By Daniel Feffer and Marcos Troyjo
Globalization has been at a crossroads for a while. The dynamics of freer circulation of goods, capital and people has lost steam. Trade protectionism is on the rise. Multilateral institutions such as the International Monetary Fund, the World Bank, and the World Trade Organization (WTO) seem to provide slow and often insufficient responses to contemporary challenges. There are indeed various forces of “deglobalization” ranging around the world today.
At the same time, sophisticated technologies inaugurate a new era of threats and opportunities that holds the world in awe. The dawn of the Fourth Industrial Revolution heralds the transformation of professions and the likely end of many jobs as we knew them. Studies show robotics and automation, not cheap labor sources in Mexico or China, are mostly to blame for many deindustrialized sectors and towns in the U.S., Europe or South America.
It is quite paradoxical, but if on the one hand technology in communications, social networks, co-working and transportation brings us ever closer, it is also one of the indirect causes of nationalistic industrial policies and protectionist trade measures.
As a consequence, WTO statistics show that since the aftermath of the Great Recession, defensive trade measures ― in one word, protectionism ― is definitely on the rise. Since the end of World War II, trade expanded formidably and at a much larger proportion than global GDP. And especially after the end of the Cold War and the inclusion of China into global markets, trade became the top driver of prosperity. But that changed from 2008 until now. We have moved from a long period of deep globalization to the current stage where deglobalization trends may unfortunately prevail.
It wouldn’t be unfair to assume the risk of deglobalization and the emergence of industry 4.0 as perhaps the two most important dynamics unfolding in the world today. And there are certainly many actions beyond the realm of trade that must be taken in order to make both globalization and the Fourth Industrial Revolution work. Retraining ― and therefore the “reskilling” of the labor force ― is definitely one of them. But by scanning the technological horizon out there, we feel there are innovations that may actually propel trade and globalization forward, in a way that is both inclusive and smart.
That is why we decided to propose an ITTI ― Intelligent Tech & Trade Initiative (www.itti-global.org), which was launched at the World Trade Organization during its 2017 Public Forum in Geneva.
ITTI will bring together technology and business leaders, negotiators and scholars in debating and devising ways on how blockchain (the trust ledger) and AI (augmented intelligence) can positively impact global trade.
The ITTI WTO launch is one of the first steps in a venture that gathers representatives from institutions and companies as different as ICC (International Chamber of Commerce), IBM, Gearbulk and UNCTAD in assessing how global trade can be enhanced by the expanded use of blockchain and cognitive technology platforms. We see the creation of ITTI as an essential move to drive trade beyond existing roadblocks.
As incipently applied as they are today, both blockchain and AI carry the potential to boost commercial exchanges. Instrumentally, they enable more proactive supply chains by predicting customer behavior, calculating fast and cheap shipping routes and foreseeing customer cancelations. Ultimately, an artificially intelligent supply chain is a proactive supply chain, one that is both agile and able to alleviate the impact of inevitable disruptions. They also enhance compliance software that saves time, help draft smarter contracts or expand the access to trade financing.
But these technologies can also be very inclusive. They can help both SMEs (small and medium sized enterprises) and Less Developed Countries (LDCs) seize a bigger piece of the global trade pie. They allow for de-intermediation, increased trust and agile market access. This will help bridge the gap between large MNCs (multi-national corporations) and SMEs, as well as between post-industrial economies and LDCs.
Both SMEs and LDCs lack access to trade networks or formal credit structures. Through blockchain, SMEs can better access credit and link into a broader investor ecosystem, enabling them to set up new trading networks and obtain funding by sharing financial data in a security-rich and transparent public arena. This will result in better transactions and trade agreements for both SMEs and LDCs.
AI can also play a major role in leveling the playing field in trade negotiations. Traditionally, countries have a tough time preparing for trade talks. Delegations, especially representing emerging economies, are not fully equipped to face tough and detailed minutiae. New technologies however can help delegations gather and structure information as well as predict different negotiation scenarios. They can achieve that by using AI tools that give them access and interaction to cloud-based resources.
Additionally, we might be able to use AI more and more in predicting and modeling trade negotiation outcomes. Protectionism often results from subjective, ill-informed analytical dynamics. Not only do they originate from incorrect premises, but they generally do not take into account the negative effects it generates for workers and consumers both domestically and across the world. Up until now, measuring the impact of protectionism ― or, on the contrary, the potential of free trade ― has relied on projection models that have not explored the full potential of new technologies.
By building and applying AI tools to project, predict and weigh the pros and cons of more or less trade agreements, countries will be able to better balance costs and benefits arising from industrial and trade policy decisions.
Many blockchain and AI applications to trade will have to be adapted from other uses in finance, logistics, or the legal world. And most will definitely have to be built from scratch. That is why we conceived ITTI as a multimedia project that will examine how cutting-edge technologies can bring about new functional and conceptual approaches allowing for international trade transactions and negotiations to advance.
Its ultimate objective is to stir the debate involving the technology community, trade negotiators, business leaders and scholars on how to better pursue a constructive trade agenda. Mindful of both national and multilateral specificities, ITTI therefore aims at countering deglobalization forces now operating in international trade.
It is only by fostering the interaction among these key stakeholders that tech-intensive solutions will be crafted and developed. ITTI will do so by promoting research papers, organizing conferences and producing TV documentaries and interviews series on the future of technology and trade.
We’ve got to make sure this new era that dawns upon us is inclusive of companies big and small, countries rich or emerging, so all can benefit from its endless potential. By bringing technology and trade closer together, we wil not only be lifting flows of exports and imports, but improving the very essence of international cooperation.
Daniel Feffer is president of ICC-Brazil, president and founder of ITTI
Marcos Troyjo is director of ITTI and co-director of BRICLab at Columbia University