Next-generation technologies and the future of trade

Jash Desai — Wed, 10 Apr 2019 16:20:05 +0000

Many forces shape trade flows, including trade policies, changes in the nature and location of consumer demand, and differentials in the costs of labour and other inputs across geographies. Another important, but underappreciated, driver of trade flows is technology.

The history of trade reflects the ongoing march of new technological innovations. After the Second Industrial Revolution, for example, the introduction of steamships and railroads changed the economics of trading across national borders. Likewise, the digital revolution of the 1990s and early 2000s enabled companies to interact with far-flung suppliers and customers (Baldwin 2016).

Global value chains existed before the internet, but the internet further enabled fragmentation and offshoring of production by vastly improving coordination and communication costs. As China and other developing countries began participating in these production networks of specialised suppliers and assembly plants, trade flows soared and stretched around the world.

Today the next generation of technologies will reshape trade flows and global value chains again. But unlike the previous ICT revolution, these innovations will have a more varied and complex effect on trade in the years ahead. Some advances, like digital platforms, blockchain, and the Internet of Things, will continue to reduce transaction and logistics costs, thereby fuelling trade (WTO 2018). But other technologies may reduce trade flows by changing the economics and location of production, and transforming the actual content of what is bought and sold across borders.

Companies trading across borders often lose time and money to customs processing or delays in international shipments and payments. But a number of new technologies can ease these frictions.

Digital platforms, for instance, connect buyers and sellers directly, lowering the costs of search and coordination (McAfee and Brynjolfsson 2017). They have created seamless global marketplaces in areas such as e-commerce, payments, travel, learning, and labour services – and there is room for much more growth. Alibaba’s AliResearch projects that cross-border B2C e-commerce sales alone will reach approximately $1 trillion by 2020. B2B e-commerce could be five or six times as that figure.

While some of those transactions may substitute for traditional offline trade flows, e-commerce could still spur some $1.3 trillion to $2.1 trillion in incremental trade by 2030, boosting trade in manufactured goods by 6–10%. This will include many small businesses that can directly reach customers in other countries. EBay, Alibaba, Amazon, Jumia and other online marketplaces are enabling the rise of ‘micro-multinationals’ – today, startups tap global talent, finance, and consumers from day one (McKinsey Global Institute 2016).

Logistics technologies also continue to improve. The Internet of Things can track shipments in real time, while AI can route trucks based on current road conditions. Automated document processing can speed goods through customs. Some companies are developing fleets of self-driving trucks, and a number of ports worldwide have introduced automated cranes and guided vehicles that can unload, stack, and reload containers faster and with fewer errors.

Blockchain has potential for tracking shipments and triggering faster automated payments, although it will be some time before its scalability and success in trade can be determined.

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Data Is Different: Why the World Needs a New Approach to Governing Cross-border Data Flows

Matt Style — Wed, 14 Nov 2018 15:54:33 +0000

Companies, governments and individuals are using data to create new services such as apps, artificial intelligence and the Internet of Things. These data-driven services rely on large pools of data and a relatively unhindered flow of data across borders (few market access or governance barriers). The current approach to governing cross-border data flows through trade agreements has not led to binding, universal or interoperable rules governing the use of data. Most countries with significant data-driven firms are in the process of debating how to regulate these services and the data that underpins them. But many developing countries are not able to participate in that debate. Policy makers must devise a more effective approach to regulating trade in data for four reasons: the unique nature of data as an item exchanged across borders; the sheer volume of data exchanged; the fact that much of the data exchanged across borders is personal data; and the fact that although data could be a significant source of growth, many developing countries are unprepared to participate in this new data-driven economy and to build new data-driven services. This paper begins with an overview and then describes how trade in data is different from trade in goods or services. It then examines analogies used to describe data as an input, which can help us understand how data could be regulated. Next, the paper discusses how trade policy makers are regulating trade in data and how these efforts have created a patchwork. Finally, it suggests an alternative approach.

paper no.197_0

To view the original post of this article on the CIGI website, click here.

This work is licensed under a Creative Commons Attribution — Non-commercial — No Derivatives License.

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Next-generation technologies and the future of trade

Data Is Different: Why the World Needs a New Approach to Governing Cross-border Data Flows