AI trade growth: The World Trade Organisation has revised its trade growth outlook for the year, citing a sharp rise in AI-related trade in the first half. The change comes at a time of rising geopolitical tensions and uncertainty over US tariff action, both of which have pushed firms to accelerate investment in automation and AI-enabled production. A new WTO report, Making Trade and AI Work Together to the Benefit of All, outlines how AI is already altering patterns of global commerce.
The report notes a clear divide in national readiness. Developed economies crossed the threshold of 100 AI-related policy interventions as early as 2015. Upper middle income countries followed by 2018. But many lower-income economies remain far behind. India is an exception: it is among the early adopters within its cohort, according to data from OECD.AI.
READ | AI education push: Can India bridge the digital divide?
AI and trade policy: a new alignment
The WTO argues that trade rules can accelerate AI adoption in two ways: by reducing tariff and non-tariff barriers for AI-enabling goods, and by lowering regulatory fragmentation. These goods include semiconductors, sensors, data-centre equipment, and high-performance computing systems — areas where fragmented national rules can slow investment.
Trade policy also intersects with AI across four domains: intellectual property, labour markets, industrial policy, and competition regulation. When aligned, these policies help countries scale AI-driven production more efficiently and integrate into complex global value chains.
In 2023, global trade in AI-enabling goods reached US$2.3 trillion, reflecting rising demand for data infrastructure, chips, and cloud computing systems. India has responded with the IndiaAI Mission, which aims to improve data ecosystems, expand domestic AI capabilities, and strengthen industry collaboration.
AI trade growth: Lower costs, fewer barriers, deeper integration
AI lowers trade costs by making logistics, warehousing, and customs processes more efficient. It improves real-time communication across borders and automates documentation, including complex sanitary and phytosanitary (SPS) checks, a longstanding hurdle in agriculture and food exports.
AI also reduces non-tariff barriers by simplifying compliance. Automated verification tools help exporters meet regulatory requirements quickly. Translation systems bridge language divides, enabling small producers to negotiate contracts and participate in cross-border trade. These features help MSMEs overcome information gaps, a barrier that previous rounds of digitalisation failed to resolve.
A joint WTO–ICC survey shows that more than 70% of firms using AI report cost efficiencies, while two-thirds of firms in developed economies and one-third in low-income economies have adopted AI tools. For small exporters in developing countries, AI improves navigation of trade rules and free-trade agreements, helping them enter new markets at lower cost.
Widening divides and shifting comparative advantage
The benefits, however, are unlikely to be evenly distributed. Developed countries enjoy a head start owing to better digital infrastructure, deeper pools of skilled labour, and stronger research ecosystems. Developing economies face structural constraints: fragmented supply chains, high costs of AI adoption, limited data access, and weak infrastructure.
The most significant concern is the potential erosion of labour-intensive comparative advantage. As automation scales, low-cost labour may no longer be the key determinant of competitiveness. Without investment in digital infrastructure and skill development, many developing economies risk falling further behind.
The WTO–ICC survey highlights adoption barriers among small firms: high upfront costs, limited technical expertise, cybersecurity concerns, and regulatory uncertainties. These challenges are acute in low- and lower-middle-income countries, where firms struggle to absorb new technologies rapidly.
India’s opportunity — and the policy gap
India’s early push through the IndiaAI Mission, and its strong IT services base, position it to benefit from the new wave of AI-enabled trade. But two gaps persist.
First, digital infrastructure remains uneven, especially in data centres, broadband availability, and secure cloud systems. Second, AI-related skills are concentrated in select sectors, leaving much of the manufacturing base unable to exploit new automation tools.
To remain competitive, India must strengthen the integration of AI into logistics, customs, and MSME export systems. This requires targeted investment, regulatory clarity, and deeper public-private partnerships.
AI is set to reshape global trade by shifting comparative advantages from labour cost to technology depth. Countries that invest early in digital infrastructure, data ecosystems, and workforce skills will capture larger gains. Those that lag may see traditional export strengths erode.
For developing economies — including India — the policy challenge is clear: build the capacity to use AI not only as a technological tool but as a trade enabler. A forward-looking trade policy, aligned with domestic digital strategies, will determine who benefits from the next phase of global trade integration.
Dr Rajeev Verma is Assistant professor (Economics) with University of Delhi.