5 policy frontiers of 'TradeTech': how global coordination can unlock more efficient and inclusive trade

TradeTech is the set of technologies that enhance the efficiency, inclusivity and sustainability of global trade. From transparency to efficiency gains, it has the potential to accelerate global trade in a way that benefits consumers and businesses.

But leveraging it requires more than technological innovation — a lack of international policy coordination and fragmented technological environments now represent the most significant barriers to widespread adoption.

To drive global adoption and scalability, the right global ecosystem must be established. Trade agreements can play a fundamental role in this regard.

That is why the World Trade Organization (WTO) and the World Economic Forum — in a joint effort and with inputs from public, private and civil society stakeholders — have identified five fundamental policy frontiers key to widespread TradeTech adoption.

These are the five Gs of TradeTech:

G1. Global data transmission and liability frameworks

G2. Global legal recognition of electronic transactions and documents

G3. Global digital identity of persons and objects

G4. Global interoperability of data models for trade documents and platforms

G5. Global trade rules access and computational law

End-to-end trade digitalization requires global access to reliable, affordable and fast connections, as well as a trustworthy legal framework that enables data transmission across borders. Advanced technologies such as Artificial Intelligence, blockchain, Distributed Ledger Technology, and Internet of Things require the development of infrastructure and wireless technologies that enable continuous connectivity.

Information — be it personal, sensitive or confidential — must also flow as freely as possible across borders, while still preserving the rights to privacy of individuals, companies, and government entities.

However, before these goals can be achieved, there remain challenges that must be addressed to support the development of a global data transmission ecosystem.

Specifically, the digital divide must be closed, international standards relating to cybersecurity must be established, regulatory fragmentation must be addressed and liability frameworks must be clarified and adapted.

The current paper-based trade environment incurs many inefficiencies. Substituting paper for digital means will alleviate many of these, but removing paper from trade requires more than technology. It requires an enabling regulatory framework that recognizes e-signatures and allows for the transfer of e-documents across borders.

The rise of advanced technologies has also led to an increased use of so-called smart contracts and the tokenization of trade documents. Yet, only around 60 countries have legislation on e-signatures, and only 7 jurisdictions have adopted the UN Commission on International Trade Law’s Model Law on Electronic Transferable Records that would facilitate this.

Other areas, such as automated contracts and tokenization — both increasingly being used in international trade — are novel to existing trade agreements and policy. These innovations have the ability to make trade more inclusive and efficient, and so should be considered for adoption.

For instance, the use of tokens could reduce the cost and timeframes for trade finance, which would be particularly beneficial for small and medium-sized enterprises.

End-to-end trade digitalization requires a global approach to digital identities of natural and legal persons, as well as of physical and digital objects sending or receiving electronic information.

Identity plays a central role in international trade, not only to identify individuals and products but also to trace the history, distribution, location and use of containers, consignments, shipments and products from end to end.

Trade agreements could set up a minimum level and type of business data or attributes, and ensure that updates to the legal status of a person or entity are continually maintained and immediately communicated. They could also encourage mutual recognition of approaches and the development of certification frameworks whereby accredited digital identity operators would issue globally recognized digital identities.

When it comes to the identity and origin of objects, trade agreements could promote the use of open global standards for product identification and data sharing across global value chains.

Agreements in the space of documents and platforms have, so far, encouraged the use of standards primarily for e-invoicing and e-certification of agricultural commodities. This narrow scope, however, does not take advantage of the opportunity offered in this space.

A lack of alignment of data models and processes limits the cross-border exchange of trade documents and information. While various platforms are being developed, they often follow their own rules and operate in isolation.

Connecting the various platforms, or developing common cross-sectoral or cross jurisdictional approaches, is necessary to enable global flows of electronic data and documents.

Trade agreements could promote the use of existing semantic libraries — essentially defining what means what — such as those by the United Nations Centre for Trade Facilitation and Electronic Business and the World Customs Organization. Priority must be given to promoting wider use of these existing semantic libraries to reach a critical mass of users.

With continual economic integration, the rules that apply in cross-border contexts are multiplying and becoming more technical. They are becoming more complicated and more difficult to implement. This is a particularly acute problem for small businesses.

Recently, legal innovations have sought to address administrative barriers to trade by expressing natural language rules in conditional programming forms to automatically provide users with legal answers that depend on the input of concrete, trade-related parameters.

Through programming, machine-learning, and natural language processing, machines can be enabled to analyze legal documents and automatically perform machine-executable tasks in accordance with certain parameters put in place, thereby expediting legal processing and augmenting computer-human interactions.

Future trade agreements can encourage governments to publish official machine-executable packages of trade policies and domestic rules that affect cross-border transactions alongside the deposited natural language texts. This could greatly enhance transparency, beyond existing WTO provisions, and could be monitored by existing mechanisms, such as the WTO’s Trade Policy Review Mechanism.

Although some of the 5 Gs are commonly covered by trade agreements, unseized opportunities remain in connectivity, data sharing and e-signatures. Others — including electronic transferable records, digital identities, interoperability of data models and more — are either not discussed in trade agreements, or only feature in very few.

The community experts behind the publication “The promise of TradeTech: Policy approaches to harness” — a joint effort between the WTO and the World Economic Forum — encourage policymakers to consider global coordination and advancement of these topics in modern digital trade agreements, such as Digital Economy Agreements. Their soft and innovative nature, together with their focus on domestic regulation coordination, will make them a good harbour to develop harmonization around the 5 Gs of TradeTech.

These new policy frontiers will help to accelerate global trade, and ensure it works for us all.