Blockchain tech can make international trade smarter: WTO report
In a detailed report titled, ‘Can Blockchain revolutionize international trade?’, the World Trade Organization (WTO) stated that the novel technology will take the current trade scenario to new levels with its distinct features. However, it pointed out that cross-border cooperation regarding blockchain technology is paramount to changing the face of international trade.
According to the report, blockchain technology will usher in a paperless trading process in international trade as numerous documents need to be submitted for any trade transactions. These papers tend to be prone to errors, losses, and fraud.
Because of this issue, various governments have been exploring how blockchain could be used to lessen the burden of paperwork and enhance the export process.
“The technology is seen by many as an interesting tool to improve the security of traditional trade finance transactions and to streamline and digitalize processes, especially letters of credit, as well as an opportunity to facilitate know-your-customer (KYC) processes and ease supply chain finance,” the report, authored by Emmanuelle Gannem, stated.
The report noted that once blockchain digitizes cross-border trade, developing countries will be the main beneficiaries the resulting efficient customs procedures.
“The full implementation of the TFA (the WTO Trade Facilitation Agreement) could reduce global trade costs by an average of 14.3%, with African countries and least-developed countries (LDCs) forecast to enjoy the biggest average reduction in trade costs. Full implementation could also reduce the average time needed to import by 47% and cut export time by more than 90%,” the report stated.
Blockchain technology is widely seen as a solution to the complexity and risks involved in government-to-government (G2G) cross-border processes. The report stated that blockchain could eliminate certain risks associated with G2G processes, such as sharing information related to authorized economic operators.
“Unless interoperability issues between such platforms are settled, turning to Blockchain with a view to facilitating technical cross-border G2G interaction, and international trade transactions more generally, is unlikely to make a real difference,” the report pointed out.
The report then delved into how blockchain technology could affect e-commerce sales. “Traditional e-commerce platforms often lack transparency. A blockchain-based e-commerce system makes it possible to easily track records of previous transactions, and smart contracts can facilitate transactions by enabling automatic payment transfers. Blockchain’s immutable nature can also help prevent fraud by making it easier to track counterfeit goods and fraudulent behaviour,” the report explained.
However, it is important to note that the report highlighted the shortcomings of blockchain technology as well, such as scalability issues, high energy consumption and above all, security.
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