The World Trade Organization (WTO) has published an analysis of the potential impact of blockchain technology on international trade: Blockchain and International Trade: Opportunities, Challenges, and Implications for International Trade Cooperation.
Blockchain technology is a tamper-proof, decentralized record of transactions that allows participants to collaborate and build trust with each other. The technology first emerged during the 2008 financial crisis, at a time when people’s trust in institutions, in particular, financial institutions, was very low. And it came to prominence as the technology underpinning Bitcoin – the famous and highly controversial cryptocurrency.
A recent study has estimated that the gains from blockchain technology could deliver $3 trillion dollars of value worldwide by 2030. It is anticipated to help ease the administration of intellectual property rights and enhance government procurement processes. Other potential benefits identified by the publication include cross-cutting opportunities to reduce trade costs, enhance supply chain transparency and open up new trading opportunities for micro, small and medium-sized enterprises.
“International trade transactions often involve dozens of actors along the supply chain and remain highly paper-intensive,” said WTO Director-General Roberto Azevêdo. “Blockchain could enhance the transparency and traceability of supply chains, accelerate the digitalization of trade transactions and automate processes. It could give rise to a new generation of services, particularly in areas like transportation and logistics, financial services and insurance.”
However, there are challenges that must be addressed before the technology can be used on a wide scale and have a significant impact on international trade. These include issues such as whether the technology can be scaled up for large or complex applications, how immune it is to security threats, to what extent various Blockchain platforms can be used in an integrated manner and which legal issues need to be ironed out to increase mainstream use of the technology.
“Blockchain could accelerate the digitalization of trade transactions, but only do so if the legislative framework allows for transactions to be carried out through digital means, and if laws recognize the validity of e-transactions and e-signatures,” said Azevêdo.
The publication calls for a multi-stakeholder dialogue to assess the practical and legal implications of the technology and to develop collective solutions. “While this technology opens interesting opportunities, clearly it also raises legal, regulatory and policy issues that deserve our attention,” said Azevêdo. “We need to consider how to spread the opportunities and overcome the challenges. We can only do this if we are in full possession of the facts. We need to fully understand the technology – what it can do and what it can’t do.”
The report cites Maersk and IBM’s Blockchain-based global trade platform, TradeLens. The platform was officially launched in August 2018 after having been piloted for several months. The trade document module, called ClearWay, enables importers, exporters, customs brokers and trusted third parties, such as customs and other government agencies, to collaborate and allows for the automation of various business processes such as import and export clearance via smart contracts.
“The success of the platform will ultimately depend on whether the various actors involved in international trade are willing to sign up,” says report author Emmanuelle Ganne. “At the time of its launch, more than 20 port and terminal operators across the globe, accounting for more than 230 marine gateways, as well as two other ocean carriers (Pacific International Lines and Hamburg Süd), several freight forwarders and customs brokers, and customs authorities in Australia, the Netherlands, Peru, Saudi Arabia and Singapore, were already participating, or had announced that they would participate, in the platform.”
Ganne, says that if projects such as these succeed, blockchain could well become the future of trade infrastructure and the biggest disruptor to the shipping industry and to international trade since the invention of the container.