The Future of
Trade is Digital

While cross-border trade is still synonymous with paperwork, the development of blockchain, advanced robotics, and the Internet of Things presents a profound shift for the future. Blockchain, while still not deployed at an industrialised scale, will begin to streamline business efficiency for global importers and exporters; reducing costs, increasing productivity, and driving economies over the next decade.

In 2007, only 21% of the world's population had access to the Internet. Now more than 47% of people, even in remote areas, are online. With more consumers gaining access to virtual market places, and an emerging global middle class, we will see growth in trade volumes.

Over the past 10 years, the number of internet users has risen almost nine-fold in South Asia and more than seven-fold in Sub-Saharan Africa, much faster than in Europe or North America.

Blockchain, a digital ledger technology promises to be especially useful for the tracking of goods and shipments as well as improving trade finance. By providing a secure, decentralised record of transactions, a large degree of paper based documentation would be eliminated resulting in simpler, automated workflows, smart contracts and cost reductions.

According to estimates by the World Economic Forum, reducing supply chain barriers to trade could increase global GDP by nearly 5%, and trade volumes by 15%.

Maersk and IBM recently announced a joint venture to provide more efficient and secure methods for conducting global trade using blockchain technology.

From innovating the way payments are made, to unlocking opportunities embedded in enterprise data - governments are realising data must be viewed as a natural resource. Data collection and analytics, servers, and transmission lines are as integral to economic interests as offshore wells, refineries, and tankers. EU General Protection Regulation (GDPR) is considered the most important change in data privacy regulation in 20 years. As more trade evolves, and virtually every company becomes a digital business, regulations will go beyond ensuring the privacy of citizens, but may also control how date is used in terms of trade.

The World Economic Forum estimates that, taken together, the cumulative value of digital transformation stands at almost $13 trillion. Scaling this up across all industries, the value of digital transformation to the global economy could reach more than $45 trillion in the decade to 2025.

“GDP growth could increase between $250 billion and $450 billion per annum if and when data flows freely.”

The Industry
Digitalisation Index

The spread of technology and data is having a significant impact on GDP. By measuring four separate functions of digitalisation: upstream supply chain, production, downstream supply chain and digital infrastructure; the Industry Digitalisation Index tracks businesses’ digitalisation progress across sectors.

Here is a brief overview of this years results:
(1-100, where 100 is fully digitalised).

The information and communication industry leads the IDI, maintaining the top spot in 2016 and 2018. With high scores on the downstream supply chain index, accommodation and food services take second place thanks to online booking and ordering becoming common practice. Construction is still the worst performing sector on the IDI with the lowest index score in production, upstream and downstream supply chain. Despite the rise in online-shopping, wholesale and retail trade still have a far way to go before being considered fully digitised.

Top sectors of businesses receiving orders over computer networks: wholesale trade, accommodation and food services.

Top countries for businesses making sales to clients over the internet: UK, US, Japan and the Netherlands. Overall, EU countries tend to make use of internet to sell goods and services slightly more than the rest of the world – EU score at 5.2 and non-EU at 4.3.

Radio Frequency Identification –
used by 13% of businesses in Europe.

Assessing the impact on Digitalisation on the future of trade

Technology is playing a significant role in changing the way global supply chains are set up, managed, and monitored. In 2017, 13% of E.U businesses used RFID (Radio Frequency Identification) to accelerate efficiency, widen access to markets and increase location and shipment transparency. Blockchain technology provides secure and linked records, which has the potential to simplify processes, reduce costs and make exporting for smaller local producers a viable option.

e-commerce is driving economic growth

In February 2018, e-commerce reached 17.2% of total retail sales within the UK. East Asia and Pacific has the highest share of e-commerce growth, at 11% in 2018, followed by Europe and central Asia at 9%. Dominating the global share, business-to-business e-commerce is the most important component of cross-border online sales. A study conducted by PayPal across six of the world's largest e-commerce markets (China, United States, United Kingdom, Germany, Australia and Brazil) found that $307 billion will be spent on cross border business-to-consumer transactions in 2018, with 130 million shoppers using overseas web sites.

In the UK, e-commerce reached 17.2%
of total retail sales in February 2018.

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