Blockchain technology can lower barriers to trade, according to a new World Economic Forum report.
The report presents a framework for using blockchain technology to facilitate trade in single windows – or one-stop electronic platforms – where registered users submit import and export documents.
Electronic trade windows have helped halve document processing times at border agencies and have cut trade compliance times to a third.
Single windows increase exports and gross domestic products and improve transparency and user experience.
As of 2017, 27 countries had full electronic single windows and 36 had a partial single window. Yet challenges remain to improve effectiveness and implementation.
With blockchain technology’s potential to lower trade time and costs it is poised to facilitate US$1.1 trillion new trade volumes globally.
The technology offers benefits such as:
- Interoperability: with improved visibility to manage risks, recognize patterns, conduct pre-arrival processing, share data and improve user experience
- Traceability: enabling more complete data on shipments, supply chains and audit trails by bringing together single windows and/or private sector trade intermediaries on a common blockchain
- Automated processes: automated payments and reconciliation to accelerate revenue collection
- Reliability of data: ensuring that data is fixed and providing single-window users with unique identities so that they allocate relevant parts of their identities to third-party service providers
“To take full advantage of blockchain’s potential for trade, we need forward-looking policies that integrate emerging technologies with international trade practices and rules,” said Ziyang Fan, Head of Digital Trade, World Economic Forum.
“This framework closes the governance gap, separates hype from reality, and enables policy-makers to make informed decisions on leveraging blockchain to facilitate international trade.”
The creation of a global system to govern blockchain will help countries and businesses maximize its benefits while mitigating risks.
The report outlines key questions to ask while developing governance structures and suggests what actions to consider.
Countries require an understanding of how data is shared, which technologies are used and where the blockchain application will be managed.
Since most decisions flow from the governance structure, this first step will ensure interoperability across borders.
The Inter-American Development Bank (IDB) will use this framework to pilot blockchain projects that improve border clearance, and will share lessons and best practices.
“Applying blockchain technology to improve efficiencies in trade and transparency for border clearance can be of critical importance for governments in Latin America and the Caribbean, and beyond,” said Fabrizio Opertti, Manager of the Integration and Trade Sector of the IDB.
“We hope this policy framework developed jointly by the Forum and the IDB becomes the starting point for governments to use blockchain to facilitate trade.”
Read the full report here.