The Cyber Revolution’s Effects on International Trade

Digital transformation is altering many of the old trading business models and enabled the creation of entirely new  ones. Today every international transaction requires a data flow across national borders and some electronic versions of products and services now are competing with physically embodied versions and these changes include the replacements of some jobs by electronics. 

Digital technology is wide open to inappropriate use by some governments, commercial operators and by criminals too. This has affected international trade. According to a recent report by the Organisation for Economic Co-operation and Development, (OECD)  trade in counterfeit and pirated goods has risen steadily, and now stands at $509 billion a year. As with previous Industrial Revolutions some governments and corporates are really benefiting.

Historical Perspective

Roughly 13 million slaves were sold between the 15th and the 19th century. Now the interconnectivity that the Internet has created has allowed slave traders more opportunities to understand markets, consumers and the economics, and this is being done on the Dark Web and on Facebook Instagram and Google and Apple Apps. And slavery has increased and today over 40 million peoples are living in some form of modern slavery. 

  • Women and girls comprise 71% of all modern slavery victims and many are sexually exploited. 
  • Children make up 25% and account for 10 millions of all the slaves worldwide.
  • In almost half of the world's countries, there is no criminal law penalising either slavery or the slave trade. 
  • Modern slavery affects people of every colour, age and gender.

Slavery is big business. Globally slavery generates £116 billion in profit every year, more than one third of which is generated in developed countries, including the European Union. 

Another historic feature of international trade was traditional piracy, where pirates attacked and stole from ships, although was reduced by the actions of national governments by the end of the 17th century, leading the pirates to refocus their efforts on the growing smuggling industry. Pirates were largely dependent on attacking ports and settlements and facilitating illegal trade. 

Today piracy is still an international crime that directly threatens the lives of seafarers and it strongly impacts maritime activity as well as economic development, although now there is satellite tracking and monitoring of shipping and this has reduced shipping piracy.

There is however, a new form of piracy - Digital Piracy - which emerged in late 1990s, driven by the exponential growth of World Wide Web. 

Current examples of digital piracy include using technology to download licensed software, movies and albums and downloading or streaming licensed digital content directly from certain pirating Dark Web sites. All it takes is one supplier to share the content online, and consumers themselves contribute to further sharing, making the content go viral and be reachable globally. 

The global damage caused by digital piracy is currently estimated at $ 6.9 billion through commercial fraud, loss of cargo or delay ane online piracy is a real problem that harms the many countries’ economies, and threatens jobs for significant numbers of middle-class workers and hits some of nation's most creative and innovative companies and entrepreneurs by stealing their ideas and commercial secrets.

However, the next generation of technologies will reshape trade flows and global value chains again. Some advances, like Digital ConnectivityBlockchain, and the Internet of Things (IoT) , will continue to reduce transaction and logistics costs, thereby fueling trade and digital platforms connect buyers and sellers directly, lowering the costs of search, sales time and delivery coordination. 

Digital technology has advanced more rapidly than any innovation in our history, reaching around 50 per cent of the world's population in only two decades. 

Recently, 2020 Was Named The Year from Hell…

Last year began with the virus pandemic, more issues about climate change, serious economic problems for many international businesses and also Brexit for the UK. As Internet users increase in emerging economies the challenges of disinformation, fake news and cyber-attacks were seriously experienced.And so now, in 2021 over half the planets population has Internet access and this is one of the main drives of the Fourth/Fifth Industrial Revolution. 

Vast amounts of data will be created and collected than ever before, making policy attempts to protect this data more urgent.
So what is lacking and definitely necessary is for business to create a strong cyber security culture within their organisations.
New technologies like 5G will substantially increase access for both devices and people and this will improve the potential of international trading. 

  • Greater and more convenient broadband at higher speeds will encourage the development and deployment of connected devices and artificial intelligence.
  • Data borders will continue to be drawn which will have effects on International trading making it legally necessary for internationally trading companies to be more responsible with the data they collect from customers. 
  • Digital technologies will begin to have an even more important impact on the ways in which businesses across the world trade in the coming years. According to a recent report from the World Trade Organisation,
  • Blockchain, artificial intelligence and the Internet of Things (IoT) could add up to 34 percentage points to trade growth by 2030. 

The World Trade Organisation (WTO) has  pointed out that key benefits can come about as trading businesses put factors like better route planning. Also, a system like blockchain could reduce the amount of time needed to follow customs rules.

Digital technologies could also have an effect on what  is being shipped across the world, opening up new opportunities for exporters.

