TRADING WITH INTELLIGENCE
Post by: chuxuan - Post date: Thursday, Dec 12, 2024 | 16:34 - View count: 26
How AI shapes and is shaped by international trade
“AI is challenging the ways we think about the world, and international trade is no exception, as AI promises to transform trade logistics and supply chain management and give rise to new forms of services.”
Dr Ngozi Okonjo-Iweala, Director-General of WTO
In November of 2024, a group of experts led by Johanna Hill, Deputy Director-General, and Ralph Ossa, Director of the Department of Economic and Statistical Research of the World Trade Organization (WTO), published the report “Trade with Artificial Intelligence – How AI shapes and is shaped by international trade” . The 118-page report raises and seeks to answer questions about how artificial intelligence (AI) is shaping international trade, why AI has become a trade issue, and the implications of national AI policies on trade.
According to research results of experts, currently AI has many different definitions given by international organizations. There are several definitions of AI systems by international bodies. The Organisation for Economic Co-operation and Development (OECD), for example, defines an “AI system” as “a machine based system that, for explicit or implicit objectives, infers, from the input it receives, how to generate outputs such as predictions, content, recommendations, or decisions that can influence physical or virtual environments. Different AI systems vary in their levels of autonomy and adaptiveness after deployment” . As for the International Organization for Standardization (ISO), it defines an AI system as an “engineered system that generates outputs such as content, forecasts, recommendations or decisions for a given set of human-defined objectives” .
So, how has AI shaped and been shaped by international trade? With this study, experts have shown that the widespread and transformative impact that artificial intelligence (AI) is currently having on society is being felt in all areas, from work, production and trade to health, arts and leisure activities. New applications of AI are expected to create unprecedented new economic and societal opportunities and benefits. However, significant ethical and societal risks are also associated with the development and application of AI. These risks have implications for all these areas too, including trade. AI is a global issue, and as governments increasingly move to regulate AI, global cooperation is more important than ever.
The next question in the study: Why is AI a trade issue?
AI is distinct from other digital technologies in several key ways, and it has the potential to affect international trade significantly.
AI might greatly improve trade efficiency by enhancing trade logistics, supply chain management, and regulatory compliance. It can automate customs clearance processes, navigate complex regulations, and predict risks. AI-based tools amplify the supply chain visibility through real-time data analytics and automated decision-making processes. This can lower trade costs and level the playing field for developing economies and small businesses. AI is capable of transforming trade patterns in services, particularly digitally delivered services, by enabling low-skilled workers to leverage best practices of high-skilled workers. However, AI has reduced the demand for traditional services and reduced the need to outsource certain ones. As the AI’s application continues to wide spread, the demand and trade in technology-related products, such as computer and telecommunications services, specialized development tools, and software libraries rise.
AI may also reshape economies’ comparative advantages by enhancing productivity across all sectors and shifting production dynamics. However, the development and control of AI technology are likely to remain concentrated in large economies and advanced AI companies, resulting in industrial concentration.
Furthermore, the adoption of AI poses significant boost of productivity and reduction of trade costs, leading to global trade and GDP gains. Simulations using the WTO global trade model show that under an optimistic scenario of universal AI adoption and high productivity growth up until 2040, global real trade growth could increase by almost 14 percentage points. Conversely, a cautious scenario with uneven AI adoption and low productivity growth projects trade growth of just under 7 percentage points. High-income economies are expected to see the largest productivity gains, while lower-income economies have better potential to reduce trade costs. The impact that AI creates on global trade and GDP varies across economies and sectors, depending on innovation and policies. Digitally delivered services are expected to experience the highest trade growth, with an optimistic scenario of universal AI adoption resulting in a cumulative growth of nearly 18 percentage points.
From the analysis of the positive impacts and risks that AI brings about, experts pointed out the commercial impacts of the policies that governments put forth to manage AI.
