In January this year, the government of UAE and the World Economic Forum (WEF) announced a unique partnership in Davos. In view of the rapidly changing global economic landscape, WEF will support UAE’s Trade Tech Initiative to accelerate the use of emerging technologies in world trade. UAE is a guest country at G20 India.
“At a time when global supply chains are still recovering from the impact of the pandemic, we believe it is essential to harness the benefits of advanced technology to catalyze global trade,” Dr Thani Al Zeyoudi, UAE Minister of State for Foreign Trade said at Davos. “From using artificial intelligence to automating customs processes and warehouse management to deploying blockchain to revolutionise trade finance, cross-border payments, and know-your-customer procedures, the potential for enhancement is limitless.”
The Trade Tech Initiative aligns with B20’s focus on promoting the deployment of emerging technologies in the global value chain.
According to a WEF-WTO study, regional trade agreements (RTAs) since 2010 have increasingly integrated e-commerce and digital trade provisions. Recent RTAs, such as the United States–Mexico–Canada Agreement, cover a wider range of e-commerce issues than previously, including a chapter on e-commerce and digital trade. Governments have introduced digital-only trade agreements, such as the Singapore–Australia Digital Economy Agreement (SADEA) and the Digital Economy Partnership Agreement (DEPA) between Chile, New Zealand and Singapore, which address a wide range of digital trade issues. More than 85 WTO members are also part of the Joint Initiative on E-commerce.
With the rising digitization of trade and related processes, Industry 4.0 becomes Trade 4.0. With Industry 4.0 technologies, supply chains fundamentally shift from traditional linear ones to integrated, digital supply networks characterized by multidirectional communication between nodes of the network. These changes would bring about new opportunities that should lead to changes in how institutions function and better integration of smaller units in trade.
Just the digitisation of trade documentation can save billions of dollars. Trade documentation is a paper-intensive and resource-consuming process. A McKinsey analysis indicates that the bill of lading accounts for between 10 and 30 percent of total trade documentation costs. An electronic bill of lading could save $6.5 billion in direct costs and enable $40 billion in global trade, McKinsey says.
“It has been well documented that removing frictional barriers of overly complex paperwork and the like can bring greater gains than eliminating all tariffs,” says Borge Brende, President of WEF.
The WEF-WTO report identifies the 5Gs of Trade Tech which play a critical role in supporting trade digitalization and its wide-scale adoption.
WTO Director-General Ngozi Okonjo-Iweala has stressed the importance of digital trade and the need for rules for this important area. “We have an e-commerce initiative that is being negotiated at the WTO. We hope that soon we can come up with rules that underpin global trade and that is where we can be helpful on the digital side,” she said at Davos. “I always say that the future of trade is services, is digital, it’s green, and it should be inclusive.”
India has submitted two papers to WTO to discuss consumer protection, digital infrastructure and e-commerce. India believes that binding rules on ecommerce and use of technology should be advantageous to developing countries.
As global leaders plan policies for the future of trade at G20 Summit in India, they can focus on developing countries that can benefit from technologies. A B20 led collaborative approach can ensure that start-ups, big tech companies and policymakers can create a multi-stakeholder model for making global trade more equitable.
The article is contributed by Pranjal Sharma, a geo-economic analyst and author based in New Delhi, India. He is a member of the B20 India Task Force on Digital Transformation. This article represents the views of the author and not of CII.