Why blockchain should be global trade’s next port of call

This paper examines the suitability of blockchain and blockchain-based distributed ledger technology (DLT) to the port, harbour and terminal industries. DLT has the potential to drastically change the world of asset transfer, asset movements and security of data movement. Testing of various DLT applications has already started – first in 2009 with the emergence of Bitcoin in the financial services industry, then subsequently in various other fields, including within the supply chain.

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Anyone working in the port, harbour and terminal industries needs to understand the potential impact and implications of blockchain – in business, in respect to government interactions and along the supply chain. The technology has the potential to change the way parties operate and interact along the value chain as well as to open doors for new players. Some intermediaries might be impacted, others may be left out of the game.

What is ‘distributed ledger technology’?

Also known as DLT, this data-sharing system allows for distributed and real-time multi-party tracking, digital “bills of lading” and letters of credit, machine-to-machine interactions, and better visibility of assets and liabilities. Smart contracts, digital wallets and secure digital asset and information transfer could ease maritime operations, unlock new opportunities for all parties and reduce risk. With this, significant amounts of paper could be cut out of processes.

Capturing the potential of DLT and blockchain requires not only an understanding of the technology and its implications for the port, harbour and terminal industries, but also pioneering and collective efforts to develop the applications and a new gold standard in business to jointly bring the traditional industries to the next level.

Blockchain for ports

The port, harbour and terminal business sits at the crossroads of the majority of global trade routes, making the sector one of the key enablers of the global supply chain; however, I believe it can also sit at the crossroads of blockchain.

The supply chain is about processes from design to the extraction of raw materials, to production and the movements and storage of goods down to repurposing, including the related flows of capital and data. The fluidity of flows across the supply chain ecosystem determines time required and cost incurred. In turn, fluidity depends on the seamlessness and integrity of the processes – seamlessness means the least number of steps and the highest level of digitization and automation. Most importantly however, it stands for integrity and authenticity of information as the basis of trust among all parties involved.

Image: IBM

An introduction to blockchain

Blockchain became known as the core technology behind bitcoin – the first decentralized crypto-currency – launched in 2009. Although blockchain has initially been thought about mainly from a financial services perspective, the technology can serve as a basis for many useful applications and manage information far beyond monetary transactions. Blockchain technology is a leapfrog technology intended to reinvent markets. Jeremy Wilson, vice-chairman of Barclays Corporate Banking, said blockchain could even become a new operating system for the planet. That is the level of technology about which we are talking.

Blockchain is a cloud-based kind of global spreadsheet or distributed ledger of transactions. Blockchains run on computers provided by volunteers around the world. Therefore, there is no central database to hack. The blockchain is public and encrypted. Although nothing is unhackable, it is extremely difficult to remove, duplicate, manipulate, tamper or copy records. Therefore, blockchain means that we can collectively trust what happens online.

Blockchain is one type of distributed ledger. But distributed ledger technology (DLT) stands for blockchain-based DLT, and both terms are used simultaneously.

New source of trust

What if information such as the provenance of goods, tariff codes, classification data, import/export data and certificates, manifests and loading lists, customs values, status information, and all other information about goods within the supply chain ecosystem was available for all parties involved at any time and everywhere? Then, the vision of a transparent, secure, paperless supply chain would have become a reality. It is blockchain and DLT that can bring track and-trace, visibility and transparency to the next level.

DLT is suited to logging and monitoring data, such as parts in the automotive supply chain or containers moving in ships, planes and on other transport devises around the world. Today, customers and buyers have limited visibility and, even more so, ability to validate the true value of products and services they wish to purchase.

Lack of transparency along the supply chain causes various concerns, including that the prices paid might be an inaccurate reflection of the true value. On the other hand, limited transparency also causes risks for manufacturers and brands resulting from illicit practices and the environmental impact that comes with certain forms of production.

DLT and blockchain can help to reassure consumers, mitigating and eliminating risks around food security, conflict minerals, counterfeit goods, forced and child labour, corruption and so forth. In the world of DLT, everyone can watch what is happening, whether they’re consumers, business partners, governments or watchdogs.

Pioneering names

There are many pioneers in the field of DLT and blockchain. Provenance, for example, applies DLT to help companies to build trust across the supply chain by making it transparent where products were made, by whom and with what environmental impact. The company BlockVerify also helps companies to fight product counterfeiting.

