trust on his bank which taps into its correspondent banking network to eventually find a suitable partner in the exporting country willing to back the supplier. While this establishes trust, each participant in this chain charges a fee for their association. A globally compatible digital identity system will undoubtedly serve to reduce the cost to establish trust.

  • New call-to-actionThe second aspect is the focus on digitization of trade. This is something that banks have been focusing on for many years and it remains one of the primary requirements for clients.
    Not having a digital system leads to errors, delays and these delays can cost millions. Not having a digital system can also lead to fraud, pilferage and other threats that a traditional paper based or a hybrid system is susceptible to.

The unique problem here is that even if a country implements guidelines for local digitization of trade, incompatible rules internationally will still be a hurdle.

This is why it could be game changing if many countries can eventually gravitate towards rules and systems which are compatible.

  • Finally, the biggest impact of international convergence in terms of digital identity rules would be in digital and service-based trades rather than trading of physical goods which is what we have been discussing so far. The lack of trust when purchasing a service internationally is a major hurdle and if countries can build systems that can overcome this hurdle, that could prove to be revolutionary. Currently, buyers and sellers rely on middlemen service providers which obviously comes at a cost. A global alignment in eID standards would certainly be helpful for digital service providers to establish trust with their overseas clients at a much cheaper cost.

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References and Further Reading