Thursday, July 18, 2024
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With supply chain resilience in mind

Danial Norjidi

A joint report by the World Economic Forum (WEF) and the World Trade Organization (WTO) has found that emerging technologies, such as artificial intelligence (AI), blockchain and distributed ledger technology, paired with international policy coordination could propel global trade and accelerate economic recovery.

The press statement said TradeTech, which it defines as the set of technologies that enables global trade and its digitalisation, is a critical part of supply chain resilience and a path to more efficient and inclusive trade.

It was shared that while the benefits of TradeTech are promising, uneven development could result in unequal growth, cybersecurity risks, fragmented “digital islands” and techno-nationalism. Building international policy coordination through public-private partnerships would advance TradeTech adoption across borders.

The statement adds that trade agreements can play a key role in this regard, noting that recent trade agreements and plurilateral initiatives have started to explore the interplay between technology and trade.

Titled The promise of TradeTech: Policy approaches to harness trade digitalisation, the report was released by the WEF and WTO on April 12 and identifies the building blocks for TradeTech policy adoption, which it refers to as the ‘5 Gs of TradeTech’.

The five building blocks are described as playing a critical role in supporting trade digitalisation and wide-scale option of TradeTech. They include: global data transmission and liability frameworks; global legal recognition of electronic transactions and documents; global digital identity of persons and objects; global interoperability of data models for trade documents and platforms; and global trade rules access and computation laws.

First is global data transmission and liability frameworks. As the report explains, “End-to-end trade digitalisation requires global access to reliable, affordable and fast connections as well as a legal framework enabling data transmission across borders in a trusted manner.”

“Advanced technologies such as AI, blockchain and DLT and Internet of Things (IoT) require the development of ICT infrastructure and wireless technologies to enable continuous connectivity,” highlights the report. “However, multiple challenges need to be addressed to allow the development of a global data transmission ecosystem, including closing the digital divide, promoting international standards and mutual recognition schemes relating to cybersecurity, addressing regulatory fragmentation, and clarifying or adapting liability frameworks.”

It also mentions that trade agreements have contributed to the far-reaching changes of the telecommunications market, both hardware and software, since 2010. “Multilateral, plurilateral and regional efforts highlighted in this publication should be further pursued by governments to foster global connectivity for all.

“Trade agreements can also play a key role in fostering regulatory convergence and interoperability, and in facilitating the exchange of information and good practices in areas such as privacy, law enforcement and regulatory oversight, competition and data-sharing mechanisms.”

The second building block is global legal recognition of electronic transactions and documents.

Here, the report states that end-to-end trade digitalisation requires a legal framework supporting the cross-border legal recognition of electronic trade documents and transactions.

“The large number of documents involved in international trade places a heavy burden on businesses seeking to trade internationally, in particular micro, small and medium-sized enterprises (MSMEs),” said the report. “Governments could leverage trade agreements to support the global recognition of electronic transactions and documents (e-signatures and trust services, electronic transferable records, e-contracts) and to coordinate regulatory approaches on new emerging issues such as tokenisation and smart contracts to avoid regulatory fragmentation.”

The third of the ‘5 Gs’ is global digital identity of persons and objects. “End-to-end trade digitalisation requires a global approach to digital identities of natural and legal persons as well as of physical and digital objects sending or receiving electronic information to avoid creating digital identity silos.”

It highlights that in a digital environment, authenticating users electronically is necessary to establish confidence in user identities whenever the user interacts with a paperless trade system.

“Governments could use trade agreements to avoid divergence of digital identity systems relating to legal and natural persons by leveraging international initiatives, setting up minimum identity attributes, and encouraging the development of a global certification framework,” the report said.

“With respect to physical and digital objects, governments could use trade agreements to promote the use of open, global standards for product identification linked to product classification systems, and encourage customs authorities to agree on a standardised treatment of IoT devices.”

The fourth building block is global interoperability of data models for trade documents and platforms. “End-to-end trade digitalisation requires common definitions and structures of data to understand information exchanged across borders in the same way and to ensure interoperability between platforms.

“For parties to seamlessly exchange electronic data and documents in a digital environment, all information needs to be clearly defined and unambiguous,” said the report.

“Governments could leverage trade agreements to promote the use of existing semantic libraries, support the development and interoperability of data models for trade documents, and encourage interoperability of single windows.”

The fifth building block is global trade rules access and computational law, where the report highlights that end-to-end trade digitalisation supported by computationally expressed trade rules would boost trade efficiency and inclusivity.

As the report explains, “With continual economic integration, the rules that apply in cross-border contexts are becoming more numerous, technical in nature, complicated to understand and difficult to implement, especially for MSMEs.”

It also shared that computational law can help to bridge the gap between legal and governance structures, information systems and users on how to comply with regulations.

“Trade agreements could encourage governments to publish official machine-executable packages of trade policies and domestic rules that affect cross-border transactions alongside the deposited natural language texts.”

A press statement on the report explains that this work builds on the Trade for Tomorrow call to action in 2021, which was signed by 30 CEOs and chairpersons from five continents and urged world leaders to make trade work for all as part of an inclusive global recovery. One specific action was advancing an electronic commerce agreement that improves access and interoperability, enables safe and efficient digital trade and data flows, promotes openness and trust, and addresses market access issues – with the ‘5 Gs’ contributing towards that end.

“Emerging technologies and digitalisation are changing trade. Only 18 per cent of trade in goods is now driven by labour cost arbitrage. Value chains are becoming increasingly knowledge-intensive, thanks in part to embedded technology,” the statement said.

“The COVID-19 pandemic has shown that digital trade and commerce are necessary for the survival of small and medium-sized enterprises, while the application of autonomous technologies – from robotics to AI – contributed to the operation of ports and warehouses with minimal staff during lockdowns.”

The statement adds that, according to a WEF survey, 65 per cent of organisations have incorporated new technologies, resulting in reconfigured value chains and increased visibility of value chain data.

At the report’s launch, WEF President Børge Brende said, “The WEF and the WTO are glad to be working on public-private partnerships that enable the further adoption of technologies in trade, in the goal of efficiency, inclusion and environmental gains.”

Meanwhile, WTO Director-General Ngozi Okonjo-Iweala said, “Advanced technologies have the potential to make trade more efficient and more inclusive, but for this to happen policy action needs to keep pace with technological developments.”