Everledger assists companies in recording and tracking the movements of diamonds from the mine to the store. Traditionally, buyers rely on paper, which can be changed or tampered. DLT allows the recording and accessing of unchangeable information and history – any time and everywhere. Everledger is one of the first users of IBM’s blockchain platform aimed at the supply chain. IBM’s partnership with Walmart to track lettuce, steaks and snack cakes from farm and factory to the shelves is one of the biggest practical tests to date, while Maersk has teamed up with IBM.

The goal for both is to develop a blockchain solution to help manage and track goods and the paper trail of millions of shipping containers by digitizing the supply chain process to enhance transparency and the highly secure sharing of information among partners – shippers, freight forwarders, ocean carriers, customs authorities, and ports. The solution, which is expected to be available later this year, has the potential to save the global economy billions of dollars.

The whole world of commerce and trade is about to be rethought and redesigned. Barclays reported the first blockchain-based trade-finance deal in September 2016. The process, from issuing to approval of the letter of credit, usually takes between seven and 10 days, but could be reduced to less than four hours. Flexport, a provider of software to manage global trade might one day help businesses to monitor re-order cycles and plan future shipments, which would allow them to instantly replenish their inventory when they run low – even through placing orders from M2M.

Smart contracts and e-wallets

When combined with other advanced technologies, such as the internet of things (IoT) and artificial intelligence, DLT and blockchain unfold their full potential. Combining DLT with IoT allows ships to autonomously contact suppliers and place orders for example when low on energy to schedule cycles to take advantage of electricity prices.

Thanks to DLT, machines can do business with machines. Blockchain brings automation to the next level. Electric vehicles can pay recharging, truck parking, tolls and fuel fees based on smart contracts with a blockchain-enabled digital wallet. E-wallets can also collect fees for equipment-sharing. Smart contracts are agreements between parties stored on a blockchain. Smart contracts work on the basis of standard templates and can, for example, refund deposits and perform instant collection of taxes as well as take over the burden of regulatory reporting.

Paperless and high speed

Putting documents on the blockchain brings significant advantages. Maersk has been participating in a proof of concept, with blockchain expertise from the IT University of Copenhagen, to digitize the bill of lading. Eliminating piles of papers speeds up processing and reduces costs and risks. A shipment of roses from Kenya to Rotterdam can generate a pile of paper 25cm high, for example.

Furthermore, prior to arrival, ships can send digital, autonomous and secure papers, documents and information to port authorities, security departments, customs, terminal operators and all other parties involved in port operations. At the port, artificial intelligence-based tools, such as auto-document verification tools can speed up the processing of the submissions.

Improved security and asset control

Facial recognition technology can improve and accelerate access controls and crew checks in ports and save time and money, while raising the level of security, as DLT contributes the digital identity. Terminal operators and other asset operators can log and monitor assets and devices such as trucks, chassis, scanners and any kind of equipment on the blockchain, which offers in this way attractive cost savings, through security and efficiency gains. Sharing of assets in the port will become safer and easier.

New players, new business

Blockchain-based open and secure platforms can also bring smaller businesses to the port, either to perform tasks in the terminals or as customers operating in the port. They can easily access the port services and connect with others via the digital port platform. Digital peer-to-peer collaboration tools and payments ease doing business.

D-printing facilities operated by ports might offer a new form of safe production and an additional revenue stream. 3-D printing combined with blockchain allows the creation of secure digital memories for each product and each part of the product. The immutable records from the source of the raw materials used, to where and how products were manufactured, to their distribution, maintenance, repair, recall and recycling histories can be a vital component of the new source of trust.

Standardization is crucial

The joint development of standards is critical, whether on industry, national or global level to avoid conflicts between different standards and ensure the optimal outcome. Standardization of blockchain involves terminology, development, deployment and security. In the supply chain and transport industries, the consequences of missing standards are well known. For example, the desired smooth exchange of data – which eases collaboration, allows instant and better responses to disruptions, and drives optimization and security throughout the supply chain – is hampered by the lack of shared data formats and technical transfer options.

In times where many physical products are digitized and almost every physical process is replicated on the digital layer that has largely taken control over the tangible world, cybersecurity has become vital for businesses, governments and the security of our lives. Boards have to take action. Companies need to recruit C-suite experts who take the board onto the journey of cybersecurity – starting with setting the board agenda. The supply chain, logistics and transport industries, including the ports, need to play an active role in the process of standardization and security.

