Transparency and Trade digitalization are the two major benefits of blockchain for international trade
The World Trade Organization has collaborated with Trade Finance Global to publish their latest findings on the classifications of blockchain projects in international trade by arranging them into what they refer to as a “periodic table” for the industry. The original rendition of the blockchain periodic table was published in 2019 in a 56-page report called ‘Blockchain & DLT in Trade: A Reality Check’.
However, a lot of factors have changed since that report and despite the pandemic, multiple indicators used in the table demonstrate that blockchain trade innovation projects worldwide are reaching higher levels of maturity than ever before.
A project’s maturity was assessed on a scale of one to five with 2.3 being the average score in the 2019 report. The same figure stands at 3.3 as of this month. The WTO and TFG explained this progress by stating that projects are now “between the early stages of production and being the life and running”.
The report outlined two major benefits that are offered by blockchain and DLR with regard to international trade. First, the technology enhances transparency and supports the track-and-trace capacity which can ensure the authenticity of products and improve consumer trust. Further, DLT offers trade digitalization. It streamlines trade documentation, processes, and enables the secure exchange and monitoring of data.
The report further identified the weakest link in the chain. “Any digital process will only be as strong as its least digitized link. For many international trade systems, this means integrating customs. While several governments are testing or considering using DLT for their customs operations and single windows, most projects remain at a conceptual or piloting stage”, it stated.
Identifying Latin America as a forerunner on the customs front, the report mentions the development of a DLT project called Cadena by ICT specialists from Mexico, Peru, Chile, and Costa Rica in cooperation with Microsoft and IDB. Cadena, targeted at custom agencies, supports the mutual recognition agreements between authorized economic operators within a framework set by the World Customs Organization.
The report also talks about the DLT-based TradeLens project which has been integrating custom authorities and a DLT trade documentation digitalization project from Avanza Innovations, which has been integrated with Dubai Customs.
Speaking about the limitations to blockchain trade optimization, the report says, “While these are significant positive developments, it is not enough. If the industry wishes to continue extending the limits in terms of trade digitalization, they need to begin to see more movement along this front.”