Death of the power house? 3D printing, blockchain, and trade negotiations

27 June 2016

3D printing, blockchain technology, and decentralised production. There is a new world order out there and it is changing the trade world as we know it.

3D printing (3DP) is a technology that builds physical objects directly from 3D computer-aided design (CAD) data and adds different materials, layer-by-layer, with the help of a 3D printer. In a new report, “Trade Regulation in a 3D world”, we at the National Board of Trade (Kommerskollegium) examined, among other things, how 3DP changes what is being traded, how it is being traded, and by whom.

As explained in the report, one of the potential effects of 3DP is the ability to move away from the old paradigm of one product to one production site. Instead production can be divided into smaller units closer to the customer, and even brought into the home. It also provides the opportunity for new companies, often small and medium-sized enterprises (SMEs) or even individuals, to enter the supply chain and participate in production. This ranges from designers of the data files that tell the 3D printer what to print to companies running platforms where these files are created and traded. We will also see the emergence of new producers of, for example, goods on a small scale for niche markets.

This has the potential to shake the foundations of current power houses, be they countries where manufacturing is gathered or powerful multinational companies. It has been predicted that 3DP will slowly but surely transform manufacturing from large centralised production facilities that are hierarchically managed to smaller, individual or cooperative-type operations.

3DP might lead to a disruption of countries’ positions in the global manufacturing hierarchy. In a somewhat speculative chapter that didn’t make into the final version of our 3DP report, we discussed the new geography of trade and production. For example, countries specialising in low-cost manufacturing will see manufacturing moving away and force these countries up the value chain. This is because simple items (from household goods to tools) can easily be printed locally and there will be a reduced need for big production hubs. Even in remote, low-tech regions, tools can be printed with access to a wireless connection, the cloud, and a 3D printer.

3DP is already decentralising production on all continents. For example, in Uganda, 3DP is used to locally create custom-made prosthetic limbs. It is possible that this technology can be picked up on a larger scale in low income countries and help them to revive their manufacturing sector. And with widely spread knowledge about 3DP might come increased demand and innovation, including in the field of design and regional online platforms.

Today’s company structures will change as well. Multinationals can turn into umbrella organisations that coordinate myriads of small, local production facilities. Using cloud solutions, they can collaborate with designers and researchers spread out globally and then outsource production and distribution to local small businesses and individual producer-consumers.

Sounds interesting in theory, but is it realistic? Don’t forget that 3DP is not the only technological (r)evolution in town. Consider for example blockchain technology. Blockchain is basically a distributed database. Think of a giant, global spreadsheet that runs on millions and millions of computers. It maintains a continuously-growing list of data records hardened against tampering and revision. Blockchain-enabled systems can, for example, be used by manufacturers to manage their supplier networks, ensuring that all component providers have an accurate list of required parts combined with clear shipping schedules and automatically logged departure and delivery records.

Now take 3DP and blockchain together and you get the ability to distribute all tasks in a production network, while still maintaining full control and insight into every single part of the process. Of course, this is the world of tomorrow, but probably not a distant future. The technologies are already in use and are changing business as you read this post. Current power houses are still dominating, but are they like dinosaurs on their way to extinction to be replaced by a new species, ready to rule in a brand new world?

We don’t know to what extent 3DP and blockchain will replace traditional manufacturing and trade within these production networks. Still, production and trade will never be the same again. And this change has to be acknowledged and understood by business and policymakers – even (!) by trade negotiators. So, here is a question relating to trade policy that will become even more tricky to answer: what does your country export and who are your exporters? Already servicification and digitisation have, for example, broadened the picture of who exports services, where to, and which services. If the power houses of today are disrupted as described, this question will be even harder to answer. Still, if we want the WTO to support actual trade, it will be essential that countries have the answer.

More broadly, 3DP and blockchain are digital technologies, further underlining the fact that the WTO must start addressing the digital economy more concretely. WTO members should work on clarifying how digital issues are already covered by WTO rules and what new issues must be addressed (the work done by the E15 Expert Group on Digital Economy is a good start here).

Finally, the issue of data transfers must be discussed. Companies are already working with subsidiaries, contractors, partners, and customers spread out globally. In order to make this work, data must move. 3DP and blockchain reinforces this requirement, including the need to move personal data since it is produced and used in all parts of the production process. A major problem is the fact that data protection, including restrictions on moving personal data, differs from country to country. Hence, there is a need, in the WTO or elsewhere, to start discussing how regulation differs between members and see if there are ways to bridge these differences. Taiwan tabled a paper in the Committee for Trade in Services to open a discussion on data protection. This effort should be applauded and should function as a starting-point for further discussion.

We need to continue discussing the future of trade negotiations changes in the real economy to ensure that we are negotiating the right issues and that the result supports current and future trade – and not trade in the power house-dominated days of dinosaurs.

Magnus Rentzhog is Senior Adviser, Swedish National Board of Trade (Kommerskollegium).