Towards a digital future

Blockchain offers the opportunity to create a global platform of performance and trust; however, scaling the technology still requires overcoming some hurdles. First, blockchain protocol(s) used to secure the ledger of global trade and manufacturers must be trusted by all users. Technical capabilities to handle very large transaction volumes need to be enhanced and the costs of maintaining the protocol need to be lowered.

Gateways to bringing on board ordinary companies and individuals into the M2M economy are also required. The liability model of business conducted on the blockchain will need to be reviewed as the appropriate treatment of liability may differ from current models. Last but not least, standard skills are required to easily and smoothly interface with legacy systems to overcome concerns and doubts of the conservative forces in business and government. Collective effort and engagement is required to make DLT and blockchain the new gold standard in business.

Independently from the time to realization, the final shape, form of the distributed ledger and blockchain technology, ports, harbours and terminals might significantly benefit just from exploring this central tool of the digital economy. Alone, the knowledge gathered and new relations built along the road – for example, with fintech and other tech companies – should justify the industries’ effort.

 

This article was originally published at Port Technology and republished at the World Economic Forum Agenda.

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As shops go cashier-free, are retail jobs checking out?

For a long time it looked as if online shopping would gradually replace the high street. But the same digital development that was considered to be the end of physical shops may have brought a new beginning.

AmazonGoHow? Over the past two years a number of cashier-less stores have emerged in Europe and the United States, including the digital check-out test shop opened by Amazon in Seattle last year.

The innovative grocery store with no checkout line was called Amazon Go. But it wasn’t a new idea: some 15 years ago the German Metro Group, one of the world’s largest retailers, experimented with something called the Future Store, where radio frequencies and electromagnetic fields were applied to identify and track the tags attached to products. The concept was never commercialized.

Fast-forward to today, and Amazon Go uses sensor fusion, historic customer data and artificial intelligence; it connects to customer accounts via an app on their mobile phones.

Digital cashier-less stores promise certain advantages for business. For a start, the information they acquire and store can enrich existing data and help companies to analyse and plan. It also helps forecast consumer demand, predicting what buyers are going to buy before they know it themselves. The result is cost savings on shipping, inventory and delivery, and increased sales. It’s also good for consumers, in that it represent a significant shift towards seamless 24/7 retail and would open up new options for people in remote locations.

One thing that a digital store doesn’t do, however, is deliver products quickly. The solution here is in the scaling: delivery on the same day, or even within hours or minutes, becomes easier in a close network of stores and distribution centres. The denser the network, the shorter the distance to the customer, and the faster the goods arrive. This is where more stores and the use of drone delivery, reportedly just around the corner, could speed things up.

But this is only one side of the story. There’s another, darker question hanging over the whole enterprise, one perhaps reflected in the public’s mixed response in the chart below: the future of jobs in the retail sector, which after all is one of the largest employee groups.

No more shopkeepers?

In the digital store, the number of check-out staff is expected to decline dramatically. By contrast, jobs for business oversight and store security – as well as in technical positions – will persist. People will always be the best candidates for customer-service roles on the shop floor. It’s an important area of differentiation and it’s already happening. Following the centralization and automation of accounting and invoicing tasks, Walmart announced it was shifting 7,000 jobs to the sales floor. It seems clear that the responsibilities of employees are going to change.

Amazon, for example, has filed a patent for 3D printing within mobile manufacturing units. This concept of a moving factory or a moving manufacturing store would mean more flexibility, less stock and more tailored manufactured products for end consumers. In store, 3D printers can be used to produce made-to-order goods or offer 3D printing as a service. Customers pay with smartphones – no checkout line, of course. On the other side of the world, another tech revolution is taking place. In China, the commerce platform ULE is transforming stores into hundreds of thousands of hubs for e-commerce business.

In order to prepare for the future, both businesses and governments need to really understand the impact of automation on the supply and value chain. But information and opinions on this impact tend to vary. Bill Gates and Elon Musk, for instance, believe consequences will be severe. Roman Zitzelsberger, meanwhile, head of the German labour union IG Metall, considers robots less as a threat and more as an opportunity to move our professional lives towards higher-value tasks and more flexibility.

It seems that whatever happens, not only our professional lives but also our private lives – and many, if not all, businesses – will be affected significantly.

This blog was originally posted on the World Economic Forum Agenda.

 

How blockchain can restore trust in trade

containerInternational trade is under pressure. Fears fuelled by the global refugee situation and terrorist threats have led to tighter border controls – and these come at a cost. Every inspection of goods, every stop along the supply chain, eats up time and drives up prices. It harms businesses and consumers alike. Those involved in international trade – whether manufacturers, trading houses, transportation companies or banks – are seeking ways to ease the situation and cut time and costs.

