Block-chain technology (BT) has the potential to transform international trade, says a recent publication from the World Trade Organization (WTO), authored by Emmanuelle Ganne. This is an interesting tool that opens opportunities to enhance the efficiency of a number of trade processes — financing, customs clearance, certification, transportation, logistics, insurance, distribution, intellectual property (IP) and government procurement.
BT is a lot more than bitcoins or crypto-currencies. It is a digital platform for decentralised, distributed records or ledgers of transactions, in which these are stored in a permanent and nearly unalterable manner. It relies on a peer-to-peer network no single party can control.
Authentication of transactions is through cryptographic means and a mathematical ‘consensus protocol’ determines the rules by which the ledger is updated. It allows participants with no particular trust in each other to collaborate, without having to rely on a single trusted third-party. So, block-chains are highly resilient to cyber attacks, compared to traditional databases. As the transactions added to the block-chain are time-stamped and cannot easily be tampered with, BT allows products and transactions to be traced easily.
The transparent, decentralised and immutable nature of block-chain has sparked the interest of private actors and governments in exploring the potential of this technology, to enhance the efficiency of trade processes. A myriad of proofs of conceps and pilot projects using block-chain have been developed in almost all areas of world trade. The complexity and costs in international trade in goods has led an increasing number of companies and governments to investigate how block-chain could be used — to cut paperwork and enhance processes involved in the export of goods, trade finance, border procedures and transportation. With the hope of moving closer to truly paperless trade.
BT could well become the future of trade infrastructure and the biggest boost to the shipping industry and to international trade since invention of the container. It could also become the future infrastructure of the services sector. And, help lower the barriers to entry, making it easier for small companies and producers to participate in global trade.
However, these opportunities can only be realised if small firms and producers have the right technical skills and enjoy adequate and low-cost internet access. Last week, the WTO initiated a discussion on the practical and legal implications of BT for international trade. It deliberated on various applications, the potential and limitations of BT, and the potential role of the WTO. The new WTO publication, ‘Can block-chain revolutionize international trade?’ was launched.
Access it at https://www.wto.org/english/res_e/booksp_e/blockchainrev18_e.pdf. Ganne, the author, says that given the potential of BT, a number of entities need to work together — companies, civil society bodies, software developers, academics, governments and inter-government organisations — to assess the practical and legal implications. And, to develop collective solutions to existing challenges, particularly in international trade. BT could make international trade smarter but smart trade requires smart standardisation. Which can only happen through cooperation, she says.
The government should now constitute a committee of stakeholders and experts to examine how our businesses could leverage the gains from BT, what regulations are necessary and how to meaningfully engage with global bodies for standardisation of processes.