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Info Service on WTO and Trade Issues (Nov24/15) Geneva, 22 Nov (D. Ravi Kanth) — The Director-General of the World Trade Organization on 21 November touted how Artificial Intelligence (AI) could “reduce trade costs, enhance productivity across sectors, and reshape traditional trade patterns” as well as “accelerate trade’s journey into this future,” in a foreword to a report on “Trading with Intelligence: How AI Shapes and is Shaped by International Trade.” Ms Ngozi Okonjo-Iweala, the incumbent DG seeking a second term, claims that “the digital transformations driven by AI is poised not only to boost services trade, it may also create whole new categories of tradeable AI-powered goods, from autonomous vehicles to robotics and beyond.” However, she acknowledged that the “inverse” could happen through “the growing risk of an “AI divide” to questions around data governance and privacy, how to regulate AI enabled products and associated ethical and societal risks, as well as how to protect intellectual property in an AI-driven age.” Issuing a disclaimer that the views of scholars and lines of inquiry contained in the report “do not reflect official positions or the Secretariat,” the DG went on to say that “together, we can shape a future where trade and technology work hand-in-hand to create a more prosperous, sustainable and equitable world.” Only two days ago in “selfies” with Chinese President Mr Xi Jinping on the margins of the G20 leaders’ summit in Rio de Janeiro, Brazil, the DG discussed “WTO reforms and how to further strengthen the multilateral trading system and update its rules to deal with 21st Century issues.” At the same meeting, she reportedly spoke about addressing global hunger. Significantly, at a time when the WTO, under her leadership, seemingly failed to deliver on any of its mandated issues, the DG’s preoccupation with issues such as trade and climate change and now trade and AI, which fall under the domain of different UN bodies, only tends to deflect focus from the WTO’s core issues, said a former GC chair from Africa. More so, when the organization is facing multiple crises and an uncertain direction in the face of tectonic shifts in global trade, it seems to have become a game for her “to run with the hares, and hunt with the hounds,” the former GC chair said. THE AI REPORT The report highlights several main findings, including: * 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. * AI is distinct from other digital technologies in several key ways, and it has the potential to affect international trade significantly. * AI can be leveraged to overcome trade costs associated with trade logistics, supply chain management and regulatory compliance. By enhancing trade logistics, overcoming language barriers, and minimizing search and match costs, AI can make trade more efficient. It can help to automate and streamline customs clearance processes and border controls, navigate complex trade regulations and compliance requirements, and predict risks. AI-based tools can be used in trade finance, and can significantly enhance supply chain visibility by providing real-time data analytics, predictive insights and automated decision-making processes. All of this could lower trade costs and, as a result, level the playing field for developing economies and small businesses, helping them to overcome trade barriers, enter global markets and participate in international trade. * AI can increase demand and trade in technology related products. Because AI systems often rely on real-time data streams and seamless connectivity, the adoption of AI is spurring demand for complementary goods related to information and communications technology (ICT) infrastructure and information technology (IT) equipment. These include computer and telecommunications services, specialized development tools and software libraries. For example, the global market for AI chips was valued at US$61.5 billion in 2023 and it has been projected that it could reach US$621 billion by 2032. * By affecting productivity, and through shifts in production dynamics, AI may reshape economies’ comparative advantages. AI is expected to enhance productivity across all economic sectors in both developed and developing economies, and to change the composition of inputs required for production, placing greater emphasis on capital investment, rather than on labour inputs. * The adoption of AI can drive productivity increases across various sectors and reduce trade costs, leading to global gains in trade and GDP. 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. * The global trade and GDP impact of AI varies significantly across economies and sectors, depending on choices made concerning innovation and policies. While trade growth in high-income economies remains relatively stable across projected scenarios, low-income economies could experience much higher trade growth under the scenarios of universal AI adoption and high productivity growth (18.1 percentage points) compared to those of uneven AI adoption and low productivity growth (6.5 percentage points). * The discussion on how AI might reshape international trade raises important policy questions. The risk of a growing divide resulting from applications of AI is significant, as are data governance challenges and the need to ensure that AI is trustworthy and to clarify how it relates to intellectual