February 26, 2021

TradeTech Has the Potential to Facilitate and Promote Further International Trade by Lowering Barriers for Companies to Enter New Markets

According to a report published by the World Economic Forum (WEF), a Swiss-based international organization promoting public-private cooperation, "TradeTech is the set of technologies and innovations that enable global trade to be more efficient, inclusive and equitable. The interplay of technology and trade has a long history, spanning from advances in transportation to the advent of the container to the emergence of coordinated production networks."

Mapping TradeTech: Trade in the Fourth Industrial Revolution "considers modern TradeTech in two layers: (1) a first layer in which trade data and processes are transformed from analogue to digital; and (2) a second layer in which trade process optimization and synchronization occurs between different parties, and where emerging technologies play a key role." The report adds that  "TradeTech solutions work in bundles. While the second layer depends on data generated in the first one, it is also hard to separate artificial intelligence (AI) from robotics or the internet of things (IoT) from 5G."

Aiming "to shed light on the landscape of emerging trade technologies and consider the opportunities and challenges for each, with case studies used for illustration," the report notes:
Business perceptions show that many technologies have a significant impact on trade. The World Economic Forum launched a global survey to understand how firms are currently using technologies in international value chains and to assess which technologies will have the biggest impact on global trade. The results are being used to determine a landscape of technologies that have the biggest effect on trade in the short and medium term. According to this survey on TradeTech, conducted from June to September 2020, "fundamental" technologies such as digital documentation, digital platforms, digital payment and cloud computing are perceived as most relevant in the shorter term, along with IoT, digital
services and 5G. Technologies expected to affect trade in the longer term are robotics, virtual reality, 3D printing and AI.
On the topic of TradeTech for micro-, small and medium-sized enterprises (MSMEs), the report says: "As the Fourth Industrial Revolution sets in, MSMEs face both opportunities and challenges in this wave of technological transformation. New technologies in trade, such as cloud computing, blockchain, IoT, big data and AI, present MSMEs with opportunities to tap into the technological edge previously only available to large firms. The application of new TradeTech can help MSMEs save costs, improve efficiency, streamline operations and scale up. Software as a service (SaaS) and e-commerce platforms have made trade more inclusive as there are no upfront costs."

As for supporting TradeTech adoption by MSMEs, the WEF suggests governments could support MSMEs in a number of ways, including by:
  • Promoting education and IT skills development, through the inclusion of IT in school and university curricula, and encouraging public-private partnerships through internship programs
  • Facilitating big data and AI tools that help MSMEs reduce market research costs and improve online visibility
  • Improving information and communications technology (ICT) and logistics infrastructure
  • Providing cybersecurity training
  • Setting up a TradeTech network, composed of key stakeholders, that has the potential to maximize the scope and outreach of any given solution while encouraging the development of local solutions (for instance, a single web page might compile and easily display all the resources, tools and services offered by the members of the TradeTech network); given the lack of skilled human resources affecting companies, external experts might bridge the gap by providing qualified advice
  • Establishing a benchmark for TradeTech adoption by MSMEs, which could help incentivize government reform actions to promote TradeTech adoption.

"Internationally," the report explains that "an increasing number of trade agreements include chapters on e-commerce and digital trade. Recent agreements, such as the Digital Economy Partnership Agreement (DEPA), include provisions on MSMEs and digital inclusion specifically. Commitments go from information sharing to enhancing public-private dialogue and cooperation involving e-commerce platforms."

Given my experience working in developing countries, I appreciate the report's assertion that "TradeTech offers developing countries leapfrog opportunities. The potential to seize these opportunities may vary by technology. TradeTech that requires higher capital, such as robotics and IoT, may be more challenging to diffuse in low-income country settings than technologies that are mainly software defined (e.g. blockchain, AI and digital platforms)."

What is more, "The network nature of TradeTech’s benefits, in which the more users there are of the technologies, the more value each user can derive from them (positive network externalities), creates incentives for the diffusion of technology worldwide.

"The most straightforward opportunities might come from the first layer of TradeTech, that is the digitalization of trade and logistics-related documents. This is a mature innovation in developed countries, where the opportunities for additional market expansion are limited, although certain developing countries have also advanced significantly in this area, for instance regarding e-invoicing."

The WEF says "TradeTech has the potential to facilitate and promote further international trade by lowering barriers for companies to enter new markets. Major TradeTech gains originate in good coordination between the different actors in supply chains. TradeTech, especially in its second layer, allows holistic decisions that can result in efficiency and environmental advantages for the whole value chain. Yet unintended consequences in terms of job displacement, competition and techno-nationalism trends require attention."

Moreover, "TradeTech's impact will depend on how data and tech interoperability are addressed, regulations are harmonized, and inclusive access to close the digital divide, also present in the trade space, is ensured. To deliver on TradeTech's promise, action is needed to build the trust required for supply chain transparency, to promote cooperation in tech regulation, to drive a trade facilitation agenda around interoperability, and to provide training for upskilling and reskilling workers."

Many will agree with the report's assertion that "[t]he COVID-19 pandemic has significantly accelerated the adoption of digital technologies and opened a window of opportunity to drive tech innovation in trade. The moment should be seized to use TradeTech to make global trade more efficient, inclusive and equitable."

How do you see emerging trade technologies facilitating and promoting international trade?

Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of GT Perspectives, an online forum focused on turning perspective into opportunity.

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