A WTO working paper published on 21 January 2025, written by Eddy Bekkers, Hryhorii Kalachyhin and Robert Teh, looked at the long-term effect of digitalisation on global patterns of trade.

The advances in information and telecommunication technologies taking place in recent decades have significantly impacted the methods by which goods, services, and information are bought and sold. New electronic and digital markets have been created, with large amounts of goods and services sold through digital platforms. Consequently, cross-border trade is increasingly digital in nature, and this trend is growing all the time.

Also, industries worldwide are increasingly using robots. In recent years there has been significant progress in the development of artificial intelligence (AI) systems with the use of large language models. This indicates that there is a new stage in the deployment and use of AI, adding to the potential advantages of digitalization.

The authors use qualitative analysis to look at the ways in which new technologies and digitalization could influence international trade in the longer term. They supplement this analysis with quantitative projections of the changes in the patterns of international trade using the WTO Global Trade Model (GTM) for this purpose.

The authors are interested in the effects of the adoption of artificial intelligence on productivity growth; the reduction of trade costs through digitalisation; the shift to online sales; the reduced need for physical interaction and related reduction of trade costs; and the changes in data policies resulting from the use of these technologies, also impacting trade costs.

The authors found that digitalization will provide a strong boost to global trade growth and a shift from merchandise trade towards services, particularly digitally deliverable services (DDS). The effect of digitalization would be to increase global trade growth from 2.3% (in the baseline) to 4.2% per year between 2018 and 2040. The share of services trade would rise to 37.2% by 2040 with further digitalization, compared to 27% in the baseline. The share of DDS in total trade would rise to 17.4% by 2040, compared to 12.4% in the baseline.

Digitalization would allow low-income and lower-middle-income economies to increase their share in global trade and income. The trade growth in DDS would be highest in low-income and lower-middle-income economies, in the convergence scenario, and the share of low-income and lower-middle-income economies in total trade would increase to 10.6% (compared to 8.2% in the baseline).

Digitalization would also change the organization of production and the patterns of revealed comparative advantage (RCA). The share of imported intermediates in exports would increase in services but fall in manufacturing. In the convergence scenario, low-income economies would expand their RCA in DDS, although high-income economies will continue to retain a strong RCA in this sector.

The findings highlight the importance of promoting the adoption of digital technologies in low-income and middle-income economies. This can be done through a combination of infrastructure provision; the establishment of a predictable regulatory environment; and investments in education and training to create a digitally-ready workforce. This is based on the assumption that geopolitical tensions do not lead to a deterioration of trade relations among major economies. Also, the authors did not specifically model how AI adoption could reduce trade costs, and this is an issue on which more research is needed. Future research should also look at how future trade and industrial policy scenarios could develop; and look further at the effect of AI adoption on trade costs.