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Sithengisiwe Ndlovu

Demand for predictable, transparent and cost-effective trade is gaining traction amidst a plethora of problems such as the ever-changing trade landscape that of late has been exacerbated by the critical shortage of containers.

The critical shortage of containers as articulated in last week’s article has spiked freight rates with East Africa reporting a 100 percent hike, while Sea Intelligence in Freight News magazine has pegged the cost of a 40 — foot container at $7 672 — a 446 percent hike in relation to last year.

The advent of containerisation was one of the best innovations complemented by global trade bodies to ensure the expansion of international trade soon after the second World War. In an article “The Box: How the Shipping Container Made the World Smaller and the World Economy Bigger”, Levinson describes how the idea of containerisation came about.

In April 1956 a shipping vessel  from a converted oil tanker under the name SS Ideal X set sail from Newark to Houston  carrying fifty eight containers. The idea  of shipping containers came from an entrepreneur who was known as  Malcom MacLean. This idea  revolutionised international trade through drastic reduction of  transportation  of  goods costs that was followed by a boom in international trade.

Levinson articulates how this novelty  overhauled the way of  moving goods across the world with some businesses going under while others repositioned to embrace the new development in the shipping industry. London and New York ports became the first casualties  as a result of the growth of new ports such as Oakland.

In addition, Levinson posits that ‘‘by making shipping so cheap that industry could locate factories far from its customers, the container paved the way for Asia to become the world’s workshop and brought consumers a previously unimaginable variety of low-cost products from around the globe.’’

Before the advent of containerisation, barrels and jars were used in the transportation  of goods across the world. International trade was  not only  dangerous  but risky too, due to the inherent risk of pirates. International trade was also costly, and unpredictable, with the whole chain dotted with unpacking and repacking of goods as dictated by the mode of transport, type of vessels  and port designs.

McLean’s idea was complimented by coordinated regulations designed by global organisations such as the World Trade Organisation and World Customs Organisation. 

Awareness on trade barriers and advocacy around trade facilitation has seen many organisations, technological experts and businesses come on board to reduce trade costs and achieve predictability within international trade.

Recent research by Blockchain Innovation Hub reveals that as much as transportation costs and regulatory costs presented trade barriers, the cost of information, its accuracy and availability inhibit trade. As transportation and regulation costs falls the portion of information rises. 

This position has been supported by other researchers Anderson and Van Wincoop, who have observed that moving goods across borders now exceeds the transportation of goods due to the information  costs associated with  drawing contracts for the transaction, searching for the trade partners, the characteristics , nature and provenance of the goods as they move along the supply chain. This information  must be distinct as it must form the basis of the blockchain.

The distinct characteristics of the information means that it cannot be counterfeited and through a tracked  system of  dynamic information ledgers, the security on information of the goods is almost guaranteed.

Blockchain can be considered as one of the avenues to promote trade facilitation while delivering on every entity  that is on the value chain. The huge number players in the supply chain epitomise a complex networks of trade relationships that can easily be  easily managed by blockchain technology. 

UNCTAD through Maesk observed that  a consignment of perishable goods from East Africa to Europe went through 30 different organisations ,generating 200 communications and interactions .It is quite evident how such a scenario can be prone to human errors, rent — seeking behaviour and delays.

In a recent statement the AfCFTA Secretary General has mentioned that the AfCFTA  wants to roll out Agri — value chains across Africa so as to change Africa from a net importer of basic food commodities. The use  of blockchain technology becomes urgent in order not only to facilitate trade within this sector but to meet the demands of the consumers who have also become sophisticated in their taste and expectations.

Consumers of today now demand information on product specifics such as how it has been grown, the type of soils, and how organic it is and the observance of fair trade around the production of the goods.

According to the World Bank publication blockchain does not only deliver commercial gain and significant savings, the technology has become an empowerment tool for farmers. In Haiti, through blockchain technology fresh agricultural products are tagged from farm to table.

‘‘A custom-built platform for fresh produce chains in Haiti allow buyers to scan a mango’s QR code and see whose tree the mango comes from, how the mango was packaged and transported, and what costs were involved at each step from the moment a mango was picked from a tree to the moment it’s paid for by a buyer’’

Blockchain technology is indeed helpful when linked to agriculture , customs administrations, insurance companies, shippers, exporters and importers and the whole logistics industry. This, however, does not mean that it can be easily embraced.

There are challenges in the form of cybersecurity, data protection, interoperability of the information ledgers, self -sovereignty, and legal enforcement of smart contracts as issues that pertain to the adoption of blockchain technology by governments.

These challenges can be thoroughly studied with a view to overcome and remain relevant in international trade. The world never imagined  how an oil tanker would reinvent international trade.

◆ Sitshengisiwe Ndlovu President of OWITZIMBABWE: MBA/UNCTAD: Trade and Gender Linkages/ IAC Dip/Cert: Trade in Services and SDGs: Robert Schuman Center of Advanced Studies/IDEPCert: Making the African Continental Free Trade Agreement Work. She writes in her personal capacity. For more on trade matters visit her Blog on website: www.owitzimbabwe.org