Cocaine exports surge 👀 + Historic regulations go live 🚀

Author

Ben Thompson
September 21, 2023

Ahoy there. Last week diamonds this week, pineapples! Because who doesn't love the juicy yellow fruit 🍍? Costa Rica takes the crown as the leading exporter, with a staggering $1 billion+ in trade value, accounting for nearly 50% of the global export market. Incredible numbers for such a small country. Keep the Piña Coladas coming!

In today’s email:

  • It’s Live: 🎉 UK implements electronic trade documents act.

  • Transition Time: 👋🏽 How Apple & Samsung are diversifying out of China.

  • Sky High: 📈 Cocaine set to become Colombia’s number one export.

TECHNOLOGY NEWS

UK Officially Implements Electronic Trade Documents Act

Today is the day! On September 20, 2023, a significant law came into effect in the United Kingdom after a 20-year wait, the Electronic Trade Documents Act. This law is a game-changer because it gives electronic trade documents the same legal status as paper ones, opening up many possibilities.

With this law in place, businesses are no longer required to use paper for trade documents like bills of lading, bills of exchange, promissory notes, warehouse receipts, and marine insurance documents. They can now use electronic versions, which is more in line with modern practices.

Many businesses worldwide prefer English law for international contracts involving ships, charterers, shipping lines, and customers. With this law, these companies can say goodbye to paper documents and switch to electronic ones, which makes their processes smoother and less bureaucratic.

Chris Southworth of ICC UK points out that paper-based processes, which make up 80% of all bills of lading and 60% of global trade finance, have been holding back economic growth, especially for small and medium-sized enterprises (SMEs). The main challenge was to give electronic trade documents the same legal status as paper ones, even though they don't have a physical form.

To solve this, the law established some rules for what qualifies as an "electronic trade document." According to Clause 2 of the law, an electronic trade document must be identifiable, maintain its integrity without unauthorized changes, prevent multiple people from controlling it at the same time, be uniquely linked to an individual, and fully transfer when passed on.

This groundbreaking Act updates an 1882 law and puts English common law, which covers 80% of global trade documents, at the forefront of the digital age in trade.

This Act is based on the Model Law on Electronic Transfer Records (MLETR), which the UN International Trade Group passed in 2017. The UK is now the 8th country to adopt this principle into law, following in the footsteps of Bahrain (2018), Belize (2021), Kiribati (2021), Papua New Guinea (2022), Paraguay (2021), and Singapore (2021). Germany is expected to do the same later this year, with France likely following by 2024/2025, while China and the USA are also working on similar timelines. This shift marks a significant change in how global trade operates.

SOFTWARE TOOLS

Electronic Documentation Templates At Your Fingertips

On the topic of the digital documents. If you haven’t already, make sure to check out the IncoDocs range of UNLK aligned export documentation templates. Use a range of standard templates, or click to edit and save your own templates.

VIDEO OF THE WEEK

Inside Apple and Samsung’s Supply Chain Shift Away From China

China has long been the manufacturing hub for tech giants like Apple and Samsung. But now, a range of geopolitical factors are pushing technology companies to spend billions to relocate their operations to places like India, Vietnam and Latin America.

TRADE NEWS

Colombia's Cocaine Production Threatens to Overtake Oil as Top Export

Colombia, historically known for its oil exports, is facing a surprising shift in its economic landscape. Cocaine production is on the rise, and it is poised to overtake oil as the country's primary export. This shift is driven by a 30% decline in oil exports in the first half of the year, according to estimates by Bloomberg Economics.

In 2022, Colombia's cocaine export revenues surged to a staggering $18.2 billion, coming dangerously close to the $19.1 billion earned from oil exports the previous year. Cocaine production reached an all-time high of 1,738 tons, with the cultivation of coca leaves, the raw material for cocaine, expanding by 13% to cover a record 230,000 hectares (570,000 acres).

This concerning trend is occurring as President Gustavo Petro, Colombia's first leftist leader, adopts a more lenient approach toward drug trafficking. His focus has shifted towards targeting drug lords who profit from overseas sales rather than cracking down on coca leaf producers, who are considered the weakest link in the production chain.

While this approach may pave the way for potential peace talks with major drug-trafficking groups to end decades of civil conflict, it has also inadvertently facilitated illegal groups in ramping up cocaine production.

The increase in cocaine production has had short-term effects on Colombia's economy, affecting domestic demand and external accounts, although it doesn't seem to have a direct correlation with the performance of the Colombian peso.

It's important to note that the estimates provided by Bloomberg Economics for cocaine exports are based on the difference between production and seizures, which may not account for domestic consumption and seizures in transit and destination countries. The export price is also calculated using various factors.

In sum, Colombia's evolving economic landscape, with cocaine potentially surpassing oil as its main export, highlights the complex challenges the country faces in addressing drug production and trade while attempting to navigate a path towards lasting peace.

GLOBAL TRADE SNIPPETS

Shipping giant Maersk unveils world’s first vessel run with green methanol. The ship’s godmother is the President of the European Commission Ursula von der Leyen, who pressed the button and broke a champagne bottle on the ship’s bow during the launching ceremony.

HSBC Launches Document-Free Trade Finance Tool TradePay. The tool, dubbed TradePay, is an industry-first, document-free trade finance solution that lets clients instantly draw down trade loans.

“Too early to talk about reversing globalisation” shipping experts say. London International Shipping Week has been focused on this question of trade and geopolitics, with a number of expert panellists discussing what this means for importers and exporters across the world.

RECOMMENDED READS 📖

Principles for Dealing with the Changing World Order: Legendary investor Ray Dalio, who has spent half a century studying global economies and markets, examines history’s most turbulent economic and political periods to reveal why the times ahead will likely be radically different from those we’ve experienced in our lifetimes—and to offer practical advice on how to navigate them well.

The Silk Road: A History of Trade, Culture, and Beyond: Have you ever wondered how the Silk Road became one of the longest and most-used trade routes in human history? Did you know that famed explorer Marco Polo was only one of the brave traveler’s to trek the famed route? Learn about it all.

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