International trade will look very different in the future, thanks to new technologies. The internet-of-things, blockchain, artificial intelligence and 5G can lower transaction costs and transform production processes – streamlining logistics for goods but also facilitating greater trade in services.
The line between physical trade and digital commerce is blurring as technologies are transforming how goods and services are produced. Online retail platforms allow physical goods to be purchased from abroad, for example, while some goods or services, including music and movies, can be delivered electronically across borders.
The fragmentation of production along global value chains means that transportation costs are no longer limited to the price of moving goods between countries.
Costs stemming from uncertainty and delays could also fall. For instance, tracking containers using the internet-of-things could improve container utilisation by 10 per cent to 25 per cent for example, saving nearly USD13 billion a year by 2025 according to Lund & Manyika. Blockchain can improve supply-chain transparency, digitise trade processes, automate contracts, and cut trade costs by creating a digital record of transactions.
Meanwhile, 5G could make the internet more accessible to consumers, particularly in emerging markets, boosting cross-border mobile commerce. Customers in South Korea and Ireland already purchase more products from abroad via their mobiles than on computers, according to Global-e.
5G may also enable smart shipping and could boost cross-border services trade, such as remote-based maintenance and virtual tourism, reducing the need to travel.
But using technology such as 3D printing for mass production could reduce some global trade, while greater automation from advanced robotics and AI could make labour costs less important, allowing firms to move operations closer to end-consumers.
Biotechnology advances such as lab-grown meats, synthetic milk and alternative proteins could also disrupt existing trade flows by enabling certain foods to be produced locally.
Demand for digital infrastructure may also increase as future cities become more digitised. These technologies may need to be imported from leading countries around the world.
So advances in digital technologies could have competing impacts on future international trade. Much will depend on how quickly certain technologies advance.
Evolving consumer preferences and rising incomes in emerging markets will also shape future global trade. And developing countries that are currently key markets for outsourcing services may also see these operations challenged by further automation and advances in AI.
Businesses and regulations must adapt quickly to the surge in e-commerce and digital trade. Globally, there are ongoing discussions around whether digital trade should be taxed and how. Should customs duties be levied on electronic transmissions? Are duty-free thresholds on low-value imports high enough to not hinder cross-border online shopping? Looking ahead, tackling issues around intellectual-property protections, data privacy, data localisation, and cybersecurity will be paramount.
Trade rules must adapt quickly to this new reality. Progress on an enhanced set of rules for market openness and non-discrimination is needed to enable businesses to trade successfully in the digitised future.
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