Globalisation, including a phenomenal expansion of trade, has helped lift millions out of poverty. But not enough people have benefited. The bureaucratic limitation of cross-border trade, as well as complex logistical processes, are keeping the global trade market from achieving its full potential. As a result, work must be done to lift these barriers and allow inclusive trading.
International trade can bring many benefits, for example, access to a larger market enables manufacturers to produce more cheaply and a larger market means larger earning potential. Conversely, if producers are only able to make products for their local market, the potential economies of scale are left out of reach. In order to eradicate this inequality, work must be done to level the playing field and allow producers from all nations to trade freely and inclusively.
Key to this transformation are the technologies that have emerged as a result of the fourth industrial revolution. New technologies such as the Internet of Things (IoT), Machine Learning (ML) and Artificial Intelligence (AI) are reducing the cost of supplying services across borders and connecting diverse actors along the value chain. These technological innovations are helping to overcome many of the constraints that are associated with operating in international markets, leading to the adoption of new business models, the entry of new businesses and a shift in sources of comparative advantage.
In addition, to transforming how trade is conducted, digitalisation is also changing who is trading and what is being traded. For instance, a larger number of low-value transactions and small shipments are now crossing borders.
As a result of the potential, action is needed to devise solutions that can deploy emerging technologies (such as IoT), digital services (such as ecommerce), as well as seamless technologies of mobility and logistics in order to foster global inclusive growth.
Leading this endeavour is ‘The Global Maker Challenge’, a project devised by The Mohammed bin Rashid Initiative for Global Prosperity is uniting world’s leading manufacturers, start-ups and entrepreneurs, governments, UN agencies and philanthropists, academia and researchers, to form a community dedicated to spreading global prosperity through the art of ‘making’. In 2016, the initiative launched its ‘Global Maker Challenge’ an online open-innovation platform that asks ‘makers’ and innovators to connect and collaborate, to solve real-world problems affecting peoples’ lives. In September 2019, the initiative will launch its second cohort, and one of the four challenges will be based on developing innovative solutions to enabling inclusive trade through emerging technologies.
However, as the latest industrial revolution unfolds, a digital divide has been created between those with access to the internet and the benefits it can bring, and those without. For instance, according to the OECD, 3.9 billion people are still offline, with only 1 in 4 people in Africa using the internet and only 1 in 7 people in Less Developed Countries (LDCs).
This disparity creates a chasm in inclusive trade as without an affordable connection, individuals and firms cannot access the marketplace of the world-wide web. And without the necessary skills and regulatory environment in place micro, small and medium sized enterprises cannot thrive. Therefore, to drive inclusive trade, this digital divide must be closed. Failure to act may reinforce existing inequalities between developed and developing economies, and within countries between women and men, rural and urban, and large and small firms.
The second area crucial to the adoption of inclusive trade is regulation that is fit for purpose. In 2018, global manufacturing slowed in both developing and developed regions. The slowdown was attributed to emerging trade and tariff barriers that constrained investment and future growth. In essence, the current restrictions on international trade have created market full of obstacles that favour a small number of key players to monopolise the market, leaving many unable to reach international markets.
Differing trading policies reinforce trade disparity as they favour some markets and producers over others. For example, UNCTAD estimate that African textiles and clothing exporters lose up to 50% of their potential export earnings because European Union regulations differ from the international standards set by the International Organization for Standardization. Meeting these complex and often opaque rules requires financial and technical resources, which means that the smallest and most vulnerable companies and countries pay the heftiest price. This is especially true for exporters from the 48 least developed countries, who lose an estimated $23bn a year (15% of their exports) because they are unable to comply.
One way of tackling this disparity is increasing the transparency of existing regulations. While many country or region-specific regulations are legitimate, the sheer number of them continues to fragment trade and causes the cost of trade to increase. As a result, there is need for coherence in policy to ensure stability, predictability, security and fairness in the rules governing trade with a view to achieving a more open, equitable and development-oriented trading system.
One way of doing this is for the trade community to migrate towards international standards to simplify unnecessary regulatory hurdles. International standards eradicate this risk and as these standards are often based on global best practices, their increased uptake can help promote sustainable development.
Also, on a regulatory level, in order to facilitate trade that boosts prosperity in the world’s poorest countries, new “inclusive” policies that prioritize women, young people, small businesses should be devised.
During a forum hosted by the World Trade Organization, UNCTAD Secretary-General Mukhisa Kituyi said that LDCs faced falling behind the rest of the world. “Most regional traders are women, but most regional integration efforts in least developed countries are structured by men for urban men,” he said. “If men are moving containers across borders it’s called regional free trade, if a woman is moving 10 kilos of grain, she’s called a smuggler. So, identifying the vulnerabilities and ambiguities in practice and roles is an important area for unlocking potential of women traders, who are going to be major players.”
In order to foster inclusive trade, a balance between adopting transparent regulation that is based on equality and unlocking the potential of emerging technologies is key. At a national, regional and global level, our efforts must be made to help less developed countries access the global market. The age of connectivity driven by the creation of the internet holds the potential to make this happen, helping to lift billions out of poverty and enabling greater global prosperity, but only if a concerted, comprehensive approach to trade is taken. We can no longer accept that the few dominant economies hold the keys to the rewards of trading internationally, instead, we must foster and support organisations, industries and governments from all over the world to help them join the table of international trade.
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