Trade Without Frontiers
With the rise of the digital economy has come a meteoric expansion of global trade. Across the world, more people than ever shop online, while digital platforms have enabled companies of all sizes to sell globally, and lowered the barriers to international trade.
Economist resource the Netherlands Bureau for Economic Policy Analysis (CPB) called 2017 “a remarkably good year for world trade”, with a global market growth of 4.5%. One key reason has been that companies are implementing technologies to reduce friction in international trading, from border processes to the operational inefficiencies in global supply chains.
An advancing industrial Internet of Things
Logistics companies have long invested in sensors to track and coordinate carriers. Now more of the global shipping network is getting online. Maersk, which is responsible for 18% of all container trade, is starting to digitise its entire supply chain. At the Port of Rotterdam, 42km of sensors collect sea and weather data that determines optimal times for ships to dock and unload, reducing berthing time by up to an hour and posing savings close to $80,000 between the port and shipping companies.
An enhanced flow of real-time information on where shipments are and the capacity of ports and carriers would allow logistics providers to route vehicles more effectively. This reduces waiting time for available cargo bays, saving on fuel consumed by idling engines.
Because of uneven import and export demands in various markets, 45% of the shipping containers that carry 90% of the world’s manufactured goods are journeying empty. These return journeys cost shippers more and increase the overall fuel consumption – and carbon footprint – of the original delivery. An ideal communication system between sensor-enabled ships and exporters could minimise these empty journeys, in turn increasing global trade by an average of 23%.
“There is a lot of potential for logistics improvements to enable environmental improvement as well as operational efficiency,” says Dr. Jan Hoffmann, Chief, Trade Logistics Branch, Division on Technology, Innovation and Trade Logistics (DTL) at United Nations Conference on Trade and Development (UNCTAD).
The proliferation of digitised supply chains would also allow cargo vehicles to cross borders more efficiently. For example, Radio Frequency Identification (RFID)-enabled driver licenses, tagged goods and a universal platform where traders share their internal accounts could form the base of a pre-arrival risk assessment system, allowing trusted shippers to pass through with the option of having goods checked at a later time, Hoffmann says.
Freight on a blockchain
Even in increasingly digital systems, international trade generates a hefty paper trail, with the cost of processing documents estimated at up to one-fifth of the physical transportation cost.
Blockchain technology, which could encrypt all such documents in an immutable ledger distributed among networked computers, would be a trustable – and automated – alternative to track how goods are transported, from the climate of warehouse storage to the checkpoints passed. This transparent record of where goods have been – and in what condition – can quicken port processing and make it easier for companies, particularly smaller businesses, to adhere to trade compliance regulations.
By simplifying bureaucratic procedures, blockchain-based systems could increase world trade in goods by $35 billion, boosting global GDP by $10-$20 billion.
Private-sector companies are already exploring the benefits of blockchain. In the world’s first trade finance transaction using a single blockchain application, HSBC and ING completed a deal for shipping soybeans from Argentina to Malaysia. Trade documents were digitised and automatically verified, reducing transaction time from around a week to 24 hours.
The irrefutability of blockchain data is also a major benefit: FedEx is trialing blockchain to store shipping information for dispute resolutions, while gold and diamond industry leaders are working with IBM on a blockchain platform to trace the provenance of valuable jewellery and encourage responsible sourcing. At a time when a rise in trade protectionism could increase the d ocument requirements at international borders, blockchain ledgers may become the most streamlined way to record trade, thus enhancing the process.
Artificial intelligence for the best possible trading
The Intelligent Tech and Trade Initiative (ITTI) was launched last year to research and publicise blockchain technology and artificial intelligence for trade growth. In the United Arab Emirates, a hub for global supply chains, government initiatives are fuelling rapid development in blockchain and artificial intelligence applications.
These technologies are setting the stage for totally digitised, AI-driven networks connecting ports, carriers, warehouses and cargo, where smart supply chains predict customer behaviour, plan fuel-efficient journeys, and automatically reroute around disruptions.
ITTI director Marcos Troyjo believes that AI would drive better trade negotiations by predicting outcomes and helping delegates structure relevant information. It could also help draft smarter contracts and auto-fill trade certificates, offering smaller enterprises and emerging economies a greater share of the global trade market.
However, this hyper-intelligent future is still a long way off. A critical development would be universal frameworks for analysing trade data – and policies for how it would be managed. “The ultimate efficiency would rely on universal sharing of information, which might involve commercially sensitive data and therefore potential issues around oligopolistic collusion,” Hoffmann says.
As exporters, technology companies and logistics operators work to digitise global supply networks, policymakers will need to collaborate on common standards for safely and fairly handling the data generated by goods moving around the world. Exploring technologies to facilitate better trade will be important steps towards an agile, more sustainable world market – and a global economy that continues to grow.
Department for International Trade
British technologies are reshaping the future of global trade and investment. For further information or to be connected with such companies, get in touch with the UK’s Department for International Trade (DIT).
DIT has overall responsibility for promoting British trade and investment across the world, and building a global appetite for British goods and services. This means that we encourage and help overseas companies and governments to source British products and services, and connect with UK partners.