Blockchain technology can help. The cloud-based ledger ensures that records can’t be duplicated, manipulated or faked, and increased visibility in parts of the supply chain promotes an unprecedented level of trust. It means governments can better protect citizens, while business partners can be certain trading documents are real. Consumers can check the quality and provenance of products, and banks can reduce processing time. And it’s all paperless.

Thanks to blockchain, all kind of legal, financial and product-related information can be made available. This allows even the least trusting parties to comfortably conduct business. With further investment and experimentation, blockchain could potentially hide confidential information to protect the interests of trading parties – pricing information, for example.

Does it work in the real world? Barclays reported the first blockchain-based trade-finance deal in September 2016. The transaction guaranteed the trade of almost $100,000 worth of cheese and butter between Irish agricultural food co-operative Ornua and the Seychelles Trading Company. The process – from issuing to approval of the letter of credit, which usually takes between seven and 10 days – could be reduced to less than four hours. Other banks are also exploring ways blockchain technology can improve processes along the supply chain. In August 2016, banking consortium R3CEV reported that 15 of its members had joined a trade finance trial to test its distributed ledger protocol, named Corda. Also in August, Bank of America, HSBC and the Infocomm Development Authority of Singapore (IDA) revealed that they had built a blockchain application to improve the letter of credit (LC) transaction process between banks, exporters and importers.

It’s not only banks: Maersk, the world’s largest container-shipping line, has been participating in a proof-of-concept initiative, using blockchain expertise from the IT University of Copenhagen to digitize the ships’ cargo inventories. These so-called “bills of lading” require an enormous amount of paper. A shipment of roses from Kenya to Rotterdam, for example, can result a pile of paper 25cm high. And the cost of handling it can be higher than the cost of transporting the containers. Maersk’s aim is to optimize the flow of information while raising visibility along the supply chain.

Often when making a purchase, buyers don’t know where the goods they ordered are coming from, or even whether they have been shipped at all. With blockchain, consumers can be informed of every step in the process. Combined with the internet of things, this could also extend to the care with which a product is transported. Swiss start-up Modum, for example, uses blockchain as a way of assuring recipients that pharmaceuticals have remained within an acceptable temperature range while in transit.

Trust and transparency

Citizens are worried that reduced barriers at the borders, as well as trade agreements, increase the risk of terrorism and illicit trade. Blockchain technology can in fact provide the backbone of a system of authorized trusted participants, bringing everything into the light, whether it’s a product, the party selling it or the path it takes to reach the buyer. Consumers and watchdogs, public and private, can trace every item moved through the authorized blockchain-backed channel and validate or reject both product and party. Customs clearance, too, can be optimized using blockchain. Parties that are part of the group can act quickly and efficiently, while others face scrutiny.

Immutable records on every aspect of a transaction – from the source of the raw material to where and how the products were manufactured, to their distribution, maintenance, repair, recall and recycling histories – are the new basis of trust. Information about ownership, provenance, authenticity and price are all held in the blockchain. Digital product memories connected to smart devices along the supply chain will provide secure proof of everything from manufacturing processes to quality controls. This will reduce the cost of compliance, i.e. the adherence with laws and regulations. Furthermore, this will open doors for replacing current product labelling practices to protect consumers and accelerate customs-clearance processes. Customers and consumer-protection organizations, as well as customs authorities, will have all the information they need to decide to buy or not to buy, to let goods through the border or to block them.


Blockchain has the potential to become the new gold standard of business and trade. But first, all nations need to accept the new technology. There are technical hurdles to overcome too. First, blockchain protocol(s) used to secure the ledger of global trade and manufacturers must be trusted by all of its users and be effectively un-hackable. Technical capabilities to handle very large transaction volumes will also need to be enhanced and the cost of maintaining the protocol may need to be lowered. Ordinary companies and individuals will need to be onboarded into the machine-to-machine (M2M) economy. The liability model of trade conducted on the blockchain will need to be reviewed as the appropriate treatment of liability may differ from current models.

Blockchain can help to reinforce trust in today’s complex and globalized world – giving citizens and governments fresh confidence in the global exchange of goods.

Image: Erwan Hesry

This blog was originally posted on the World Economic Forum Agenda.

