The World Trade Organization and Trade Finance Global have released their latest taxonomy of blockchain projects in international trade, organized into what they present as a ‘periodic table’ for industry.
The original version of the periodic table was released in the winter of 2019. Since then, a lot has changed: Despite the pandemic, several indicators used in the table show that blockchain business innovation projects around the world are reaching maturity of bigger and bigger.
On a scale of one to five, project maturity was rated at 2.3 on average in December 2019. As of that month, the same figure is 3.3. To translate it into non-digital terms, these projects are now “between the early stages of production and commissioning”, according to the WTO and the TFG.
According to the report, blockchain – also known as distributed ledger technology or DLT – has two main advantages from an international business perspective. First, it improves transparency, supporting what analysts also refer to as the “track and trace” capability, which is useful in ensuring product authenticity and thus building customer confidence.
The other benefit of DLT is the digitalization of commerce: streamlining business documentation and processes, as well as secure data exchange and control. Here, the report identifies what it considers to be the “weakest link” in the chain:
“Any digital process will only be as powerful as its least digitized link. For many international trade systems, this means integration of customs. While several governments are testing or considering using DLT for their customs operations and one-stop shops, most projects are still in the design or pilot stage. “
Latin America is a forerunner in customs matters. The report positively cites the development of a DLT project called Cadena by ICT specialists from Mexico, Peru, Chile and Costa Rica in cooperation with Microsoft and the IDB. Cadena addresses customs agencies and supports mutual recognition agreements between what are defined as “authorized economic operators”, all within a framework defined by the World Customs Organization.
Elsewhere, progress is underway with proof of concept and pilot concepts for customs by the US Customs and Border Protection for NAFTA / CAFTA, as well as the ‘One Stop Shop’ project. of Shanghai, the Korean export customs clearance project and the European Proof of Concept project for the Union DG Taxud ATA Carnet.
Apart from this, the DLT-based TradeLens project increasingly integrates customs authorities, and a project to digitize DLT trade documentation from Avanza Innovations has been integrated into Dubai Customs. Nonetheless, the report is straightforward on the limitations of blockchain trade optimization:
“While these are important positive developments, they are not enough. If the industry is to continue to extend the limits of terms of trade digitization, it must start to see more movement on this front. ”