Donald Trump is not the only force that is changing the world of global trade. As the US President rails against what he sees as unfair trade rules, there is another set of forces that is changing the nature of trade. A combination of new technology solutions is allowing international commerce to discover new efficiencies while allowing smaller traders to join the global trading world.
UNCTAD has estimated that the gross merchandise value of the cross-border e-commerce is growing rapidly. From about $300 billion in 2015, it will be growing by 25 per cent annually to be close to $1 trillion by 2020. While it is a small percentage of the overall global trade, it is an indication of things to come. Global e-commerce can be between a person and a business. Or between two businesses. In each of these cases, governments are coming together to explore technology-based solutions for faster and cheaper processing of documentation.
“Several WTO members have raised the possibility of using the global trade body as an institution to advance greater interoperability of legal rules on e-transactions and e-signatures. Some have suggested adopting commitments to ensure contracts can be concluded online within individual jurisdictions and cannot be denied legal validity purely because of their being digital, mirroring commitments made in FTAs. Similar principles have also been suggested regarding e-signatures and trust services,” according to a World Economic Forum report on making deals in the cyber space.
The tedious system of letter of credit and trade financing is being impacted by the use of blockchain-based solutions. Using blockchain can reduce issuance time for a letter of credit from 20 days to a few hours. Real time tracking of inventory using IoT-based solutions helps companies raise working capital faster and at cheaper rates. IBM and Maersk are developing a solution for track and manage documents for the millions of containers that are shipped globally. Enforcement agency the US Customs and Border Protection is working with blockchain for confirming country of origin information among other solutions. A study group created by the agency is working on ideas like “capturing and keeping track of partnering government agencies licenses, permits, certificate of origin reporting and free trade agreement product qualifications, carnets and bonded movement tracking. The group is now looking into these cases and determining through workflow processes to determine how this would be deployed with blockchain technology.”
At multilateral level countries are debating common rules for global KYC rules while building standards for e-signatures that can be recognised by all countries. Use of augmented and virtual reality is helping companies manage their warehouses better. Some companies have created artificial intelligence (AI) systems that allow traders to automate commodity classification under the harmonised system. Another benefit is identifying inaccurate or insecure transactions so that traders are warned of possible fraud in advance.
Even though political wars and trade sanctions are dominating global commerce, the operation aspects of doing cross border business can addressed by multilateral agencies. The use of technology will lower the barriers for smaller companies to participate in cross-border trade. Globalisation will not just be the playing ground of MNCs. WTO must encourage all new ideas and solutions while nudging countries to agree on transparent and common standards for trade finance and facilitation. Lower cost and reduced process time will allow smaller companies to participate in with greater ease. Tech led democratisation of trade could take the sting out of protectionism as the benefits of globalisation would spread more equally between and within countries.