Why China could lead the next phase of globalization

Donald Trump is the 45th president of the United States. Among his promises are a 45% import tax on Chinese products, the cancellation of the Paris climate agreement and, as was confirmed today, the end of the Trans-Pacific Partnership trade deal.

chinafutureIf he doesn’t go back on his plans for global trade and international affairs, Trump will give room to other nations to take the lead in shaping globalization. While the US might be taking a step back from the world – a world it helped to create, to a large extent – China in particular can be expected to take on a more prominent role.

While the US is currently the world’s largest economy, in purchasing-power terms China is expected to overtake it in 2016, according to the International Monetary Fund. China has benefited significantly from globalization. Over decades, it has invested in enhancing its capabilities and built economic links with many countries. It has become viewed as an important overseas partner and investor.

This chart shows how China is forecast to overtake the US as the world’s dominant economic power by 2030, based on share of global GDP, trade and exports.

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Image: Economist

Something China understands very well is the importance of connectivity – and hence transport infrastructure – for economic growth and development. Its major development framework is the One Belt One Road initiative with its two pillars, the Silk Road Economic Belt and the 21st Century Maritime Silk Road. This development project involves a territory equal to 55% of global GDP, 70% of the global population and 75% of its known energy reserves. “The investments will involve about 300 projects extending from Singapore to Turkmenistan,” reports Reuters.

One building block of One Belt One Road – also known as OBOR – is the Regional Comprehensive Economic Partnership (RCEP). This China-driven alliance will comprise Australia, New Zealand, China, India, Japan and South Korea – as well as the ASEAN region. In 2014, ASEAN was the seventh-largest economic power in the world. It was also the third-largest economy in Asia, with a combined GDP of US$2.6 trillion – higher than all of India.

China on the world stage

On the African continent, China is lending billions towards large-scale infrastructure investments, again part of OBOR, and particularly in transportation. One of its flagship projects is the Standard Gauge Railway in Kenya. There’s also the development of deepwater ports in cities such as Dakar, Dar es Salaam and Djibouti. These are likely to become industrial hubs, following the model of China’s development of the new Cameroonian deepwater port of Kribi.

The Russian Trans-Siberian Railway (TSR) is at the origin of rail transportation between Europe and Asia. Recently, Anthony Cuthbertson wrote in Newsweek that Vladimir Putin may be envisaging a Hyperloop Silk Road. This could present an alternative to the planned construction of 64,000 kilometres of rail tracks that are intended to strengthen existing pathways between the east and west. CRRC Corp, China’s largest maker of railway equipment, was in talks for a potential investment in Hyperloop One, the company behind the idea, Bloomberg reported earlier this year.

Meanwhile, China is launching an $11 billion fund for Central and Eastern Europe, targeting investments in infrastructure and high-tech manufacturing, among other things, both in the region and beyond. Supply-chain operator DB Schenker started running weekly block trains between China and Germany as long ago as 2011. Four years later, the first train carrying containers from China arrived in the Rail Service Centre freight terminal in the Port of Rotterdam.

With the New Development Bank (NDB), the Silk Road Fund and the Asia Infrastructure Investment Bank (AIIB), China has prepared itself for responses to major financing needs – within and beyond the Belt and Road area. This shows some similarity with the Marshall Plan, the US support plan that helped to rebuild western Europe after the end of the Second World War.

With the US pulling out of the TPP, as Trump has indicated it will, China holds an advantage. The binding agreement, which connects Asian countries to North and Latin American nations, has been perceived by many as an obstacle to China’s reach and a way to solidify US alliances with other nations in the Pacific region. Other Asian countries with high export potential, such as Malaysia and Vietnam, are expected to benefit significantly from TPP, while countries that did not sign the agreement, such as the Philippines, risk losing out. This could have a disruptive effect on the region due to trade and investment diversion.

So far, China has faced scepticism and criticism for its international activities. Many have questioned its development in Africa, for example. But China could yet regain a level of moral authority; it could lead the global climate adaption effort if the US pulls away, for instance. It has already warned Trump against backing away from the Paris climate deal.

What’s in store for relations between the US and China? For a start, there may be tough negotiations over the US import tax on Chinese goods. If both nations find the right balance, they will not only avoid a global trade war, as in the 1930s when the implementation of the Smoot-Hawley tariff act intensified nationalism around the world, but they could also move their bilateral relations to new grounds.

Whatever happens, if the US pulls away from globalization, China stands ready to fill the gap.

This blog was originally posted on the World Economic Forum Agenda.