AI’s potential to reshape international trade raises policy questions, including the risk of a growing AI divide, data governance challenges, and the need to ensure trustworthiness and IP rights. The implementation of AI at domestic, regional, and international levels entails both benefits and risks, and a lack of coordination could cause regulatory fragmentation. As the current AI development capacity is concentrated in a few large economies, there is a significant divide between AI-leading economies and the rest of the world. Restrictions on data flows might hinder AI innovation, increase costs, and negatively impact trade. A reasonable trade-off between data access and privacy protection is needed.
AI trustworthiness is crucial for trade, but balancing reliability, security, privacy, safety, accountability, and quality can be challenging due to its opaque nature and potential dual-use. Traditional regulations may not address all potential risks, and AI poses new challenges for traditional IP rights. Governments are implementing AI strategies and policies to promote its development and use, but most are implemented by developed economies, potentially deepening the AI divide.
The emerging image of fragmented measures and domestic initiatives may lead to regulatory fragmentation, directly impacting AI-specific regulations, sector-specific legislation, and trade distorting effects. The economic costs of regulatory heterogeneity, particularly for small businesses, are at large number, with fragmentation resulting in a loss of over 1% of real GDP. The increasing number of bilateral and regional cooperation initiatives on AI governance adds to the risk of creating fragmented approaches. Regional trade agreements (RTAs) and digital economy agreements are important mechanisms to promote and regulate AI, with AI-specific provisions mainly taking the form of “soft” non-binding provisions. However, the depth of digital trade provisions in RTAs varies significantly, reflecting diverging approaches. Disciplines on trade in services in RTAs also play a crucial role in influencing the policy environment for AI.
Although international initiatives related to AI have emerged in recent years, focusing on various aspects of AI governance, including regulations, standards, IP rights, privacy, and data governance; however, there is still no global alignment on AI terminology, which could restrict implementation efforts. International organizations like ITU, UNESCO, UNIDO, and the World Bank are developing courses on AI, with the support of AI itself in appropriate technical assistance activities. The WTO, as the only rules-based global body dealing with trade policy, can help promote benefits and limit risks of AI, facilitating trade in AI-related goods and services.
In that circumstance, the World Trade Organization (WTO) acts as a forum that promotes global convergence through transparency, non-discrimination, discussion, and the exchange of good practices. Its agreements, such as the Technical Barriers to Trade (TBT) Agreement, enable WTO members to stay informed about regulatory developments, preventing trade obstacles and accelerating global convergence. In fact, WTO members are increasingly notifying regulations on digital technologies, such as cybersecurity and IoT/robotics, to the TBT Committee, along with the contribution of WTO Trade Policy Review Mechanism to the transparency in trade policies.
The WTO prioritizes the strengthening of regulatory harmonization and coherence through international standards, mutual recognition, and equivalence. It is the cornerstone of global efforts to facilitate trade in services and goods that enable or are enabled by AI. The TBT Agreement of WTO ensures that AI standards and regulations are not trade-restrictive and optimal for policy objectives.
In order to adapt with the fast-changing AI development, WTO has established principles and guidelines to support trade in AI systems and products, minimizing negative spillovers. These include the non-discrimination principle, Agreement on Trade-Related Investment Measures (TRIMS), and Agreement on Subsidies and Countervailing Measures (SCM). The WTO also helps to prevent and settle trade tensions by raising “specific trade concerns” (STCs) and serving as a global forum for resolving trade-related disputes through the WTO Dispute Settlement System. It also promotes inclusiveness through special and differential treatment and technical assistance for developing economies, who are the benificiaries of these provisions as WTO rules are implemented and engaged more effectively in international trade. Multi-stakeholder programs like Aid for Trade and the Enhanced Integrated Framework can further help developing economies seize the benefits of AI for trade.
As a forum for negotiation, discussion and rule-making, the WTO can contribute to developing a robust AI governance framework, promoting policy coherence and considering the intersection of AI and trade. As AI carries on its evolvement, governments should continue to discuss the intersection of AI and trade and its possible implications for the WTO rulebook.
