International trade is critical for economic and social development worldwide. A major cost to facilitating global trade stems from regulatory requirements, which involves submitting enormous volumes of information to governmental authorities to comply with import, export and transit-related documents and certificates.
Trade single windows are flagship initiatives that reduce these administrative processes, creating a single electronic platform where standardized information will only need to be submitted once. However, persistent pain points and challenges – including lack of interoperability among agencies, the persistence of outdated processes, and limited visibility and traceability of shipped goods prevent the initiative's full potential.
With the development of technologies, such as the Internet of Things (IoT) and artificial intelligence (AI), new opportunities to improve efficiency, transparency and interoperability in the trade ecosystem are emerging.
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In this context, the Integration and Trade Sector of the Inter-American Development Bank (IDB) and the Centre for the Fourth Industrial Revolution (C4IR) of the World Economic Forum’s (WEF) launched a unique project in 2018: the Global Trade Single Window with Blockchain project, as part of the Forum's TradeTech Initiative, to evaluate the potential use of Blockchain technology in the trade ecosystem.
We worked to design a policy framework for governments across the world to explore the potential use of blockchain in single windows, while understanding the experimental nature surrounding the technology. The white paper, Windows of Opportunity: Facilitating Trade with Blockchain Technology, found that blockchain could help lower barriers to trade. And it now serves to guide governments to make informed decisions about how to operationalize this technology, and encourage the development of pilot projects.
What is the World Economic Forum doing about digital trade?
What is the World Economic Forum doing about digital trade?
The Fourth Industrial Revolution – driven by rapid technological change and digitalization – has already had a profound impact on global trade, economic growth and social progress. Cross-border e-commerce has generated trillions of dollars in economic activity continues to accelerate and the ability of data to move across borders underpins new business models, boosting global GDP by 10% in the last decade alone.
The application of emerging technologies in trade looks to increase efficiency and inclusivity in global trade by enabling more small and medium enterprises (SMEs) to repeat its benefits and by closing the economic gap between developed and developing countries.
However, digital trade barriers including outdated regulations and fragmented governance of emerging technologies could potentially hamper these gains. We are leading the charge to apply 4IR technologies to make international trade more inclusive and efficient, ranging from enabling e-commerce and digital payments to designing norms and trade policies around emerging technologies (‘TradeTech’).
A collaborative work
To develop the framework, a team of trade, customs and technology specialists from the Inter-American Development Bank and the World Economic Forum – and its Digital Trade Team – worked both remotely and locally through meetings in Washington D.C., San Francisco and Buenos Aires. Leveraging each other’s networks, we also built a community of over 80 experts globally across various industry sectors, government agencies, intergovernmental organizations, academic institutions and civil society.
Single window pain points
While they have delivered significant gains over time, single windows have yet to be fully implemented in many countries due to challenges we have identified:
- Limited interoperability. Duplicates efforts, which adds delays and increases lack of end-to-end visibility, with the subsequent time and costs for companies to engage in trade.
- Persistence of paper and lack of automation. Create inefficiencies in making and reconciling databases and customs duty and fee payments.
- Limited traceability of goods in supply chains. Impede agencies' ability to verify the origin of goods, trace goods in supply chains, and detect anomalies and fraudulent patterns.
- Concerns about data trustworthiness and security. Makes companies reluctant to use single windows to submit commercial and financial data.
Blockchain use cases
Blockchain could be a useful solution, along with complementary technologies and policy measures, to address some of the pain points outlined above. It can help stakeholders interoperate by enabling them to access the same data at the same time; smart contracts built on a blockchain can automate stakeholders’ compliance with various contractual obligations; and data on a blockchain are a stream of reliable information on past transactions, as they are immutable once entered. Nonetheless, the white paper makes clear the ability of other digital technologies to address these pain points and the challenges and limitations of analyzing blockchain’s potential in single windows.
Several potential use cases were identified through the design process. Interoperability among two or more national single windows and among border agencies within a country drew most interest by the expert community.
We found that blockchain has the potential to lower trade costs by helping to:
· Increase interoperability: improve visibility to manage risks, recognize patterns, conduct pre-arrival processing, share data and improve user experience.
· Increase traceability: enable more complete data on shipments, supply chains and audit trails by bringing together single windows and/or private sector trade intermediaries on a common blockchain.
· Automate processes: automate payments and reconciliation to accelerate revenue collection.
· Increase the trustworthiness of data: make data immutable and provide single-window users with unique identities, enabling them to apportion relevant parts of their identities to third-party service providers.
Guidelines for using blockchain in single windows
To achieve these benefits, the report presents six key steps for operationalizing blockchain into single windows:
1. Create a grand vision and make the business case, ensuring high-level political support.
2. Establish a governance structure, including for data, design and implementation.
3. Build the technology architecture and integrate blockchain with existing systems.
4. Manage user identities and data, by testing digital identifies for users.
5. Measure impact by developing and track Key Performance Indicators and report on the progress and results.
6. Iterate and assess pilot results to further improve and scale.
We have found that blockchain has the potential to solve various pain points facing single windows, and bring new efficiencies and capabilities to border agencies. However, benefits will hinge on the rigour of its implementation.
This framework aims to pave the way for blockchain pilots around the world. The IDB will soon be working to implement proof of concepts with governments in Latin America and the Caribbean (LAC). One objective is to build LAC governments’ capacity to understand and apply new technologies on border clearance, and to share lessons learned.
The Inter-American Development Bank and the World Economic Forum look to further joint efforts on emerging technologies – to drive inclusive economic development, improve competitiveness, and facilitate world trade.
Read the full report on How to Use Blockchain Technology to Boost Global Trade here.