Why border controls won’t protect Europe against terrorism

In mid-December, people and families all over Europe and in many parts of the world were gearing up to celebrate Christmas, one of the most important events in the Christian calendar. But on 19 December 2016 at 20:02 local time, a hijacked truck veered into a traditional Christmas market next to the Kaiser Wilhelm Memorial Church in Berlin. Twelve people were killed. Four days later, the suspected perpetrator was shot and killed by police on an Italian plaza in Sesto San Giovanni, a suburb north of central Milan.

bordercontrolsOn the same day, ISIS extremists released a video of the perpetrator, filmed recently in Berlin. His name was Anis Amri. Having pledged allegiance to the group, he suggested that the Berlin attack was vengeance for coalition airstrikes in Syria.

Amri was from Tunisia and had arrived illegally in Italy in 2011. The New York Times reported that after he had showed signs of radicalism, Amri was classified as a terrorism risk in 2014 – one of a group of a few hundred individuals only – before making his way to Germany in 2015. In Germany he had been under covert surveillance for more than six months. Italy and Germany had failed to deport him due to a lack of cooperation by his home country.

After the Berlin attack, Amri had travelled for three days and 1,000 miles across Europe. A train ticket found on his body showed he had come from Chambery in France via Turin. European right-wing politicians, including Marine Le Pen, the leader of French far-right National Front, and Nigel Farage, the former leader of the UK Independence Party, responded by demanding an end to the Schengen agreement, a historic deal signed by five European countries in 1985, which had led to the creation of Europe’s borderless Schengen Area.

bordersschengenfailure

Are borders ever the answer?

Few national borders are absolutely impermeable, and controls may fail due to fake and stolen documents. The Chicago Tribune reported that in 2015 around 170,000 people escaped detection at the US border with Mexico and 200,000 eluded capture when adding those who entered by sea. This is barely half of people who entered the US illegally. The wall that made Berlin one of the most difficult places to cross the border could not stop illegal crossings. The wall only reduced the number of escapees to 868 per annum during the 1970s and to 334 per annum between 1980 and 1988.

Aviation security measures are considered most tight in the world of travel and transport – but two passengers were able to board Malaysia Airlines Flight 370 on stolen passports. The Berlin suspect had used at least six different aliases under three different nationalities, reported the Daily Mail.

The threat often lies within: “Not one Paris attacker has been identified as a Syrian refugee”, Mashable wrote. All people named in connection with the Paris attack of 13 November 2015 were French or Belgian citizens who held European passports. The BBC reported that on 23 December 2016, Australian police detained six men and a woman – four Australia-born. Three are suspected to have planned a Melbourne Christmas Day terror attack which Australian Prime Minister Malcom Turnbull called one of the most substantial pots to have been disrupted in recent years.

According to Eurostat, it is estimated that the European Union’s citizens aged 15 or over made 1.2 billion tourism trips in 2014, for personal or business purposes – 25.1% were to destinations outside the country. Labour markets would also be affected: 1.7 million people cross European borders every day to get to work. Waiting and inspection times at the borders would need to be factored into the prices of goods, as well as the required changes to the highly cost-optimized just-in-time concepts – largely applied in the automotive industry – and the efficient goods supply out of European distribution centres. Consumer prices would rise due to the forced slowdown, necessary adjustments and increased logistics costs. Many products would disappear from supermarkets – at least temporarily. The Bertelsmann Foundation warns that reestablishing permanent border controls in Europe could produce losses of up to 1.4 trillion euros over 10 years.

A united Europe

The current terrorist threat requires collaboration across all European countries, the use of advanced technology and a common European anti-terrorism strategy. Instead of investing time, money and energy in individual and isolated efforts to protect each country, Europe could be made much safer through consolidating budgets and other resources to better protect the outer borders of the EU and leverage advanced digital technology. The most effective way would be for all European countries to unite under one strategy – for example in a “homeland security alliance”. There is little chance that European countries with long and highly permeable coastal borders can manage the protection challenge alone. The effort cannot be shared but needs to be concentrated where needed.

The potential measures range from increasing EU security forces at the southern European borders to identifying and registering new arrivals; introducing waterproof authentication checks for example at train and bus ticket booths. The digital age brings solutions that allow smooth travel and fluid transport while also ensuring the highest level of security.

The exchange of security-relevant information should be mandatory. Country authorities need to be able to authenticate every individual and check for security risks. Facial-recognition software on surveillance cameras, which is available yet still rudimentary in many places, needs to be improved.

