Block-chain for trade facilitation

Event report

[Read more session reports from the UNCTAD E-Commerce Week 2018]

This session aimed to develop a collective understanding of the potential of blockchain for supporting trade facilitation. The session was opened by Ms Ivonne Higuero (Director, Economic Cooperation and Trade Division, UN Economic Commission for Europe (UNECE)) who explained that the current momentum around blockchain raises questions about its promises for trade facilitation, especially in increasing the reliability and security of trade transactions. Moderator Mr Lance Thompson (Chief, UN Centre for Trade Facilitation and Electronic Business (UN/CEFACT)) introduced the panellists and showed an introductory video that explained the basics of blockchain.

Ms Virginia Cram-Martos (Chief Executive Officer (CEO), Triangularity, and UN/CEFACT Domain Coordinator for Trade Procedures) elaborated on the concepts of blockchain that were introduced by the video and explained that different blockchain technologies vary in their vulnerability, robustness, cost, speed and ability to scale up, and the degree of privacy they enable. In the context of trade, the creation of ‘smart contracts’ might be the most valuable blockchain application, as they are immutable, verifiable, allow for automated reconciliation, can trace digital assets, and can be linked with goods. In this context, UN/CEFACT is drafting two white papers on how such technology can best be used by governments. These papers will address the standards that are needed for blockchain, and its application, in trade facilitation processes.

Mr Enrico Camerinelli (Senior Analyst, Aite Group) spoke about the potential of blockchain in supply chain management, as it can improve the immutability and traceability of documents. The two cases he presented focused on the use of blockchain in quality certification and shipping documents. According to Camerinelli, the real value of blockchain is not how it is used within a company, but how it can foster collaboration across the entire supply chain network. To capture this potential, it is important to start with internal education on, and awareness of, how to apply blockchain properly to the needs of the organisation.

Mr Giovanni Pio (Head of Global Change Management, World Food Programme (WFP)) presented a pilot project by WFP to improve food security for refugees, using blockchain applications. Pio explained that in recent years, WFP has started to increase its reliance on cash-based transfers compared to ‘in kind’ food distribution to populations. While cash-based transfers boost the local economy, empower the beneficiary, and are favoured by donors, they are often plagued by high banking fees, financial risks, data protection concerns, and a lack of direct control. To mitigate this challenge, WFP has established a project that uses blockchain technology, allowing refugees to obtain their food supplies directly from the vendor, limiting the cash transactions to those between the vendors and WFP. The pilot has proved to make transactions cheaper and more secure, to address data protection concerns, and to foster inter-agency operability. WFP is planning to scale up the project globally by 2020 and to integrate the work of other UN agencies.

Mr Jorge Alvarado (Manager, Consulting & Solutions, Swisscom Blockchain) presented some of the blockchain solutions for the energy industry. The energy sector is currently being transformed by the three ‘Ds’: digitisation, decentralisation, and decarbonisation. Changes in the sector have generated a number of complexities related to legislation, technology, standards, and security. While many companies are open to the adoption of blockchain technology, it is not yet widely used. To maximise the potential of blockchain in the energy sector, Alvarado recommended the creation of standards, the improvement of software to allow for decentralisation, and the use of digital tokens to track the flow of assets through the economy.

Mr Steven Capell (CEO, GoSource Australia) explained how blockchain can facilitate innovation in invoice financing, which can particularly benefit small businesses. Capell explained that in searching for a solution to improve e-invoicing – which is often challenged by the lack of trust between the invoicing parties – the Australian government is considering the use of blockchain. This would reduce the risks faced by lenders, and could result in material benefits for small businesses, especially if the lending community were to reduce their rates on the basis of risk reduction. Regulators will have to play an important role in setting standards, creating a registry, and providing identity integrity.

The presentations were followed by a dynamic discussion, addressing many different aspects of the applications and obstacles related to blockchain, including the affordability of the technology, the dependence on Internet access, the relationship between private sector initiatives and governments, the security of blockchain in the context of quantum computing, and data protection issues related to its use by vulnerable populations. On the question of what is missing for blockchain to be applied more widely, Capell explained that there is a need for willingness to use new technologies, as well as for interoperability standards to ensure the harmonisation of the many blockchain projects that are created around the world.

Closing the session, Mrs Maria Ceccarelli (Head, UNECE Trade Facilitation Section) provided a summary of the main points brought forward in the discussion, and highlighted the potential of blockchain in enhancing efficiency, transparency, security, and confidentiality, and in lowering financial risk. The need for better interoperability and consistency, which is currently being addressed by UN/CEFACT in its research for the white papers, is meant to maximise the value of blockchain for governments and constituents.

By Barbara Rosen Jacobson