property (IP) rights. The implementation of AI at the domestic, regional and international levels entails both benefits and risks, and a lack of coordination could cause increasing regulatory fragmentation with regard to AI. * Addressing the risk of a growing AI divide is essential to leverage the opportunities offered by this technology. Currently, the capacity to develop AI technology is concentrated in a few large economies, and this is creating a significant divide between economies that are leading research and development (R&D) in AI – in particular China and the United States – and the rest of the world. This imbalance could be further exacerbated by the use of government subsidies to develop AI. The risk of industry concentration within a few large firms could also intensify the divide between firms. These features, combined with the opacity of AI algorithms and the possibility of tacit collusion among competitor firms to maintain higher prices, present challenges for competition authorities. * The rise of AI is raising important data governance issues that will need to be addressed to prevent further digital trade barriers. Cross-border data flows are essential to AI, as vast amounts of data are needed to train AI models, as well as minimize possible biases. Thus, restrictions on data flows can slow AI innovation and development, increase costs for firms, and negatively impact trade in AI enabled products. A recent study found that if all economies fully restricted their data flows, this could result in a 5 per cent reduction in global GDP and a 10 per cent decrease in exports. * Ensuring that AI is trustworthy without hindering trade can be challenging. “AI trustworthiness” means that it meets expectations in terms of reliability, security, privacy, safety, accountability and quality in a verifiable way. However, given the behaviour and opaque nature of AI systems, as well as the potential dual-use of some AI products (i.e., for both civilian and military applications), striking a balance between ensuring that AI is trustworthy and enabling trade to flow as smoothly as possible may prove especially challenging. * AI also poses new conceptual challenges for the traditional, “human-centric” approach to IP rights. Issues that deserve particular attention include the protection of AI algorithms and of copyrighted material for training AI, and the protection and ownership of AI generated outputs. These questions may call for a re-evaluation of existing IP legal frameworks. * The WTO, as the only rules-based global body dealing with trade policy, can contribute to promoting the benefits of AI and limiting its potential risks. It can play an important role in limiting regulatory fragmentation, promoting the development of trustworthy AI and access to it, and facilitating trade in AI-related goods and services, thereby enabling the growth of AI and promoting innovation through IP. * WTO rules and processes promote global convergence. The WTO is a forum that promotes transparency, non-discrimination, discussion, the exchange of good practices, regulatory harmonization, non-mandatory policy guidance, and global alignment through the negotiation of new binding trade rules on trade. Transparency provisions included in WTO agreements allow WTO members, as well as economic operators and consumers, to be kept abreast of latest regulatory developments. * The WTO is the cornerstone of global efforts to facilitate trade in services and goods that enable or are enabled by AI. * Various principles, provisions and guidelines in the WTO rulebook can support trade in AI systems and AI-enabled products by minimizing international negative spillovers. Examples include the non-discrimination principle and the Agreement on Trade-Related Investment Measures (TRIMs), which recognizes that certain investment measures can restrict and distort trade and states that members may not apply investment measures that discriminate against foreign products or lead to quantitative restrictions. * The WTO can help to prevent and settle trade tensions and frictions. The practice of raising “specific trade concerns” (STCs) allows WTO committees to serve as a venue for defusing potential trade tensions with regulatory measures in a cooperative, pragmatic and non-litigious way. * The WTO promotes inclusiveness through special and differential treatment and technical assistance for developing economies. WTO agreements recognize the constraints faced by developing economies and, for this reason, include various special and differential (S&D) treatment provisions to help them to implement WTO rules and participate more effectively in international trade. * As a forum for negotiation, discussion and rule-making, the WTO provides a multilateral framework that can help address the trade-related aspects of AI governance. Nevertheless, AI may have implications for international trade rules. * While AI governance extends beyond trade, trade remains a crucial element within AI governance. The WTO can contribute significantly to developing a robust AI governance framework. In short, the report appears to make some rather “tall” claims and at times “hyperbolic” statements that do not correspond to the current realities at the WTO where the rules are allegedly being flouted on account of a weakened enforcement function, said people who asked not to be quoted. +
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