AI and trade reconciliation is the need of the hour. Artificial Intelligence (AI) transforms international trade by enhancing efficiency, enabling better decision-making, and creating new opportunities across global markets. Here’s how AI is influencing international trade and its broader implications.
Global trade is in constant flux, reshaped by technological breakthroughs that open new frontiers for commerce but also present fresh challenges for international trade policy.
This was the case with the advent of the internet and the propagation of e-commerce, which will be so with artificial intelligence.
Given the sometimes-glacial pace at which multilateral policy-making moves, and the generalized and profound impact that AI will have on trade, there is an urgent need to build a policy architecture that reconciles trade and AI.
AI and trade
The impact of AI on international trade is very significant in today’s world.
AI is a transformative force capable of enhancing productivity and innovation and reducing trade costs, creating unprecedented economic and societal opportunities.
The key applications of AI in trade can be:
- Supply Chain Optimization:
- AI algorithms help optimize global supply chains by predicting demand, managing inventory, and identifying the most efficient shipping routes.
- Companies use AI for real-time tracking of goods, minimizing delays, and reducing costs.
- Customs and Border Management:
- AI-powered systems expedite customs clearance by automating paperwork, detecting fraudulent transactions, and ensuring compliance with trade regulations.
- Examples include automated risk assessment tools used by customs agencies globally.
- Trade Analytics and Forecasting:
- AI analyzes trade data to predict market trends, identify new opportunities, and assess risks in international markets.
- Businesses use these insights for strategic planning and to adapt to rapidly changing global trade dynamics.
- E-Commerce and Digital Trade:
- AI enhances cross-border e-commerce by personalizing customer experiences, enabling targeted marketing, and improving payment security.
- It also facilitates language translation and localization for international customers.
- Quality Control and Standards Compliance:
- AI systems are used to monitor product quality, ensuring that goods meet international standards and certifications, thereby reducing trade barriers.
AI’s Role in Reducing Trade Barriers
Understanding how AI intersects with trade is vital for harnessing its benefits and addressing the associated challenge
- Language Translation: AI-powered tools like Google Translate enable seamless communication in multiple languages, fostering trade between countries with language differences.
- Smart Contracts: Blockchain-based AI systems automate trade agreements, reducing reliance on intermediaries and ensuring transparency in transactions.
- Logistics Management: AI improves logistics efficiency, helping small and medium-sized enterprises (SMEs) access international markets more easily.
Challenges and Risks
The rapid advancement of AI also brings forth complex challenges and risks that require global approaches.
- Fragmentation between domestic policy: The various domestic regulations on AI emerging in many countries, including major trading actors such as the US, China, Australia, Singapore, Japan and others, risk causing regulatory fragmentation: different rules in different regions that hinder international trade.
- Implications for the General Agreement on Trade in Services (GATS): The GATS ensures that WTO members conduct a fair and open exchange of services (financial services, insurance, travel etc.). AI could qualify under several of these; the distinction is important because, under the agreement, countries have varying obligations based on the mode.
- Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS): The TRIPS agreements standards for copyright protections on intellectual creations. However, under the Berne Convention, only humans can be considered authors. This leads to questions about who bears the rights to AI-generated materials and who can trade in them. TRIPS needs updating to clarify if AI-generated works are copyrightable, and how this protection might differ from traditional copyright.
- Subsidies: WTO subsidy rules apply to government support for producers. While current rules cover goods used in AI production, such as semiconductors, they don’t fully cover the actual AI service.
- Digital Divide: Unequal access to AI technologies between developed and developing countries may widen the global trade gap.
- Cybersecurity Concerns: Increased digitization in trade makes systems vulnerable to cyberattacks, threatening data integrity and trade security.
- Regulatory Issues: Lack of uniform global regulations for AI in trade creates challenges in standardization and governance.
- Job Displacement: Automation driven by AI may displace traditional roles in trade-related sectors, requiring workforce reskilling.
AI and Trade in Emerging Economies
There is great promise in the benefits that AI can bring. Some estimates suggest that it could raise global GDP by 7% over 10 years.
However, innovation must be balanced against risks related to privacy, bias, cybersecurity and labour markets.
As such, several policies have already been enacted at both an international and domestic level to navigate the costs and benefits of AI, many of which touch on trade.
- AI offers significant potential for developing countries by enhancing agricultural exports, enabling SMEs to access global markets, and reducing dependency on intermediaries.
- Governments can leverage AI to streamline trade policies and reduce non-tariff barriers, boosting competitiveness.
- In 2019, the OECD adopted the OECD AI Principles, the first intergovernmental standard on AI that was adopted by 47 countries. It provides value-based principles and policy recommendations for both government and other AI actors.
- UNESCO released the Recommendation on the Ethics of Artificial Intelligence in November 2021 to address the ethical risks associated with AI.
- In 2023, the UK government convened officials, scientists and other experts at an AI Safety Summit and released the Bletchley Declaration for AI to jumpstart international collaboration on the safety and regulation of “frontier” AI.
- At a regional level, the European Union passed one of the most comprehensive legal frameworks on AI in March of this year. The EU AI Act takes a values-based approach, aiming to foster AI innovation, while upholding human rights, the rule of law and democracy.
Future Outlook
- AI-Driven Free Trade Agreements (FTAs): Future trade agreements may include provisions for AI cooperation, data sharing, and digital infrastructure development.
- AI in Trade Negotiations: Governments and international organizations could use AI for trade policy simulations and scenario planning.
Conclusion
AI is reshaping international trade by increasing efficiency and reducing barriers, but challenges like regulation, cybersecurity, and equity need to be addressed. Collaborative global policies and investments in AI research are critical to ensuring that its benefits are widely distributed.
Frequently Asked Questions (FAQs)
Q. How does AI Stock Trading work?
Ans: AI trading companies use various AI tools to interpret the financial market, use data to calculate price changes, identify reasons behind price fluctuations, carry out sales and trades, and monitor the ever-changing market.
Q. Is AI going to replace traders?
Ans: Even in long-term trading, where strategy plays a bigger role, AI’s current capabilities are limited. Human traders still have the upper hand when it comes to a deeper understanding of market trends and the ability to make informed predictions.
Q. Is AI trading legal in India?
Ans: Only institutional traders may use algorithmic trading lawfully in some nations. For instance, institutional investors and traders in India are the only ones allowed to use algorithmic trading. Retail traders and investors are not permitted to use it.
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-Article by Swathi Satish
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