5 strategies for boosting innovation in trade

Over the years, international trade has undergone significant transformations. From traditional barter systems to the exchange of services and digital goods, the evolution of global commerce stands as a testament to human ingenuity and innovation. In this era of rapid technological advancement and interconnected economies, cultivating a culture that nurtures innovation in trade is paramount. This article outlines five strategies to boost innovation in trade.

When harnessed effectively, data can serve as a powerful driver of insights and improvements. For instance, the Korean Customs Service strategically leveraged its pre-existing datasets to combat illegal shipment smuggling. By aggregating electronic data from express couriers and Korea Post, Korean Customs Service recognized the potential of this information in countering split shipment smuggling. However, the challenge lay in analyzing a vast dataset encompassing 200 million import records amassed over a decade.

In response, Korean Customs launched a pilot project in 2018, assembling a multidisciplinary team to identify patterns indicative of split shipment fraud, such as single importers exploiting multiple addresses. Through meticulous data aggregation, organization and refinement, the team focused on regular import records spanning three years, uncovering suspicious importers involved in fraudulent activities.

The pilot highlighted the untapped potential of leveraging existing databases beyond their originally intended purpose to enhance trade intelligence. But, the potential of shared data assets and joint analytics extends broadly, offering enhanced trade-related insights, such as the types of goods being traded, traders’ profiles or modes of transport among others. This, in turn, helps customs in ensuring secure borders while facilitating the seamless flow of goods.

The collaboration between public and private sectors plays a pivotal role in driving trade innovation. This partnership is indispensable because the private sector often possesses invaluable insights into trade-related inefficiencies. While the concept of public-private partnership is not novel, at its core lies co-creation, a project development process where issues and solutions are jointly devised and implemented by both public and private actors.

Using this approach, the Global Alliance for Trade Facilitation, a public-private initiative dedicated to trade facilitation, collaborated with Mozambique to facilitate the import of rapid testing kits for the diagnosis of HIV/AIDS and malaria. Through inclusive dialogues involving the public and private sectors, the project aligned interests, ensuring broad-based support from government agencies, local importers and multinational corporations to identify challenges and collaboratively devise solutions.

Their joint efforts revealed that inconsistent, overlapping, or duplicative product codes at the pre-shipment authorization stage, were primarily responsible for creating border delays. The project digitized these processes by integrating them into Mozambique’s existing Single Window and established ways for relevant government ministries, health agencies and customs to coordinate more effectively on vaccine imports. These efforts supported Mozambique in reducing the time and costs associated with importing testing kits, contributing to the government’s overarching goal of enhancing public health.

The integration of emerging technologies, such as artificial intelligence (AI), the Internet of Things (IoT) and Distributed Ledger Technology, etc. has the potential to revolutionize cross-border transportation, tracking and verification of goods, while promoting environmental sustainability. A prime example is the Port of Rotterdam’s commitment to creating a cutting-edge port of the future, leveraging AI for advanced data analysis and using IoT, including a sensor-equipped container for cargo tracking and activity monitoring. This vision includes transforming the port into a zero-emission facility, offering vessels access to sustainable fuels, clean shore power and renewable energy-powered charging stations and fostering progress in clean industry and transportation.

Implementing such a complex transformation can be risky and expensive, however. To address this challenge, the Port of Rotterdam pioneered the use of a digital twin, a virtual replica of its operations, for testing potential changes to port operations. By applying AI to analyze the data, the digital twin can predict optimal vessel mooring and departure times with precision, resulting in reduced wait times, lower emissions and increased cost savings, information that the Port could use to improve its existing operations towards environmental sustainability. Several countries are promoting the use of advanced technologies in trade, notably the United Arab Emirates, which recently joined forces with the World Economic Forum to launch the TradeTech initiative, aiming to leverage cutting-edge technologies for efficient, inclusive and equitable trade processes.

While innovation often leads to success, embracing failure as an integral part of the process is equally essential. Consider the story of Dr. Spencer Silver at 3M, who inadvertently created a weak adhesive named 'microspheres' while striving to develop a robust one. Although his original goal was not met, he discerned the potential in his invention. Years later, he repurposed the weak adhesive to create the widely recognized Post-it® Notes.

This anecdote underscores the significance of embracing failure as a stepping stone towards innovation. In the context of international trade, the ability to adapt and innovate is crucial due to the constantly evolving global market dynamics, regulations and technologies. In recent years, a number of software applications using new technologies such as Distributed Ledger Technology have not succeeded, the community is currently compiling lessons learned to build again from this apparent failure. Thus, promoting a culture where failure is seen as a learning opportunity can encourage stakeholders in international trade to explore new ideas and solutions, ultimately improving trade facilitation processes.

The strategies outlined above can thrive only in an environment that champions change and encourages continual improvement. Therefore, establishing dedicated spaces that encourage innovative thinking and challenge the status quo is essential. The Alliance, for instance, has curated innovation spaces through events, such as Hackathons, Innovation Sprints and Challenges. Such initiatives foster a dynamic and agile atmosphere, enabling innovative solutions to be tested on seemingly intractable border and customs challenges.

In 2022, the Alliance partnered with UNCTAD to launch the Trade Facilitation Innovation Days, a pioneering global platform bringing together stakeholders to discuss inventive solutions to trade-related obstacles. The second edition of the Trade Facilitation Innovation Days took place in September 2023 and continued providing opportunities for discussions and insights on key trade issues, including supply chain management, risk management, climate-smart trade facilitation and more. Furthermore, it provided a platform for innovators from various parts of the world to present their solutions to trade-related challenges. More information on the event can be found here.

Innovation does not happen in a vacuum; rather, it requires a deliberate series of choices to flourish. While not exhaustive, these five strategies can serve as a foundational stepping stone towards shaping an innovative and efficient trade landscape.