For global trade to see blockchain’s benefits, trusted data needs to be shared across interconnected networks in digital marketplaces.
Industries and governments are continuously seeking ways to optimize the movement of goods, data, and currencies across global supply chains. Yet for all that effort, global growth needs a jumpstart. In 2019, the world’s GDP rose by roughly 2.2 percent. And in 2020, we are seeing the impact of unprecedented global events tied to the COVID-19 pandemic and resulting economic upheaval.
To ease economic barriers in trade, improving visible frictions such as tariffs and quotas, with most outcomes focused on reducing cost, can help. The World Trade Organization (WTO) expects that new technology will help to further reduce trade costs. And as a result of those falling trade costs, global trade could grow by 31 to 34 percent over 15 years.
But just as intriguing: the 2017 Trade Facilitation Agreement (TFA), signed by over 160 World Trade Organization (WTO) member countries, projects the achievement of significant cost reductions by improving nonvisible frictions in trade such as paperwork, procedures, and administrative formalities.
Enter blockchain technology. It has the potential to diminish these nonvisible frictions in global business, reduce cost, and save time while also mitigating risk and creating new business models. Early adopter organizations have been working with partners—and even competitors—to improve existing, shared processes. As they continue to collaborate in nontraditional ways, they recognize that blockchain brings a level of trust both among participants and in data shared. This could include dealing with customs paperwork, cross-border payments, or contracts for a service.
But for global trade to see the full range of benefits from blockchain, trusted data needs to be shared and value exchanged both on and off the blockchain—not just among participants in a single network, but across interconnected networks in digital marketplaces. As a neutral agent for trust, a “network of networks” economy could help companies build greater flexibility and resilience into operational and supply chain management—both essential attributes in times of crisis. As well, a blockchain-enabled marketplace highlights the importance of transparency and insights within the global economy.
The movement of data across these digital marketplaces presents new challenges. Interconnected networks require validation of the data being exchanged—think of digital contracts and signatures that need legal validation, and border and custom processes. To achieve data sovereignty, organizations must also navigate a more stringent regulatory environment related to digital trade, with factors such as the EU’s General Data Protection Regulation (GDPR) to consider. With network validation and enhanced data security, blockchain can help maintain data source integrity while protecting data privacy.
When it comes to unlocking the global value of digitized trade, governments, regulators, and even trade associations are assuming more active roles. For example, the ICC Digital Trade Standards Initiative (DSI) builds on previous initiatives through the development of open trade standards. DSI will continue to drive technical interoperability among blockchain-based networks and technology platforms that have entered the trade space over the past two years. According to ICC Secretary General John W.H. Denton AO, “Universal standards will connect existing digital islands and enable market forces to improve customer experience."
Even in the age of COVID-19, organizations invested or interested in global trade will still seek to optimize digital transformation efforts. They’ll evaluate shifting priorities and market conditions and course-correct their blockchain initiatives accordingly. To examine the value gained from interconnected blockchain marketplaces and their role in facilitating global trade, in late 2019, the IBV surveyed more than 1,000 executives across 22 industries in 34 countries. This report includes insights and actions related to:
- The current blockchain landscape and expectations related to value creation
- Why trusted marketplaces on blockchain can promote a data-driven, global economy
- How to approach the establishment and governance of interconnected global networks.