By Karen Lynch
ITTI aims to break down roadblocks to further AI and blockchain advances in international trade. To that end, its first report discusses the business, technology, and regulatory barriers to widespread adoption of those technologies in international trade and recommends steps to overcome them.
Blockchain's potential for applications such as payments and trade finance is underscored in the report, which says the technology could reduce transaction times, improve currency conversion, and minimize trade finance risk. However, each of these blockchain applications poses significant challenges, the report says.
For example, central banks would need to monitor online currency conversions carried out through blockchain, according to the report. They would also have to establish new controls on their money supplies and protect against market manipulation. The report calls for central banks to work alongside private banks to analyze how blockchain currency conversions could be monitored, in the run-up to establishing relevant regulation.
Another example is blockchain's potential in trade finance to supplant letters of credit, which guarantee that exporters will be paid upon delivery to importers. As the most actively used structured payment instrument in international trade, the letter of credit is costly and time-consuming and can involve the exchange of physical documents among buyers, sellers, banks, insurers, shipping companies, port authorities, and customs agencies, according to the report. "Blockchain can turn an ineffective and expensive process of validating documents into a real-time platform that brings together the entities involved in the transaction," it says.
One of the challenges, however, is that players from different sectors and countries would all have to adopt blockchain for such trade finance developments to have a meaningful impact. Notably, banks and other businesses have launched an increasing number of blockchain trade finance platforms. A major technology company completed a blockchain pilot for shipping in late 2017, including automated letters of credit.2 The ITTI report calls on such early adopters to help financial regulators prepare the framework for wider adoption.
AI, which the report also refers to as "augmented intelligence," promises to enhance government trade negotiations as well as the business of international trade, the report says. "AI can be increasingly used to predict and model international trade negotiations … weighing the pros and cons of alternative scenarios through AI's predictive potential," it says.
Significant work would be required to pave the way for such capabilities, and the report suggests that multilateral institutions such as the WTO engage in a series of "design labs" to start the process. Among the challenges to be addressed: teaching AI diplomatic and trade negotiating terms as well as WTO rules; creating a cloud-hosted database of international trade agreements; ensuring the information is complete and accurate; and providing equitable access to information for both developed and developing countries by building AI skills at international trade agencies worldwide.
For businesses, AI also holds significant potential in other aspects of international trade, according to the report. In global supply chain management, for example, companies are starting to apply AI to improve efficiency, speed, and decision-making for supply chain planning, warehouse automation, logistics, and other functions.
The ITTI report places particular emphasis on the challenges that small and midsize enterprises (SMEs) face in using AI. "Larger companies will be able to implement in-house AI capabilities, which SMEs may not be able to compete with," in such areas as predicting customer behavior, calculating cheaper shipping routes, mitigating disruptions, and foreseeing customer cancellations. Among other steps, the report calls on national trade promotion agencies to run workshops on how SMEs can use AI to boost their international trade potential.
Advancing these technologies in international trade will require the combined efforts of the technology community, trade negotiators, business leaders, and scholars, the ITTI report says. "It is only by fostering interaction among these key stakeholders that tech-intensive solutions will be crafted and developed."
Notably, ITTI's founders include representatives of many of those constituencies, including the ICC, United Nations Conference on Trade and Development (UNCTAD), Columbia University, and major technology and shipping firms. Going forward, the group's planned activities include workshops, online media and publications, design labs, and the advancement of solutions by involving key stakeholders.
Some of the blockchain and AI development efforts discussed in the report would rely in part on current government initiatives in areas such as paperless trade. A 2017 United Nations survey of the state of paperless trade found that most economies are actively working on developing the basic IT infrastructure and services needed for paperless trade.3 More specifically, "electronic/automated customs systems [and] electronic submission of customs declarations are fully implemented in more than half of the economies surveyed and at least partially available in almost all of them," the UN report says. E-payment of customs duties and fees has been implemented by more than 70 percent of countries, according the report.
Still, implementation of more advanced paperless trade measures remains at a relatively early stage, the report says. For example, nearly 60 percent of countries have begun creating an electronic "single window" where international traders can submit all import, export, and transit documents, but very few have fully operational systems in place. Electronic application and issuance of preferential certificates of origin have been fully or partially implemented by only half of countries.
Blockchain and AI are said to hold great promise to break through barriers hindering international trade growth. A new report from ITTI presents the business, technology, and regulatory barriers to widespread adoption of these technologies in international trade and recommends steps to overcome them.
Karen Lynch is a journalist who has covered global business, technology and policy in New York, Paris and Washington, DC, for more than 30 years. Karen also is a principal at Content Marketing Partners.
1. Building ITTI, Intelligent Tech & Trade Initiative; http://itti-global.org/wp-content/uploads/2017/12/ICC_DP_ITTI-2.pdf
2. “Samsung SDS Concludes Test on Blockchain Tech for Shipping,” Hellenic Shipping News, http://www.hellenicshippingnews.com/samsung-sds-concludes-test-on-blockchain-tech-for-shipping/
3. Trade Facilitation and Paperless Trade Implementation, United Nations; http://www.unescap.org/sites/default/files/Global%20Report%20Final_26%20Oct%202017.pdf