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The COVID-19 pandemic has shined a bright light on the fact that global trade and our supply chains are squeezed to a breaking point. While the virus’s spread mercifully appears to have started to subside, we now face what could very well be the largest economic downturn many countries have ever seen. Make no mistake, we’re heading to some dark times as a global economy. But there are steps we can begin taking now, to ensure that when we do emerge from this crisis, we will emerge even stronger.
The global economy is measured and assessed based on the strength of GDP growth, and facilitating GDP growth and facilitating global trade are often one-in-the-same. By taking this opportunity to rectify the inefficiencies in global trade that the pandemic has laid bare, we can lay a stronger foundation for growth and prosperity in the years to come.
One problem the COVID-19 crisis has highlighted is lack of not only consistent digitization, but also digitization with trust. Paperwork-based and manual processes are brutally inefficient, they also require the in-person interactions that are impossible to recreate in remote work environments. Digitizing these processes makes them shorter and the results achieved faster, extending a priceless lifeline in particular to small businesses stretched thin. Digitization with technology tools that include blockchain can also enhance transparency, making it possible to share relevant data about transactions and enhance trust. These are exactly the types of enhancements we need to make to give global trade a chance so that the economy has a chance to recover.
The power of digitization
The benefits of simply reducing costs by eliminating paper-based processes are clear. The World Trade Organization (WTO) estimates that falling trade costs alone could help global trade grow by 31 to 34 percent over the next 15 years. But there is also incredible demand for transparency, according to a recent report from the IBM Institute for Business Value (IBV) highlighting the growing role blockchain is playing in supporting and improving critical trade infrastructure. Of the organizations surveyed, 79 percent value trusted data but less than 50 percent of them are willing to share data with other members of their industry. Blockchain can facilitate this data exchange and help drive the collaboration and innovation needed to help lead us out of this crisis.
Indeed, blockchain technology remains unique in its potential to diminish the frictions of global business, reduce cost, and save time while also mitigating risk and creating new business models. But for global trade to see the full range of benefits from blockchain, trusted data needs to be shared and value exchanged both on blockchain and non-blockchain networks — not just among participants in a single network, but across interconnected networks in digital marketplaces. Examples include we.trade, a joint venture started by 12 European banks to facilitate international trade, and which now attracts not just financial services companies but also logistics and insurance businesses around the world. As a neutral agent for trust, blockchain can enable a “network of networks” economy that can help companies build greater flexibility and resilience into operational and supply chain management, but also use that trust, to create new relationships for new business — both essential attributes in times of crisis.
As we emerge from what Gartner called the “trough of disillusionment,” blockchain has once again found its footing as a source of great optimism. According to the IBV study, 41 percent of organizations with a blockchain initiative report experiencing a positive ROI in 2019. Of the CTOs and CIOs surveyed, 85 percent expect to work with multiple blockchain technologies within the next three years. Perhaps most importantly from the perspective of a global economy, 90 percent of respondents expect between 1 and 10 percent GDP growth from a blockchain network effect once these interconnected networks are formed.
Looking beyond profitability
These early adopters are redefining how they do business by embracing an approach that looks beyond profitability. They see what’s coming: whether they are buying a smartphone or a carton of eggs, consumers want to know that the cobalt in the smartphone was mined ethically and that the eggs they are queuing up for are certified organic. Younger generations picking up the tab for centuries of pollution are only going to get more disposed to buying products they believe are produced in socially and environmentally sound ways. The companies investing in blockchain now are the ones who are going to earn the trust of the supply chain conscious consumer of tomorrow.
Businesses around the world have been affected by the COVID-19 crisis, but there is already reason to be optimistic. Blockchain can provide a transparency that cannot be tampered with, an asset we know will help us weather future crises. Blockchain developers continue to innovate every day and have already helped create solutions unique to battling the crisis, from a platform to onboard emergency suppliers to new data platforms that can attest and integrate different sources of pandemic data.
These efforts have been inspiring, but we must now turn our attention to how we can revive our flailing economy. In this effort, our study also showed that the role of governments, regulators and industry bodies like the International Chambers of Commerce and the World Trade Organization should work with technology companies and academia to provide a “neutral venue” with a “natural incentive” to collaborate. We must digitize global trade with trust and give all businesses around the world the tools they need to re-build, thrive and compete again.
To elaborate on the work that needs to take place, we are holding the webinar Advancing global trade with blockchain on 9 June 2020 at 12 PM Eastern Time (ET). In this discussion, you’ll be able to hear directly from experts Chris Southworth, Secretary General International Chamber of Commerce UK, Omer Ahsan, Head of Commercial Banking Innovation and Propositions HSBC UK, Ciaran McGowan, CEO we.trade Innovation DAC and myself. Please be sure to sign up for the webinar here.