Blockchain technology – which can ensure the authenticity of goods – will possibly help in future to track the origin of freight. The transport of weapons and explosives would become significantly difficult. Manufacturers have already started to use blockchain technology to confirm the authenticity of luxury goods. The AMBER alert, a child-abduction alarm system that distributes alerts via TV and radio as well as emails and text messages, could be transformed into an effective measure to put the entire European population at the disposal of its own security system.

Even the most secured borders have proven to be permeable. And borders cannot stop local-born and locally operating terrorists. Political leaders need to explain why digital and coordinated European measures are better suited to protect the lives of European citizens and visitors than the reinstallation of intra-European borders.

The situation demands an act of solidarity across all governments in Europe. In its own interests, the private sector is required to support this effort. Leaders could leverage the current threat as a historic chance to unite Europe under an urgently needed common security vision and execution plan.

Image: REUTERS/Vincent Kessler

This blog was originally posted on the World Economic Forum Agenda.

Don’t Blame China For Taking U.S. Jobs

The problems are more complicated than that.

Where have all the manufacturing jobs gone? If you ask Republican presidential candidate Donald Trump, the answer is clear: China! But there is another, more plausible explanation. To paraphrase Democratic presidential candidate Hillary Clinton, “It’s the robots, stupid”.

The U.S. has lost 5 million factory jobs since 2000. And trade has indeed claimed production jobs – in particular when China joined the World Trade Organization in 2001. Nevertheless, there was no downturn in U.S. manufacturing output. As a matter of fact, U.S. production has been growing over the last decades. From 2006 to 2013, “manufacturing grew by 17.6%, or at roughly 2.2% per year,” according to a report from Ball State University. The study reports as well that trade accounted for 13% of the lost U.S. factory jobs, but 88% of the jobs were taken by robots and other factors at home.

If not China, what then explains these jobs losses? It’s simple: factories don’t need as many workers as they used to, because robots increasingly do the work.

manufacturing1Investment in automation and software has doubled the output per U.S. manufacturing worker over the past two decades. Robots are replacing workers, regardless of trade at an accelerating pace. “The real robotics revolution is ready to begin” writes BCG and predicts that “the share of tasks that are performed by robots will rise from a global average of around 10% across all manufacturing industries today to around 25% by 2025.”

With increasing automation, the manufacturing industry is becoming more productive. From 1998 to 2012, all sectors experienced a productivity growth of 32% when adjusted for inflation – the production of computer and electronic products rose 829%. The researchers at Ball State University calculated: If 2000-levels of productivity are applied to 2010-levels of production, the U.S. would have required 20.9 million manufacturing workers instead of the 12.1 million actually employed.

Many of today’s customers demand fast products, such as fast fashion with quickly changing models. Producing far away is only then still an option when margins are high and able to absorb high transport cost for air transportation. Moving closer to markets means more distributed manufacturing which reduces also the impact of disruptive events, such as the tsunami in Japan and the flooding in Thailand.

Focus on manufacturing pays off. One example is Greenville, South Carolina. Greenwille was for decades the state’s heart of the textile industry till its gradual decline when confronted with competition from Mexico and South East Asia. “In 1990, 48,000 people still worked in textile manufacturing in the Greenville area, according to the U.S. Bureau of Labor Statistics. Today fewer than 6,000 do” we can read in MIT Technology Review.

The U.S. needs to aim at leading the adoption in robotics. According to the BCG report, manufacturing labor costs in 2025 are expected to be 33% lower in South Korea for example and only 18% to 25% lower in the U.S. Therefore, South Korea is estimated to improve its manufacturing cost competitiveness by 6 percentage points relative to the U.S. by 2025. Focus need as well as skilled workers due to the fundamental shift in competences and because programming and automation talent will replace low-cost labor as key drivers of manufacturing competitiveness.

The focus on China is diverting energy from the real challenge. This is not only misleading but puts at risk the future of the U.S. economy.

Read my full article on Fortune.

Wildlife crime: a $23 billion trade that’s destroying our planet

Between 2007 and 2013, rhino poaching in South Africa increased by 7,700%. Rhinos, which are poached for their horn, aren’t the only victims of this illicit trade, which is driving many species of wild animals and plants to extinction: elephants are poached for ivory, tigers and leopards for their skin, pangolins for meat and scales, and iguanas are caught for the pet trade. Rare timber is targeted for hardwood furniture.

wildlifecrimeWith a value of between $7 billion and $23 billion each year, illegal wildlife trafficking is the fourth most lucrative global crime after drugs, humans and arms. Trophy hunting is estimated to create around $200 million in annual revenue. Only 3% of the fees paid for the hunts reach local communities.

