Blockchain Could Bring $1.1 Trillion in New Global Trade
A new report from the World Economic Forum has high hopes for blockchain with revenue growth predicted to be over $1 trillion in world trade.
The white paper published in June examines supply chain management and the enormous role that blockchain will play in the near future, particularly with SMEs (small or medium-sized businesses). The Asian Development Bank estimates that there is a $1.5 trillion trade gap/trade deficit which is projected to increase to $2.4 trillion by 2025. The gap is largely due to smaller businesses having insufficient access to credit, particularly affecting businesses in East Asia and the Pacific.
Suppliers require importers to pay for goods in advance, and the trade gap of $1.5 trillion refers to the deficit created by businesses being unable to front the money capable of generating that potential trade revenue.
The report states: “Distributed ledger technology, can reduce a large part of this gap, facilitating about $1.1 trillion of new trade volumes globally (see Figures 3 and 4). Trade allows countries to specialize in industries; it helps technologies and ideas to spread, and yields economies of scale.
But a major impediment stands in the way of expanding trade and making it more efficient and safe: namely, paper-intensive, manual processes.”
The section of the white paper entitled ‘Financing: Suffering under the paper monster’ is dedicated to this issue, making reference to an experiment in which Maersk and IBM tracked a single shipping container from Kenya to the Netherlands only to find that the process was far from efficient. Out of the 34 days it took the shipping container to get from the farm to the retailers, 10 days were spent waiting for documents to be processed and even then one of the critical documents went missing, only to be found later amid a pile of paper.
The WEF indicates: “Paper-based, manual processes, some created centuries ago, lead to complexity and delays, introduce errors and risks, and stand in the way of reliable, real-time information gathering and tracking required for credible financing decisions.”
Eliminating the paper trail by replacing these processes with DLT will have a major positive impact on the environment, reduce smuggling due to increased transparency, and generate over $1 trillion in trade while saving costs on paper.
Tracking supply chains via immutable blockchain records as opposed to easily-forged paper documents means that it will be easier for companies to fulfill their goals of sourcing their goods ethically and proving their origins, reducing food fraud.
The $1.1 trillion growth predicted in the next decade equates to 1.5% growth in the global GDP attributable solely to blockchain technology.