The director-general of the WTO, said: "From the invention of the wheel, to the railways, to the advent of containerisation, technology has shaped the way we trade. Today, this phenomenon is accelerating as never before.... We are living through an era of unprecedented technological change. Some call it the 4th Industrial Revolution or the New 5th Digital Revolution. But the common theme is clear that this is a New Revolution." He added that the WTO and other bodies have a duty to make this revolution work for everyone, so debates over emerging technologies cannot be shied away from. The WTO chief economist agreed that digital technologies have the power to "transform the world economy more deeply than other technologies have before".

From trade finance to customs clearance, transportation and logistics, trade in goods in many countries remains paper-intensive. But now blockchain is seen by many as an interesting tool to improve the efficiency of trade processes and help move towards paperless trade. The Internet is increasing the sales and decreasing the costs. This is partly because the web advertisements can reach massive numbers of customers all over the world if organisations use the technology well. 

AI & Autonomous Ships.

The autonomous ship is also known as crewless watercraft piloted by artificial intelligence (AI) without human interference.Autonomous ships work on artificial intelligence technology and sensors which include lidar, radar, high definition cameras, sonar, and thermal imaging.There is the potential of satellites to enable the free flow of information in countries that simply don’t have enough bandwidth, or have central governments or operators that block some social networks like Facebook and Google, et al.

International trade was formerly not possible for many countries. However, with the Internet’s ability to communicate with investors and customers worldwide, many small countries have been able to expand their businesses and industries worldwide. The maritime shipping world was already making great strides toward making international trade a reality for smaller and smaller businesses when the Internet started making it possible for these businesses to actually utilise these services.

The Internet has not only allowed small companies and isolated countries to do international business, but it has improved the ocean shipping industry.  The Internet allows companies to easily communicate with their shipping provider. This one advancement has allowed industries and companies to avoid major delays. 

Retail & Shopping

Online shopping has also changed the retail market, with shoppers foregoing a trip to the high street in favour of buying what they need from their computer or phone. It has also opened up the market for local businesses, with the likes of small boutiques now being able to export to an international market. Some businesses now choose to exist solely online, avoiding the costs of rent and retail staff.

The rise of social media, and data capture has meant that businesses potentially know more about their customers than ever before and it allows companies to understand a buyer’s personality to enable more sales. 

New digital technologies Artificial Intelligence and Machine Learning can be used to optimise trade shipping routes, manage vessel and truck traffic at ports, and translate e-commerce search queries from one language into other languages and respond with translated inventory.

More than efficiencies gains and better consumer services, AI is also being used to make global trade sustainable. 

For example, Google launched Global Fishing Watch in 2016, which is a real-time tool using machine learning to combat illegal fishing by providing a global view of commercial fishing activities based on ship movements and satellite data. It can be used by governments and other organisations to identify suspicious behaviours and develop sustainable policies.
Just a decade ago, building an accurate picture of commercial fishing across the globe would have been impossible. 

International Trade Continues To Grow Due To Better Connectivity. 

In 2020 the US Trade Representative threatened to impose 25% tariffs on French cheese, champagne and luxury goods, in retaliation for France’s 3% levy on large technology companies, which the US said unfairly targeted American businesses. Recently President Biden has tried to suspend the tariffs, but the office of US Trade has said it still wants to impose tariffs, while France and other countries view digital services and social media as businesses taking revenue from the local operations. They criticise the big tech companies are not paying local taxes and yet are profiting enormously from these markets. 

The Internet helps countries find new markets and then helps them monitor their trade history, current role, global position and potential future markets, but of course this also means they are often being monitored and spied on by other organisations and  countries. Organisations like Zen Innovations have created an on-line Global Trade Tracker to help countries and organisations monitor their international trade. This helps them collect, manage, disseminate data, statistics and trends in international trade and policy, including customs tariffs, tariff preferences, trade agreements, security measures. 

Cyber crime is being carry out by individual criminals, cyber gangs and some of these gangs are funded and controlled by governments, in a way very similar to 17th Century piracy. 

In the last decade what is apparent is that some of the larger commercial organisations are more effective at using the technology than many governments. The globalisation of technology is being spearheaded by North America, Western Europe, and Japan.  

  • The United States is a leader in developing important emergent technologies, in response to competitive pressure from China. 
  • Japan, which has demonstrated enormous success in commercialising new technologies, has an economy excessively dependent on exports. 
  • Western Europe has the cultural tradition and a core of excellent research groups to facilitate its leadership in the technology arena. 

Trade, like many aspects of human history, is often based on previous commercial activity. As the current revolutions in automation and connectivity take effect, its time for countries and organisations around the world to get up to date - and that is definitely the most urgent current effect of  digital technology on international trade.

You Might Also Read:            Image: Unsplash

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