How can blockchain be useful for international trade?

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How can blockchain be useful for international trade?

The increase by the Trump Administration of import duties on steel and aluminum provokes justified fears about the EU and other countries' retaliatory steps. These US actions also prompted the World Bank to issue a forecast of a decline in world trade by approximately 9%, as during the 2008 financial crisis.

The cumulative effect of unfavorable trends - protectionism, increased risks, slower growth in commodity turnover and pessimism - can have a negative impact on the value of trade operations, which will lead to an increase in the price of goods for the end user. However, blocking and other technologies of the distributed registry can reduce operational costs of the global trading system in two directions at once. 

Transaction costs

International trade operations are complicated, expensive and expensive. For example, the delivery of refrigerated cargo from Africa to Europe may include more than 200 acts of interaction between 30 officials and agencies. Only the process of paying invoices, starting with the approval of a letter of credit (LC), takes 7 to 10 working days. But the technology of blocking can dramatically reduce the time spent on payment under international contracts, and, consequently, the transaction costs. Last year, a transaction for the export of equipment from Japan to Australia carried out all the processes on the blockchain platform, which allowed to reduce the effort to create and exchange documents, shorten the duration of the main processes from a few days to a couple of hours and make the procedure transparent for all interested parties.

Protection against financial fraud

Fraud and protectionism in the world trading system cause significant damage to the economy. A study conducted by John Zdanovic, an expert on financial fraud, a professor at the Business College of the International University of Florida, showed that between 2003 and 2014, the number of counterfeit payment documents in the US increased by 30%, from $ 168.3 billion to $ 230.5 billion. And as a whole, fraud with payments, tax evasion and money laundering cost the country about $ 2.3 trillion of tax revenue.

Counterfeiting and duplication of invoices and bills is steadily increasing, as banks have limited possibilities to verify the authenticity of documents. However, with the technology of distributed registries, this problem is eliminated forever, due to the overall transparency of the procedure, which does not allow duplicating or forging documents.

The potential for blockchain and other technologies in the distributed registry in reducing the costs of the world trade system is huge. With proper implementation, the operating costs of trade finance can be reduced by 50% -80%, and the processing time of letters of credit - by 80%