A new report released by the World Trade Organization secretariat highlighted that while the rise of artificial intelligence offered transformative economic and societal opportunities, it also presented significant challenges, including ethical dilemmas, regulatory complexities and the potential for widening economic divides.

AI’s impact on international trade is profound, offering benefits such as enhanced trade logistics, supply chain management, and digital services, but also raising issues like regulatory fragmentation and competition challenges, particularly for small businesses, the report said published on November 21.

The report, titled ‘Trading with Intelligence: How AI Shapes and is Shaped by International Trade’, discussed how AI can reduce trade costs, reshape trade in services, increase trade in AI-related goods and services, and redefine economies’ comparative advantages.

The report also highlighted the increasing fragmentation of approaches to AI regulation, which might have a particular impact on trade opportunities for micro, small and medium-sized businesses.

The report provided an overview of government initiatives taken at the domestic, regional and international levels both to promote and to regulate AI.

AI is reshaping trade patterns by increasing productivity and driving demand for technology-related products. However, its adoption risks deepening inequalities between large, AI-capable economies and smaller ones, the report said.

Moreover, AI’s reliance on vast datasets and the need for cross-border data flow pose additional trade barriers and privacy concerns, WTO report mentioned.

It said that governments were responding with AI policies, but these efforts were fragmented, especially between developed and developing economies.

AI-related trade provisions are being integrated into regional trade agreements (RTAs), but their depth and effectiveness vary. Global cooperation, particularly through the WTO, is essential to avoid fragmentation, ensure AI’s trustworthy use, and foster innovation, the report said.

It also said that addressing data governance, IP rights, and privacy concerns would be critical for balancing AI’s potential with its risks, ensuring equitable benefits across all economies.

‘This report aims to stimulate a discussion on how the WTO can promote the development and deployment of AI and help mitigate its associated risks and looming concerns about regulatory fragmentation,’ WTO Director-General Ngozi Okonjo-Iweala said in the report’s foreword.

In this regard, she said that the report seeks to address two key questions: how can the WTO help ensure that the benefits of AI are widely shared, and how can the challenges AI presents be tackled through global coordination?

The report argued that AI could help to overcome trade costs associated with trade logistics, supply chain management and regulatory compliance.

For instance, AI can assist in automating and streamlining customs clearance processes and border controls, navigating complex trade regulations and compliance requirements, and predicting risks.

By lowering trade costs, AI can help level the playing field for developing economies and small businesses, helping them to overcome trade barriers, enter global markets and participate in international trade, the report said.

The report estimated 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.

In contrast, a cautious scenario, with uneven AI adoption and low productivity growth, projects trade growth of just under 7 percentage points, it identified.

While high-income economies are expected to see the largest productivity gains, lower-income economies have better potential to reduce trade costs, the report mentioned.

The report noted that AI can transform patterns of trade in services, particularly digitally delivered services, which were projected to see cumulative growth of nearly 18 percentage points in an optimistic scenario of universal AI adoption and high productivity growth.

However, the report cautioned that the risk of a widening AI divide between economies and between large and small firms is substantial, alongside challenges in data governance and the need to ensure AI trustworthiness. Additionally, there is a need to clarify the relationship between AI and intellectual property (IP) rights.

The report stresses that a lack of coordination could lead to greater regulatory fragmentation concerning AI. It also highlights that addressing the growing AI divide is crucial to fully harness the opportunities presented by this technology.

The report outlines the WTO’s potential role as a platform for negotiation, discussion, and rule-making, supporting the promotion of AI benefits while mitigating its risks. It underscores that the WTO’s multilateral framework can foster policy coherence and tackle the trade-related aspects of AI governance.