The report released by the World Trade Organization (WTO) recognizes the transformative potential of AI as a general-purpose technology that can reshape wealth distribution and income across economies.
How AI can act as catalysts for Trade and Inclusive Growth?
- Reducing Trade cost and improving productivity: By optimizing logistics, streamlining regulatory compliance, overcoming language barriers, and improving contract enforcement, AI could lead to 34-37% rise in global trade by 2040.
- Reducing ‘Skill Premium’: AI is expected to substitute tasks performed by medium- and high-skilled workers more than those of low-skilled workers, thereby reducing the relative demand for higher-skilled labor.
- Skill premium is the wage ratio of high-skilled to low-skilled workers which is projected to decline by 3-4% globally.
- Knowledge diffusion: Economies more open to trade experience stronger innovation spillovers - a 10% increase in digitally deliverable services trade is associated with a 2.6% rise in cross-border AI patent citations.
- New Development Pathways: Economies rich in critical minerals or renewable energy can become hubs for upstream inputs like hardware manufacturing or data hosting and other labor-intensive activities like data collection and annotation.
What are the concerns demanding urgent Policy action?
- Concentration of AI: AI development is highly concentrated in a few firms and economies, which poses risks to equitable access.
- Labor market disruption: Displacement of some workers by automating tasks, requiring investment in education and active labor market policies to help workers adapt.
Conclusion
To realize the inclusive potential of AI and trade, there is a need for proactive and coordinated policies, including investing in digital infrastructure and skills, promoting regulatory coherence, ensuring competition, and leveraging international cooperation through organizations like the WTO.
