Posted by Emmanuelle Ganne is Senior Analyst in the Economic Research and Statistics Division of the World Trade Organization (WTO) where she leads the organisation’s work on blockchain. Her recently published book “Can Blockchain Revolutionize International Trade?” argues that blockchain technology has the potential to break the various silos that exist between parties involved in cross-border transactions, but that standardisation and cooperation are necessary to solve challenging technical, interoperability, and legal issues.
In this interview, Emmanuelle explains the role of the WTO, her work on blockchain, and the technology’s potential to transform trade.
Q: Can you give a brief overview of the World Trade Organization and its role in global trade?
Ganne: The World Trade Organization is what we call an intergovernmental organisation, meaning that our members are governments. Today, we have 164 members that together represent 98% of world trade. The organization is a fairly recent organisation, established in 1995, so this year we are celebrating its 25th birthday.
The WTO’s role is to promote predictability and transparency in trade, because companies, investors, and governments need to be confident that trade barriers cannot be raised arbitrarily. The organisation has a number of agreements that were negotiated by our members, mostly during a period of negotiations known as the Uruguay Round, and we have also some newer agreements such as the Trade Facilitation Agreement that was finalised a few years ago, in 2013. These agreements establish a number of rules to make trade more predictable and more transparent.
When it comes to transparency, there are a number of obligations that WTO members have to fulfil. To give one example, members have to notify new regulations and put in place what we call enquiry points so that a member or a trader can find answers to their questions, or ask new questions to that particular member about their foreign trade regime.
WTO rules also encompass non-discrimination. The idea is to ensure a level playing field between all our members so that a country cannot discriminate between its trading partners and should not discriminate between its own and foreign products, services, or nationals.
In addition to making the trading system more predictable and transparent, WTO rules also include lowering barriers to trade. By reducing customs duties, for example, or prohibiting import bans, trade can flow more freely. WTO rules also discourage unfair practices.
And finally, the are a number of rules that are aimed specifically at least developed countries and developing countries to give them more time to adjust and more flexibility in applying the rules. These provisions are called special and differential treatment. This is very important because three quarters of our members are developing and least developed economies.
To fulfil its duties, the organisation is organised around five main functions. Because of the many agreements in place, one of the main functions of the organisation is to administer WTO trade agreements. The second function is to negotiate new trade rules, such as the Trade Facilitation Agreement I mentioned earlier. The third function is to handle disputes between members. The fourth function is monitoring national trade policies through regular trade policy reviews taking place every 3-7 years depending on the member. The fifth function is technical assistance and training for our developing members. We have an entire division dedicated to this task and practically all of us at the WTO provide technical assistance in the course of our work, for example by training trade officials on WTO rules. These are the key functions of the organisation but we also do work beyond those, often by working in collaboration with other intergovernmental organisations like the World Bank or the IMF on trade-related issues.
Q: What does your role as blockchain lead at the WTO entail?
Ganne: To a large extent this is a role I created myself because I saw how powerful this technology could be when it comes to international trade. One main aspect of my role is to follow developments in blockchain technology and analyze how they can impact international trade. The second goal of my role is to raise awareness among our members about potential benefits to international trade but also the challenges that the technology may bring, and how best to address them and mitigate new risks — in short, what are the opportunities and challenges?
To that end, I decided to publish a book just over a year ago. The book was issued in November 2018 and looks at how blockchain can revolutionise international trade. The idea behind this publication was to build a bridge between the IT community and the private sector on the one hand and trade officials on the other and try to explain to our members what the potential of the technology is, how it works, and what issues they should follow and they should start thinking about. I tried to write the book in simple terms to avoid a publication that would be too technical, because ultimately the goal was to educate trade officials on this technology and why I believe it can have such a huge impact on international trade.
Also as part of my educational and awareness-raising efforts I organised a workshop on this topic in November 2018. And last year, in early December 2019, I upgraded the workshop to a global trade and blockchain forum, bringing concrete cases to the members so they could understand how the technology is being used and how it can impact international trade. Blockchain is a technology that could have a regulatory impact and where new regulations may be required at some point. Regulation can act as an enabler. You can have a great technology but if you don’t recognise e-signatures, for example, the technology will not be of much use. While you do not want to regulate overregulate or regulate too early, some level of regulation will be needed and to ensure it is a success you need to follow what is happening and be ready to act when the time comes.
Q: Who would be the major beneficiaries of widespread blockchain adoption in the trading system?
