Technological advancements have brought both benefits and challenges to international trade. While technologies such as artificial intelligence (AI) and blockchain have the potential to vastly improve the efficiency of supply chains, they can also disrupt current patterns of production and trade.
The Boston Consulting Group’s (BCG) Henderson Institute estimates that ‘digitally enabled’ trade is worth between US$800 billion and US$1.5 trillion. This highlights the immense potential of technological improvements to increase efficiency and open up new markets. AI and blockchain, in particular, have the potential to improve the aggregate supply for many industries, promoting lower prices and higher output.
However, technology also poses a threat to trade. Shortening supply chains and creating greater autonomy between individual countries could reduce the value of trade down to only US$400 billion. The threat of such disruptions is real, but the implementation of domestic policies by government officials can minimize these risks and take advantage of technology instead.
To this end, policymakers’ role in minimizing the threat technology brings will be integral towards the future. With non-standardized and continuously tightening policies regarding technological trade, specifically in cross-border data transfer, comes a future of fragmented economies that may close off the trade of services between countries.
The potential for technology to revolutionize international trade is vast, but the challenges and threats are real. Governments must strike a balance between promoting technological innovation and mitigating risks to trade. In a world that is increasingly reliant on technology, policymakers must create policies that balance the benefits and risks of digital trade.
For example, governments may consider creating regulations to ensure that technologies do not disrupt existing supply chains, or they may invest in technology infrastructure to improve supply chains and create new markets. They may also seek to harmonize cross-border policies and create international standards for data transfer to facilitate trade.
Overall, technology and international trade present both opportunities and challenges, and policymakers must act strategically to maximize the benefits of technological advancements while mitigating risks to trade.
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