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Image: African Wildlife Foundation

In 2015, the United Nations General Assembly unanimously adopted a resolution for tackling illicit trafficking in wildlife. The Sustainable Development Goals specific targets to combat poaching and trafficking of protected species. That’s quite some progress, but more action is urgently needed, because more than 7,000 species, in 120 countries, are at risk.

Fighting this type of corruption requires civil servants, including park rangers, who are properly paid, trained and equipped. Along the entire supply chain, awareness needs to be raised and measures must be increased.

Commitment and collaboration to break the chain

Transportation and logistics is not only the backbone of a modern economy but also a key enabler for trafficking wild animals and wildlife products. Therefore, the transportation and logistics sector plays a critical role in identifying and eliminating risks along the supply chain. In light of the surge in wildlife crime, the industry has been taking a range of actions to break the chain between supply and demand.

At the end of January 2015, TRAFFIC and the World Customs Organization (WCO), with the support of the United States Agency for International Development (USAID) and the Wildlife Trafficking Response, Assessment and Priority Setting (TRAPS) Project, convened a two-day consultative workshop. Delegates from shipping and logistics companies, airlines and courier and transport associations were seeking solutions to deter wildlife smuggling activities.

In March that same year, representatives from logistics and transportation companies operating in China made a public declaration pledging their zero tolerance towards illegal wildlife trade. The 17 companies, which include EMS, DHL, FedEx and SF Express, account for 95% of the Chinese courier market.

The same month, the Declaration of the United for Wildlife International Taskforce on the Transportation of Illegal Wildlife Products, which outlines 11 commitments to help bring an end to the illegal trade in wildlife, was signed by some 40 corporations, agencies and organizations, including Maersk Line, Kenya Airways, IATA and the World Customs Organization (WCO).

Many airlines have banned hunting trophies: Air Canada, Air France, British Airways, Brussels Airlines, Emirates Airline, Etihad Airways, Iberia, KLM, Lufthansa, Qantas, Qatar Airways, Singapore Airlines and Virgin Atlantic Airways. Following the killing of Cecil the lion in early July 2015, Delta Airlines banned all lion, leopard, elephant, rhinoceros and buffalo trophies in the cargo holds; United Airlines and American Airlines later followed suit. US embargos are important. The person who killed Cecil, Walter Palmer, is one the estimated 15,000 American tourists who visit Africa on hunting safaris each year. Although he had a permit and was not charged with any crime, Cecil was an illegal kill.

In June 2016, the International Air Transport Association (IATA) adopted a resolution on the illegal trade in wildlife at the 72nd IATA Annual General Meeting. IATA denounces illegal trade in wildlife and wildlife products, and calls upon the member airlines to consider the adoption of appropriate policies and procedures that discourage the illegal wildlife trade.

Modern technology can stop the crime at the root

Breaking the chain is important. However, it would be better to stop wildlife and forest crime at its root. Satellites, drones and internet live-streaming enable solutions which capture the crime taking place to inform law enforcement agencies and the general public in real time. Solutions like this could not only protect wildlife and forests, but also support important initiatives in many fields and areas, such as deforestation, illegal fishing and natural disasters.

The development has already begun: Global Forest Watch is providing data and high-resolution alerts. Witness, established in 1992 by Peter Gabriel with the help of Human Rights First and its founding executive director Michael Posner, trains and supports activists and citizens around the world to use video safely, ethically and effectively to expose human rights abuse and fight for human rights change.

Building new tools requires support from the private and public sector, international organizations and consumers. Until new high-tech solutions arrive, collaboration in fighting corruption and wildlife and forest crime along the supply chain needs to be tightened and strengthened.

This month, leaders and experts are in Johannesburg for the 17th meeting of the Conference of the Parties to CITES. The participating parties are discussing a dedicated resolution on prohibiting, preventing and countering corruption facilitation activities.

As Yury Fedotov, the executive director of the United Nations Office on Drugs and Crime, said: “We all share a responsibility to act where we can.” Hidden in fashion or furniture, as food or pets, the products of wildlife and forest crime find their way into our homes and lives, so we all have a responsibility to act.

This blog was originally posted on the World Economic Forum Agenda.