Ganne: All actors involved in international trade can be beneficiaries of widespread adoption of blockchain technology. Of course this is true of the traders, meaning the exporters and importers, but also for the various actors in the supply chain — the shippers, the banks, and so on. The challenge we face with international trade is that each transaction involves multiple documents and very complex procedures. This is a challenge for all stakeholders, especially smaller players such as SMEs or small producers for whom the challenge is even greater due to the high fixed costs of engaging in these complex procedures. If blockchain technology can help reduce these fixed costs, that would be a big win.
It is well known that SMEs have difficulties accessing trade finance. I believe that this technology can help ease access to trade finance for SMEs in particular, reduce costs, and make it easier for them to participate in international trade. The technology can also empower them to prove the quality and origin of their products. But it is not only SMEs that stand to benefit — if the technology spreads in the right way we can allow all actors in the trading system to interact in real-time, on a peer-to-peer basis, and ultimately create a number of synergies.
Q: In your book you argue that blockchain technology has the potential to break the various silos that exist between parties involved in cross-border transactions but that standardisation and cooperation are necessary to solve challenging technical, interoperability, and legal issues. Can you expand upon these challenges and how you believe they can be resolved?
Ganne: As I said earlier, blockchain is a technology with huge potential to connect the players in the international trading system. The challenge of ensuring widespread blockchain adoption is that the many systems that are emerging today do not necessarily connect with one another. Ensuring more interoperability between the applications being built is where we should be focusing going forward, in my opinion.
This term, interoperability, is a catch-all phrase. It is used to refer to different situations: there is the question of technical interoperability, the fact that platforms are being built on different technologies — some are being built using Hyperledger, others use Corda, especially in the trade finance world, and some use Quorum — so how do you make these systems interoperable? There are some solutions emerging on the tech side, but technical interoperability is only one aspect. It is also very important to ensure that there is interoperability at the level of semantics and processes. By semantics, I mean “what is meant by a specific term?” Is a port of discharge the same as a port of unlading? It is important to make sure everyone is referring to the same thing when using a specific term. Then there is the question of aligning processes. We need to make sure that we all work in the same direction so that we can remove friction from international trade through what some people call standardisation — I prefer the term alignment or smart standardisation because standardisation can sometimes convey stiffness or rigidity. We need to work hand in hand to remove redundant processes and align approaches.
Finally, there are also legal issues. If your jurisdiction still requires a paper copy, the technology will not be of much use. And is a blockchain transaction recognised in court? There are currently some interesting developments on this topic in China, but it is not clear what would happen in another country if a transaction is taken to court. And what about the legal aspects of smart contracts? The word “smart contract” is something of a misnomer as the contract are neither smart (there is no AI component) nor a contract in the legal sense of the term — what happens if a smart contract malfunctions? And what are the liabilities along the supply chain of a trade finance transaction? There are, for example, rules developed by the ICC called UCP 600 concerning Letters of Credit. Who will have liability at what stage of the process if we move to a blockchain-based transaction? I once spoke to a customs officer about their border procedures. He raised an interesting question: In customs clearance there is the notion of a declarant, meaning the person who declares the goods and has liability. But in a blockchain where each actor can add some information to the ledger, who would be the declarant?
These are some examples of issues that we need to keep in mind as we continue to develop blockchain solutions for international trade. I think the best way to address these issues is to have a collective approach, to have all the stakeholders involved. We cannot afford to stick to a one-sector approach, which is what happens too often. We need to bring all actors together, even those who are not necessarily used to working in collaboration. We need to find collective solutions. This is why the WTO works with the ICC, governments, and with companies — to ensure we all work in the same direction.
Q: Many tradeXplain readers are students or early-stage professionals with an interest in trade. Can you tell us about how your career led you to work at the WTO and what lessons you learnt on the way?
Ganne: Even when I was a little girl, I knew that I wanted to work at an international level. With my parents I travelled a lot and we always had foreigners at home — I loved it. So I knew I wanted to work at an international level and I wanted to do something that would have a global impact. Later, having studied economics, I moved closer toward that direction. I realised at an early stage that trade had a big impact so I became increasingly interested in the economic and trade aspects of international relations and the role that trade could play in development. That is what led me to where I am now. Of course it happened in purely practical terms that I saw an opening at the WTO and applied to the job. But the inclination to have a global impact and work on economic issues were there the whole time.
In terms of lessons I have learnt, I would highlight that it is extremely important to be driven by your heart and convictions because this is what will motivate you and get you to where you will be at your best. And as you are driven by your values you also need to be perseverant so that once an opportunity comes along you are ready to jump on it. You never know what life will bring you, but if you make sure your values are what drives you forward you will be able to make the right decisions when you are faced with difficult career choices.
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