Digital tech to have profound effect on trade
African and other developing countries stand to benefit if well-prepared for the transition to digitalisation
igital technologies
namely the internet of things, artificial intelligence, 3D printing and blockchain |— will have a profound effect on global trade, adding up to 34% to trade growth by 2030, thanks to lower costs and higher productivity, according to the 2018 World Trade Report.
However, the WTO publication also finds that digital technologies could create a challenging environment for those seeking to keep up with the latest innovations.
The report says the share of services in global trade is projected to grow from 21% in 2016 to 25% in 2030.
The report also finds that the reduction in trade costs could be especially beneficial for micro, small and medium-sized enterprises (MSMEs) and firms from developing countries, provided they have the ability to keep up with the adoption of digital technologies.
In the best scenario, developing and least-developed economies’ share in global trade is predicted to grow to 57% by 2030, from 46% in 2015, if they
Dcannot keep up, but this share is predicted to rise to 51%. Digital technologies can also significantly affect what the world trades. For example, remote-controlled robotics have led to revolutionary advances in trade in services and the emergence of new services such as telesurgery. Enhanced technological capacities which allow faster and simpler processing of traded products could also foster trade in time-sensitive, certification-intensive and contract-intensive goods.
The report argues that new technologies are likely to change the established ways the world trades, with comparative advantages predicted to change across economies.
Artificial intelligence, 3D printing and advanced robotics could reduce the role of labour as a source of comparative advantage, while factors such as the quality of digital infrastructure and market size as well as institutional and regulatory determinants of comparative advantage, including intellectual property protection, might become more relevant. Furthermore, 3D printing may to some extent reduce the need for outsourced assembly, the number of production steps and other factors related to value chains.
The report identifies areas that may warrant international co-operation. These include initiatives being undertaken by multilateral organisations, such as facilitating legal and regulatory frameworks, tackling competition-related issues, intellectual property rules, supporting MSMEs, promoting digital inclusion and tackling challenges related to trade facilitation and infrastructure for information communication technology.
The report concludes that the expansion of digital trade holds the potential to generate considerable benefits if it takes place under conditions that adequately address important public policy challenges.
Issues concerning inclusiveness, privacy protection and cybersecurity are likely to figure prominently in debates on the future governance of digital trade.
At the launch of the World Trade Report on October 3, panellists debated what the future of trade would look like in the face of upheavals brought on by digital technologies. Some questioned whether services would indeed take up a larger share of trade and whether developing and least-developed countries would truly benefit from the projected trade growth. All panellists nevertheless agreed that digital technologies pose challenges to global trade regulation and that governments must work hard for co-ordinated solutions.
“Trade and technology are closely interlinked and they always have been. From the invention of the wheel, to the railways, to the advent of containerisation, technology has shaped the way we trade,” said WTO director-general Roberto Azevêdo. “This phenomenon is accelerating as never before. We are living through an era of unprecedented technological change,” he said.
WTO chief economist Robert Koopman encouraged WTO members to take a close look at the section on how to prepare for the technology-induced reshaping of trade, because the rapid development of digital technologies that are making use of the internet is expected to transform the world economy more deeply than other technologies have before.
Caroline Freund, World Bank director for macroeconomics, trade and investment climate, said she was optimistic of strong trade growth in the future given that the world had already seen hyperglobalisation in the mid1990s and early 2000s alongside the rise of the internet and mobile computing.
However, history has also shown other things to be “remarkably consistent”, she said, citing the stagnant share of services in global trade, the continued importance of geographical distance in determining trade patterns, and the lagging share leastdeveloped countries have of world trade.
Freund said more data, particularly on services, would help in charting the future of trade. She said that governments would do well to look at new areas of trade, such as e-commerce and investment instead of the traditional “smokestack” industries.
ALL PANELLISTS NEVERTHELESS AGREED THAT DIGITAL TECHNOLOGIES POSE CHALLENGES TO GLOBAL TRADE REGULATION