By Matthew Wilson, Ambassador of Barbados to the UN, WTO, and other international organizations in Geneva
Artificial intelligence (AI) is the next frontier. As with digitalization, it will transform how we access information, how we produce, and how we consume. It will create tremendous opportunities for micro-, small, and medium-sized enterprises (MSMEs) to scale up market access and scale down certain activities currently undertaken by humans. But it also risks eradicating whole sectors that MSMEs are involved in, especially in the services sector such as data processing, data analytics, translation, and more. We need to be honest about this to ensure we are prepared.
AI is not automation. Automation we know has been good in gaining efficiencies and cutting costs. AI is a whole different ball game, and there are three angles to consider it from:
- How it will help small businesses to be better, do better, and be smarter;
- How it will change consumer behavior to the benefit of MSMEs; and
- How it will lead to the death of some MSMEs.
Underpinning all of this is digital readiness. And many are not ready. We are seeing the digital divide grow wider in many developing countries, including around access to technology for women and rural populations. The pace of digital access is not necessarily keeping up with the pace of digital innovation. Data drives effective use of AI, and far too many MSMEs still have under-developed data around compliance, finances, and sourcing.
The regulatory environment around AI is complex, and in the vast majority of developing countries where MSMEs can make up around 95% of the business and entrepreneurial ecosystem, there are no AI regulations or protocols. There is no ‘Ministry of the Future.’
But as we move towards regulatory development, we need to avoid fragmentation. We know regulatory differences are inevitably more challenging for MSMEs to adhere to. There are currently overlap, differences in objectives, and no precisely agreed terminology within AI regulations, all of which will pose greater challenges for smaller businesses in the future unless these are streamlined now.
There are risks of having no regulation. No regulations means no regulating. No regulating means no ownership. No ownership means no monetizing. And no monetizing means no development deliverables.
We are, however, still in a position to start investing in building these local ecosystems even as we grapple with where to anchor a global regulatory discussion on AI. Is it in the International Telecommunications Union (ITU), informed by the upcoming Global Digital Compact? Is it at the World Trade Organization (WTO)? In September, at the WTO Public Forum, one high-level official suggested one of the next plurilateral negotiations should be around AI and trade. In September, the President of the Human Rights Council (HRC) held a special meeting on AI and human rights. Clearly, it is a subject at the forefront of the strategic thinking of many agencies.
We do know that AI will have some impact on jobs. Here I reference recent research from the Inter-American Development Bank (IDB), which just released their AI Generated Index of Occupational Exposure (GENOE). It quantifies AI’s potential impact on jobs looking at task automation, social and ethical factors, and regulatory constraints.
Some of the key findings include that the likelihood of average job replacement is 28% in one year, 38% in five years, and 44% in ten years. According to the research this implies that 980 million jobs worldwide are exposed to AI disruption. We know this will disproportionately impact lower- and middle-income workers, many of whom are in MSMEs.
On the flipside, we do know that the positive possibilities of AI are endless.
If used intelligently, AI will help MSMEs to better understand market trends, chart market access, make market choices, identify regulatory barriers, and understand input sourcing at the click of a button. It even risks overtaking many of what were considered cutting-edge offerings from many international organizations if they do not quickly use AI to upgrade. Here we see the International Trade Centre’s (ITC) Global Trade Helpdesk doing just that by incorporating elements of AI.
We know that AI is ‘automation ++’ that can be used at borders on trade facilitation around low-value shipments and preferential and trusted traders, which is immediately good for small businesses.
Generative AI has already been serving as a form of a co-pilot for some entrepreneurs and start-ups, helping them understand and navigate complex legal and exportation documents, turbocharging their marketing, and helping them understand how to establish a presence in other jurisdictions.
It can also be used intelligently around sustainability requirements and benefit the green transition by improving supply chain traceability. Multinational enterprises have an incentive to demonstrate sustainable supply chains, especially with ESG (Environmental, Social, and Governance) reporting requirements, but they do not always have full insight into their tier 2 or 3 suppliers (typically MSMEs). AI can help organize, gather, and analyze this information.
MSMEs also face challenges with sustainability reporting, which can impact their access to green finance. AI can help with data integration for reporting, navigating divergent requirements, and real-time monitoring.
AI will also transform consumer behavior and increase choice, which is always good for small businesses and their limited marketing and physical and virtual shelf space. For example, Apple’s new iPhone 16 designed for AI is the first Apple smartphone purpose-built for generative AI, which will “create text and images based on natural language prompts.” The user will be able to take a picture of anything and the phone can direct you to multiple places to purchase it. This opens opportunities for small businesses – with one caveat: they still need to have their products and services on digital platforms. It can create a whole new market for individual preference-based consuming. Search engines bolstered by AI technology will be able to find you any computation of products and services.
But policies need to work to make AI more accessible to MSMEs. In the small number of countries that have national AI policies, around one-third focus on fostering AI innovation and adoption, including skills training programs, and around one-fifth provide financial support for AI research, development, and adoption. Although not MSME-specific, smaller firms could benefit from these kinds of forward-looking interventions.
The Group of 20 (G20) has issued a paper outlining ‘Policy Examples on How to Enhance the Adoption of AI by MSMEs and Start-ups’ with points on raising awareness, ensuring access to data, ensuring access to finance for AI uptake, ensuring an enabling business environment for AI, and sharing practices for MSME and start-up policies related to AI. This is promising, now what we need to see is funding, investment, technology transfer and open-source access for the rest of the global majority to also benefit.
At the regional level, very few regional trade agreements (RTAs) have AI provisions. In Digital Economy Agreements (DEAs), there are no MSME-specific AI provisions, even though all in-force DEAs do have an MSME section to enhance trade and investment opportunities for SMEs in the digital economy.
But there are a few bright spots.
Singapore, with its Digital Economy Partnership Agreements (DEPAs), has been a leader in terms of developing trade agreements and digitalization language with its partners. And we should learn from what this country is doing.
At the WTO Informal Working Group MSME Group, which is chaired by Barbados and consists of 103 members, we are working to make information digitally available for MSMEs and policymakers through: a) the Trade4MSMEs website; and b) databases like MSME references in Trade Policy Reviews (TPRs), MSME references in RTAs, and, most recently, the joint database of the Compendium of Financial Inclusion Initiatives for Women Entrepreneurs.
The Working Group serves as a platform for discussions and presentations on trade digitalization with a focus on paperless trade and the Model Law on Electronic Transferable Records (MLETR) of the UN Commission on International Trade Law (UNCITRAL).
We do not yet have a mandate at the WTO to discuss AI in depth but the hope is that the WTO is gearing up to play an even bigger role in the implications and opportunities for AI in trade and how best it can be used to support MSMEs.