Forward

At the World Economic Forum Annual Meeting 2017 in Davos-Klosters, Switzerland, the Governors of the Supply Chain and Transport community, and the Stewardship Board of the System Initiative on Shaping the Future of International Trade and Investment, suggested that the Forum conduct research to better understand the impact of the Fourth Industrial Revolution on trade flows and supply chains. In particular, the research would identify how Fourth Industrial Revolution technologies can help facilitate trade in the future, when the world risks becoming even more fractured than it has been in the past.

International trade and global value chains have been critical for both the wealth of nations and the reduction of geopolitical tensions. The distribution of production around the world has fuelled globalization while gradually reducing the gap between developed and developing countries. International trade has made the world economically more balanced and inclusive. Yet, still more remains to be done, and the poorest nations continue to capture a very limited share of global trade. Archaic processes pose a significant obstacle for small and medium-sized enterprises (SMEs) and trade with emerging markets. Participating in international markets and value chains requires reducing trade barriers and establishing seamless processes at the core of an effective and efficient cross-border ecosystem. Improving border processes and systems has become even more important because trade growth is slower compared to historical highs, thus limiting its potential contribution to jobs, opportunity and economic growth. Experiments have shown that the current situation at many borders could be vastly improved.

With the rise of technologies, such as the internet of things (IoT), blockchain and artificial intelligence, the means to facilitate international trade are growing, too. Digitalization and advanced technologies have the potential to significantly reduce processing times and the cost of cross-border movements of goods. Transforming paper-based documentation into electronic formats and applying smart tools and technologies help to reduce trade barriers, particularly for small businesses and companies in higher- risk developing countries. The single window has demonstrated the dramatic improvements that can be achieved through digitization. However, the real potential lies in the combination and interplay of various technologies, advanced analytics for better decision-making, the IoT for better supply chain visibility, and artificial intelligence for mitigating money-laundering and other risks.

Trade finance and supply chain finance are important enablers of international trade. However, financial instruments, such as letters of credit and guarantees, are particularly unattractive for small-ticket transactions because of the relatively high operational costs. Distributed ledger and other technological innovations promise groundbreaking advances in trade and supply chain finance by reducing costs and ease of use. Established vendors offer many off-the-shelf, innovative trade finance solutions: likewise, supply chain finance solutions from vendors are used by banks. In financing, third-party technology platforms and crowdfunding platforms have also recently emerged.

This White Paper – a joint initiative of the Supply Chain and Transportation industries and the System Initiative on Shaping the Future of International Trade and Investment – provides a first look at the narrow topic of trade and supply chain finance, as well as a snapshot of the status of technological developments, as the starting point for deeper and broader studies.

Wolfgang Lehmacher
Head of Supply Chain and Transportation Industries, World Economic Forum