Asia’s International Trade, Services, and Supply Chains: The Effects of Foundational AI
Introduction
Fundamental AI models, like ChatGPT, have the potential to fundamentally alter the type and extent of cross-border economic transactions, which will have a substantial impact on globalisation and international trade. AI-driven automation may result in job reshoring and a decline in global trade in products. But AI’s capacity to boost output and open up new doors could encourage service trade and aid in the growth of global value chains. Another important consideration is AI regulation, since different national laws may impede international trade and have an impact on how AI is incorporated into the world economy. Global value chains can be reshaped and the flow of AI technology further disrupted by geopolitical conflicts like those between the US and China. AI’s effects on trade are increasingly being addressed by free trade agreements (FTAs) and digital economy accords (DEAs).
Why Foundational AI Matters
What are foundational AI models?
Large language models (LLMs) such as ChatGPT-4 are examples of foundational AI models that use machine learning techniques like deep neural networks to process visual inputs and analyse and produce language that is human-like. Important characteristics of these models include transfer learning, which enables them to adapt information from one task to another. Because of its generalizability, foundational AI can be applied in a variety of ways. Furthermore, model performance is greatly enhanced by increasing AI compute power and training data; within the previous 10 years, AI compute has scaled up tenfold annually. This trajectory implies that LLMs will become even more potent and influential with each passing generation. Furthermore, emergent capabilities have been made possible by the growth of data sets, advancements in AI computing, and model parameters.
The big picture
Fundamental AI models are anticipated to have significant societal and economic ramifications. According to PwC, by 2030, AI might increase global GDP by 14%, or around $16 trillion. Similarly, over the next ten years, foundational AI could boost productivity growth by 1.5% and the global GDP by 7%, according to Goldman Sachs. According to McKinsey, generative AI, like ChatGPT-4, could boost GDP by $2.6 to $4.4 trillion a year across 63 use cases, with the main benefits going to customer operations, software engineering, marketing and sales, and research and development (R&D). Through increased use of robotics, improved product R&D, and new business models, foundational AI is predicted to revolutionise enterprises and result in more productive supply chains, efficient manufacturing, and advances in productivity in the services sector.
AI, jobs and trade
Because foundational AI is new and has the ability to change labour markets and global trade, evaluating its effects on jobs and skills is difficult. Three key ways that AI is predicted to impact the labour market are through increasing human potential, automating chores, and generating new jobs that require different skill sets. Both low-skilled and high-skilled positions, including laboratory technicians, chemical engineers, and optometrists, may be automated using foundational AI. AI and robotics working together could replace human labour in production for dangerous or repetitive activities. AI is predicted to destroy certain jobs, but it will also generate new ones and increase the need for workers with the skills necessary to handle its integration across industries.
The implications of foundational AI for international trade
AI is going to have a lot of effects on global trade. Artificial intelligence (AI) increases productivity, which makes businesses more competitive and may result in more trade as skilled AI users surpass non-adopters. AI enhances international commerce efficiency by streamlining supply chains, clearing customs, and managing inventories, all while promoting product diversity and trade. By automating document analysis and compliance verification, AI-powered systems can expedite trade facilitation, lowering administrative costs and boosting security. But because AI can lead to onshoring and lower imports because of sophisticated automation and robots on factory floors, it can also mean less commerce in goods. Conversely, nearshoring could be encouraged by AI-powered additive manufacturing, which is efficient and supports more localised production.
