We are in the middle of an unparalleled digital revolution. The WTO (World Trade Organization) introduced the World Trade Report of this year just a few weeks ago, the report evaluates the contributions of digital technologies in revolutionizing global commerce and also the challenges and prospects created by it. The report also includes Blockchain as one of the technologies. This article deals with Blockchain in details and also its contributions to international trade. WTO conducted further research on Blockchain. It focuses on the effect of distributed ledger technology on international trade.
Almost everyone has heard about the term Blockchain. It is quite popular and needs to be examined closely. The technology became prominent at the time of the financial crisis in 2008. This was the time when people rarely trusted financial institutions. It was based on the technology related to Bitcoin which was the popular and highly controversial cryptocurrency. People often associate Blockchain with Bitcoin but there are many more things to know about Blockchain. The term is often used to refer to distributed ledger technology, but the reality is much more complex as there are different types of distributed ledger technologies and many other useful applications of such technologies.
Significance of Blockchain
Blockchain signifies a lot for international trade. Trade transactions at the global level involve almost a dozen people throughout the supply chain and are highly dependent on rigorous paperwork. Blockchain increases the traceability and transparency of supply chains, quickens the digitalization of trade transactions and automate processes. It can help in offering a new generation of services, especially in areas relating to financial services, insurance, transportation, and logistics. It can also smoothen the exposure of small businesses’ to global markets and trade finance by assisting them in creating a digital identity and also in building confidence with partners scattered all around the world.
It can also affect the implementation and administration of intellectual property rights, molding the entire scenario of competition in the process. It can also produce cost reductions and revenue gains that are significant. A recent study has pointed out that the gains made from Blockchain can deliver a value worth 3 trillion dollars all over the world by 2030.
You don’t need to go into depth to understand the effects of technology on global trade. The technology is now being used in real life applications. There are retailers who use it every day to track a huge number of packages throughout their supply chains. Some of the trade finance and the trade transportation platforms can process live operations due to the use of Blockchain. The technology has also drawn the attention of custom and other government authorities.
Related: India to be one of the World’s Blockchain Leaders by 2023.
Drawbacks of Blockchain
There are some drawbacks of using Blockchain. First of all, it is not suitable for every situation. It is deserving of a lot of attention, but it cannot solve all problems. In fact, technology throws up many challenges. The blockchain platforms that are existing now don’t talk to each other, even if they do, it is limited to a certain extent. Many term this problem as the “digital island problem”. There are many blockchain applications that need more than just the Blockchain technology.
As mentioned above, Blockchain can act as a catalyst in the digitalization of trade transactions, but one can do so only when legislative framework permits you to conduct transactions digitally and the laws also need to acknowledge the validity of e-signatures and e-transactions. You need to have a regulatory framework that makes it feasible for you to carry out digital transactions. The policy environment should authorize the technology to function smoothly or else opportunities will get lost to make international trade more inclusive and effective.
There are policy questions that are pertinent regarding the use of Blockchain. It can smoothen the access of small businesses’ to global markets and trade finance by helping them to create their own digital identity but the problem here is about accessibility, how can small farmers benefit from the technology when they lack access to a stable internet connection and mobile phones. The technology has created many interesting opportunities, but it has also raised a number of problems regarding regulatory, legal and policy issues that need to be scrutinized thoroughly.
We have to conquer the challenges and propagate the technology. The only way of doing this is to have outstanding and complete knowledge of the facts. You need to discern the technology fully-its advantages and disadvantages and the most important thing is to understand its significance for international trade. An informed debate is essential in this case and the debate should include people other than trade experts.
The debate should include all those who are related to the technology of Blockchain, government authorities, blockchain experts, the business community, representatives from other international organizations etc. This can help in developing the technology further.
Hence, this article discusses mostly blockchain technology that affects international trade in different ways. Most importantly it helps in bringing transparency in digital transactions. Transparency has been a big problem for digital transactions in recent times. Blockchain makes it sure that the records or documents in business are genuine. With this technology, you can track your packages quite easily. It reduces the costs and time of international trade transaction through digitalization of the process. People can trust more on digital transactions due to technologies like Blockchain. It will help you to trade with your partners confidently without worrying about the authenticity of documents related to trade.
Yes, Blockchain can revolutionize the realm of international trade by offering technology that helps you to provide a host of advanced services, but it has its own set of drawbacks, every country needs to accept and implement the technology, the legal framework should favor the use of this technology and the level of accessibility needs to increase. Small farmers should not be kept out of the ambit of this technology, fast and stable mobile internet connection needs to spread at a rapid pace. We need to diagnose the problems, discuss and debate the ways of solving those problems for the emancipation of international trade and finance.