The Impact of Foundational AI on International Trade, Services and Supply Chains in Asia

ABSTRACT Foundational artificial intelligence (AI) is a general purpose technology that will affect economic activity across industries, with potentially significant impacts on jobs and international trade. This could include automation of routine and nonroutine white‐collar jobs, which reduces international trade where these jobs are on‐shored. However, where AI compliments existing jobs and leads to higher productivity, this could open up new opportunities for international trade in services. How foundational AI affects international trade will also depend on how it is regulated. Governments are moving to regulate AI, which could become a barrier to international trade. Geopolitics could also undermine opportunities for AI to deepen globalization and trade in AI as the USA and China restrict trade in the technology needed to build and run foundational AI systems. Regulating the impact of AI on international trade is an increasing focus in free trade agreements (FTAs) and digital economy agreements (DEAs). The World Trade Organization (WTO) Joint Statement Initiative (JSI) e‐commerce negotiations could also support trade in AI. Yet, there is much more that trade policy could do to minimize barriers to trade in AI.