Blockchain technology a boon for trade?

The development of new technology has benefited trade and commerce, and blockchain technology seems set to improve the multinational trade system, especially customs operations. As different countries release their quarterly and annual data at different times, it is difficult to compare them simultaneously. But the application of blockchain technology will turn every country's customs record into a "ledger" connected to those of other countries, and every shipment can be recorded and filed at the same time.

First, blockchain technology is good for business. One of its technological merits is recording transactions and/or movements at the same time. With instant trade numbers being available, businesspeople can better monitor the global market and make more informed decisions. Which will increase their ability to maintain sectoral trade balance, and reduce the chances of short supply or oversupply in the market.

Second, the technology is transparent, and can help solve disputes over methods of calculation. It would also allow preemptive measures to be taken to address contentious issues and thus reduce the possibility of a trade war. For instance, some of the goods China exports to the United States come from other economies, the US included. They are only assembled in China to be exported to the US, and the majority of the profits on those goods are pocketed by foreign enterprises, including US companies. By tracing the real sources of such goods, blockchain technology can help the two parties to settle their disputes.

Third, blockchain technology simplifies the authentication issue by linking the different economies' customs departments, which are government bodies. And government appointment and authorization of customs officials are in line with the "proof of work" rule set by Bitcoin to form the "genesis block" of the customs' blockchain network. accordingly, identities of business entities and individuals are then verified by the customs.

Fourth, the technology is cost-efficient. Since customs departments are not commercial organizations, they don't need to implement a financial incentive program to expand their "business". Which makes the blockchain mechanism simple and cost-efficient, in particular because it doesn't consume a lot of resources to get data from different "ledgers".

Fifth, it is an effective weapon against counterfeit goods. Since every merchandise is given a customs code, the manufacturer and supplier of a particular merchandise can track its shipments and destinations to determine that those numbers and destinations match their own records. Since there are many counterfeits in the market－of, say, famous wines－it is not easy to trace them. But blockchain technology can help wine exporters to monitor the flow of their products and take precise actions to protect their brands and the value of their products.

Cross-border e-commerce has developed rapidly, yet there is a lack of new regulations. Which is depriving many governments of valuable tax revenue. Governments are scratching their heads to figure out how to prevent this loss of revenue. Blockchain technology will help them to record each shipment and trace its origin. And since the sales of all goods are taxable subject to relevant regulations, the governments could be the first to apply the technology to secure their tax revenues.

The World Trade Organization is facing a challenge as its rules are being flouted and mandates scorned by some major trade powers. Blockchain technology can help increase transparency in trade, and strengthen the WTO by helping it more authoritatively arbitrate trade disputes between different economies.

Although it may be difficult in the beginning to reach a broad consensus on the inclusion of the technology in the customs system, there is no harm in starting consultations on the issue, and perhaps launching a pilot program with a few other countries, even if it encompasses a few sectors at first.

For long, China has been emphasizing that the modernization of the global customs system using new technology will serve all economies' interests－including that of the largest economy which is desperate to rewrite global rules－and boost the development of developing as well developed countries.

China has the resources, expertise and incentive to develop a new technological platform to make global trade more transparent and promote fairness. This is the right time to assemble a group of experts from different regions, economies and sectors to start consultations on blockchain technology. Less-developed and small trading economies may not be as enthusiastic as the major economies to do so, but the cost of modernizing the global customs system is insignificant compared with the loss of energy and market value due to the lack of efficiency.

International organizations should play a special role in this regard, by giving less-developed economies a helping hand. In fact, China has been stressing the importance of international organizations including the United Nations and the WTO in global political and economic relations, especially because its ultimate goal is to help build a community with a shared future for mankind.

The author is a council member of the Center for China and Globalization. The views don't necessarily reflect those of China Daily.