“The numerous blockchain networks and DLT platforms will help realize the potential of digital transformation to drive greater economic inclusion. The International Chamber of Commerce (ICC) together with its partners, as neutral conveners of all trade stakeholders across the world, aims at connecting and coordinating these disparate groups in order to accelerate efforts to digitalize trade” said David Bischof, Deputy Director, Finance for Development, International Chamber of Commerce.

“Having a constant need to know all developments and involved parties, this report is an indispensable tool for the entire ecosystem to keep track and align actions.” Bischof added.

Reality Check

We’re living through exciting times. While international trade in goods has seen little innovation since the invention of the container in the 50s, the tedious, labour- and paper-intensive processes required to ship around the world could well become a story of the past thanks to the advent of new technologies, particularly distributed ledger technology (DLT) – colloquially termed “blockchain”. 

Rarely has a technology spurred so much hype and hope amongst the trade and trade finance community. Not without reason: The possibilities that blockchain unlocks to track transactions and exchange assets in real-time, in a trusted and highly secure environment using peer-to-peer validation and networks makes it an appealing tool to remove many of the inefficiencies that hinder one of the oldest forms of traditional finance today.

Over the past few years a myriad of projects have been launched to enhance processes related to trade finance, to digitalize trade documentation, and to reduce inefficiencies in transportation and logistics. Some take the form of multi-player consortia and networks, others are building a fabric layer to interconnect these different projects, and others are built to digitize particular aspects of the trade and supply chain.

These international trade actors are changing fast, but how many of these initiatives have moved beyond a proof-of-concept? What are the challenges that these new actors now face as we go past the trough of disillusionment and exploratory phase of DLT in trade?

Building on the WTO publication “Can Blockchain Revolutionize International Trade?” authored by Emmanuelle Ganne and TFG’s white paper “Blockchain and Trade Finance”, this study provides an overview of the main projects underway in trade, with a focus on trade finance, shipping, and the digitalization of trade documents, and assesses their stages of maturity. Based on a survey of more than 200 actors in the field, it analyses the key challenges that companies involved in blockchain projects are facing and discusses actions that may need to be taken to allow the technology to truly transform international trade. After years of hype around blockchain, the time has come for a reality check.

To access the original source: Click here

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The 4IR will affect how companies produce goods and services and what they will produce. Based partly on interviews with Swedish industrial companies, we have identified the following five major production trends: i) automation of physical and digital processes (eventually possibly resulting in the spreading out of production where computers make the decisions), ii) a move towards mass customisation, iii) accelerated servicification, iv) increased specialisation, and v) disintegration of global value chains (GVCs) and production in ecosystems. The technologies will – in turn – affect trade in the following three ways:

1. Improve trade logistics and lower transaction costs.
2. Change the actual content of what firms trade – moving from goods to services and data.
3. Change production processes and the location of production. Technologies can lead to automation and, in turn, the possibility of dispersed, self-orchestrated production. The impact on trade is likely to be significant.

First, moving production closer to customers to serve local markets will lead to less measured trade. Second, the GVC setup will change when companies no longer produce their goods in one place. Beyond being close to customers, companies want to be close to “hubs”, i.e., centres of coopetition, innovation and collaboration. Again, this will affect the GVC set-up. Third, trade flows will change since reorganised GVCs lead to changed movements of the inputs and regional sourcing. Fourth, trade participation will change, for both for countries and firms. For countries, trade participation will change as new GVC set-ups will make the receiving countries importers of inputs and exporters of the product now produced in that same country. For companies, often SMEs, new technologies allow them to enter the supply chain and participate in production.

The technological opportunities of the 4IR will lower the threshold to enter trade, especially for SMEs. Many SMEs have already stepped over the threshold and more will follow. However, taking the step is generally more difficult for SMEs. One central reason is that the benefits of automation have to be even more certain to small companies. Uncertainty about which direction the 4IR will take is a barrier for companies entering the 4IR.

To read the full report, click here

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But with the “return of history” we may also be witnessing a return—after an anomalous period of positive-sum progress—of the geopolitics of technology. The scale and speed of this technological change makes it difficult to completely internalize the opportunities and challenges that lie ahead for the world’s major powers.

Essentially, different approaches to technological development, and specifically the use of data, threaten to divide the world and shape the contours of geopolitical competition, contributing further to the securitization of technological competition. Instead of a “clash of civilizations,” we could be in for a “clash of automations.”

The iPhone Era

The past two to three decades may well have been an aberration. They were marked by an acceleration of globalization: the faster, cheaper, and more efficient flow of goods, people, capital, information, and energy. This period witnessed rapid advances in broadband and satellite telecommunications, accelerated microprocessor speeds, more efficient energy use, the evolution of global financial markets, and the dispersal of manufacturing supply chains. The apotheosis of this world was the iPhone.

But there was an inherent compromise at the heart of the iPhone era of globalization. The United States and other advanced economies remained world leaders in innovation, deriving benefits from the resulting intellectual property and their marketing power. Meanwhile, actual manufacturing of these products shifted to lower income countries, notably China, and also parts of East and Southeast Asia. Lower cost services—software development, research, and back-end work—were outsourced to places like India. The global economy grew and everyone benefited, even if some—such as China, the United States, and India—benefited more than others.

The Next Wave of Technologies

But the new era of technologies, many of which are already emerging, may not simply build upon these developments—rather, in counterintuitive ways they may in fact undermine the globalizing effects of earlier breakthroughs. To date, many new developments are simply buzzwords to most consumers, so it is important to break down what the new set of technological developments will encompass. They can be grouped into six broad areas. The combinations of these technologies may well form the basis of what some have described as the Fourth Industrial Revolution.

• Computing and storage, both of which will increasingly migrate to remote servers (the “cloud”), bringing down the cost and increase the scale of data storage. This could have potential implications for security and communications, especially features such as distributed record-keeping (blockchain) and new developments in data storage.
• Telecommunications, specifically the developments of a fifth generation (5G) of infrastructure, which may operate up to 20 times faster than existing systems, with low latency (delay in data communication). This will enable a vast array of applications, including driverless cars and machine-to-machine communications.
• Artificial intelligence, specifically machine learning, which involves fast and accurate pattern recognition by feeding vast troves of data to computers in order to “teach” them. This can then be applied to language, visual imagery, and other domains to resemble a form of intelligence.
• Automation, including the online integration of physical objects: cyber physical systems (CPS) or the “internet of things” (IoT). Think health monitors, remotely-managed factory robots, or internet-enabled security systems.
• Manufacturing, including in materials, optics, sensors, and additive manufacturing (“3D printing”).
  Energy, particularly renewable and mobile energy sources and smarter management systems.

When combined, these changes are already beginning to affect every aspect of globalization. The emerging sectors in which this will be felt directly by consumers include social media for information, financial technologies (“fintech” e.g. digital payments) for capital flows, e-commerce (both wholesale and retail) for goods trade, e-services (including peer-to-peer businesses, automation, and digital identification) affecting mobility and social services, and changes to the sourcing and management of energy.

Most “unicorns”—start-ups valued at over $1 billion—would fall in one or more of these domains. Consider QQ, Stripe, Rakuten, Oyo, or Tesla. Today’s tech giants are already investing heavily in future technologies from which start-ups are benefiting: Google in machine learning, Samsung in 5G, Amazon and Alibaba in automation, and so forth.

The Re-Securitization of Technology

The geopolitics of these emerging technological developments are already being felt. China continues to project the benefits of its model. Beijing is no longer content to restrict it to its own territory: For the continuing success of a firm like Huawei, it will have to be able to compete in the global marketplace.

To view the full blog, click here.

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