According to Irasin, AI stands out among digital technologies in several key aspects and can have a profound impact on international trade. As a multipurpose technology, AI offers unprecedented flexibility and efficiency, enabling adaptation to various tasks and domains. AI relies on large datasets to learn and improve its performance. Its functions and capabilities evolve rapidly, leading to dynamic changes in its autonomy and operational potential.
The inherent complexity and opacity of AI, coupled with the potential for errors and biases, raise significant concerns regarding AI-driven decisions and recommendations, ethical considerations, and broader social consequences. AI has the capability to reduce costs related to trade logistics, manage supply chains, and ensure regulatory compliance. It can automate and streamline customs and border processes, handle complex trade regulations, and predict associated risks. AI tools, by processing real-time data and offering predictive insights, enhance supply chain efficiency. These advancements not only reduce trade costs but also make it easier for small businesses and developing economies to access global markets.
Transformation of Service Trade Patterns
AI can reshape service trade, particularly digital services. It boosts productivity, especially in sectors reliant on manual processes, and enables innovative services that drive higher demand. Conversely, demand for traditional services may decline, and the need for outsourcing some services could decrease. Additionally, AI increases demand and trade in technology-related products, strengthening ICT infrastructure and accelerating sector development.
AI also redefines comparative advantages across economies by increasing productivity throughout various sectors. It influences the composition of production inputs, favoring capital investment over labor. However, AI development and control are likely to remain concentrated in major economies and large corporations, potentially leading to industrial concentration. Overall, AI holds significant potential benefits for all economies, but policymaking and regulatory frameworks require global collaboration and careful management to ensure equitable benefit distribution and risk mitigation.
Economic Impacts and Adoption Scenarios
Adopting AI, by boosting productivity across sectors and reducing trade costs, can generate substantial gains in global trade and GDP. According to simulations by the World Trade Organization’s Global Trade Model, in an optimistic scenario with widespread AI adoption and high productivity growth, global trade is projected to increase by up to 14% by 2040. In a cautious scenario with uneven AI adoption and low productivity growth, this increase could be limited to under 7%. Simulations also indicate that high-income economies would experience the largest productivity gains, whereas low-income economies have the greatest potential for reducing trade costs. If AI is widely adopted with appropriate infrastructure, the trade growth of low-income economies could reach 18.1% under the optimistic scenario, compared to 6.5% under uneven adoption.
Digital services are expected to experience the highest growth in AI-driven global trade. In a scenario of widespread AI adoption, digital service trade could grow nearly 18% above baseline levels — the largest increase among all sectors — driven by reduced trade costs and improved service delivery efficiency. Sectors likely to benefit most include education, healthcare, entertainment, financial services, and processed food production, while natural resource extraction and textiles may see limited growth.
Widening Global Gaps
One of AI’s key challenges is the widening gap between countries and companies in leveraging this advanced technology. Currently, AI development capacity is largely concentrated in major economies, notably the U.S. and China. This concentration may deepen disparities between developed and developing nations. Algorithmic opacity and the potential for indirect collusion among major firms to maintain higher prices pose complex challenges for regulators. Regulatory inconsistencies in AI may also lead to fragmented rules, creating barriers to global trade. Fully leveraging AI opportunities and mitigating risks requires coordinated global governance. Developing economies can enhance readiness by strengthening digital infrastructure, improving workforce skills, fostering innovation, and boosting regulatory capacity.
A 2024 OECD and WTO study shows that if economies fully restrict data flows, global GDP could fall by 5%, and global exports could decline by up to 10%. AI’s reliance on large datasets raises serious privacy concerns, highlighting the need for a balanced approach that ensures both data availability for AI training and protection of individual privacy.
Governments are attempting to support domestic innovation, economic competition, privacy protection, and border data flow control through open data initiatives and data-sharing policies. However, current efforts remain fragmented, potentially leading to regulatory divergence. This fragmentation extends beyond AI-specific regulations to sectoral laws, including intellectual property and data governance, affecting AI applications. The economic consequences of such divergence, particularly for SMEs, underscore the importance of harmonizing regulations. OECD and WTO reports indicate that regulatory fragmentation across geo-economic blocks could reduce real global GDP by more than 1%.
AI Governance
Bilateral and regional AI governance initiatives are increasing, focusing on diverse priorities but also raising the risk of fragmented approaches. Some initiatives emphasize harmonizing AI terminology, classification, and risk oversight, while others promote broader alignment or reinforce AI safety and governance. Regional trade agreements and digital economy agreements serve as key tools to regulate and promote responsible AI usage.
Recent years have seen a wave of international AI initiatives. While complementary in core principles, each focuses on different aspects of AI governance, including avoiding regulatory fragmentation, the role of standards and regulations, data privacy protection, data governance, and intellectual property rights. Additionally, international coordination through constructive dialogue among governments has become increasingly important. Some initiatives also address environmental impacts, highlighting sustainability in AI development.
The WTO, as the only global rules-based trade institution, can play a critical role in harnessing AI benefits while mitigating potential risks. It can limit regulatory fragmentation, promote trustworthy AI development, and facilitate trade in AI-related goods and services, supporting sustainable growth and innovation. Protecting intellectual property rights is also central to stimulating innovation and advanced technology development. WTO rules enhance global convergence, offering transparency, non-discrimination, consultations, best practice sharing, regulatory coordination, and non-binding policy guidance. These mechanisms allow members, economic actors, and consumers to stay informed of regulatory developments. Enhanced transparency provisions in the Technical Barriers to Trade Agreement require early notification of regulatory actions and stakeholder input during the draft stage, helping reduce trade barriers and accelerate global regulatory alignment.
The WTO also encourages the use of international standards, mutual recognition, equivalence, and “soft law” tools like voluntary committee guidelines to promote regulatory coherence. It serves as a cornerstone for facilitating AI-related trade in goods and services. WTO agreements, including the General Agreement on Trade in Services, play a key role in shaping policy environments that enable AI development and adoption.
AI Trade Development
The Information Technology Agreement, by eliminating tariffs on covered ICT products, facilitates global access to advanced goods essential for AI development and deployment. This reduces costs and accelerates global innovation and adoption of AI technologies.
The TBT Agreement helps governments ensure that AI-related standards and regulations do not create trade barriers while achieving policy goals like safety, security, and competitiveness. Early notification and stakeholder engagement in regulation drafting are key features.
Intellectual property provisions aim to balance IP rights, encouraging innovation while facilitating technology dissemination and access. These agreements support sustainable development of AI technologies and protect the interests of innovators and users.
The WTO, through non-discrimination principles and investment-related trade agreements, reduces barriers and biases against foreign products, ensuring national investment policies align with global free trade rules. These measures ultimately support AI development. Additionally, the WTO provides dispute settlement mechanisms for digital economy issues and, through programs like “Aid for Trade” and the “Enhanced Integrated Framework,” empowers developing economies to participate more effectively in international trade and leverage advanced technologies. With AI’s growing importance in international trade, establishing a multi-faceted governance framework has never been more critical.