How Automation Might Improve Global Trade

For years, business leaders and politicians have been sounding the alarm about how automation is going to replace human workers with robots and disrupt global supply chains as more manufacturing is done locally using 3-D printers and other technologies.

A new report from The World Bank aims to calm some of those fears by emphasizing the benefits that Global Value Chains (GVC) can bring to business — and how automation can improve them.

According to The World Bank, GVCs have been largely stagnant since the 2008 recession, despite the massive improvements in automation that have happened since then. While it’s true that artificial intelligence and other technologies have taken jobs, the report argues that it can still be a net positive for global trade and even help bring new countries onto the international playing field.

This growth occurs in two ways. First, it allows businesses to specialize in the tasks they do best because other parts of the production process are handled by partners elsewhere in the GVC. Second, it gives organizations in developing countries the opportunity to learn best practices from more established firms around the world. 

“Overall, participation in global value chains can deliver a double dividend,” The World Bank report states. “As a result, countries enjoy faster income growth and falling poverty.”

Writing in The Hill, Christine McDaniel, a senior research fellow in the Mercatus Center at George Mason University and former senior trade economist in the White House Council of Economic Advisers, agrees with the basic conclusion of the World Bank that automation is having the opposite effect of what many experts feared.

The sectors that have increased their use of automation have also seen the largest increase in trade as automation creates new tasks and changes the need for materials to support robotics, 3D printing, and other innovations.

Further, the expansion of digital technology lowers the cost of coordinating trade across long distances, which provides an opportunity for developing countries to enter global value chains and compete with more established countries, regardless of where they are located.

McDaniel does note, however, that these long-term gains do not offset the short-term pain that’s felt when automation changes the way that industries function and results in job losses. But those changes are typically short lived and not enough to offset the broader gains that automation brings to GVCs and the countries that participate in them.

These trends are likely to continue into the future, she says, but they will not be as detrimental to global trade as some might predict.

“Change is the one thing in the economy you can count on. Improvements in how we make things and advanced production technologies are likely to continue, and workers and firms that adapt and embrace these changes are likely to outperform those that do not,” McDaniel writes. “But a wide-sweeping elimination of trade and global value chains due to automation and robots? Don’t believe the hype.”

Grassroots Pulse covers public policy and political issues aimed at engaging highly-active policy makers, donors, and grassroots leaders at the forefront of the political process in America today.

Image Credit: Photo by ZMorph Multitool 3D Printer on Unsplash

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