Goods, Information and Funds: The Role of Infrastructure in Technological Revolutions

Each of the technological revolutions of the past two hundred and fifty years has been associated with a step change in infrastructure.

As much as canals and water power were entwined in the success of the Industrial Revolution, railways and ports were instrumental in the delivery of globally traded goods to the new urban centres of the early Nineteenth century.

Electricity networks in 1870s, road networks in the early 20th century and digital networks in the 1970s – all have facilitated the lowering of costs and changes in communication that have shaped the modern world.

In general, this process of investing in infrastructure has resulted in a liberalisation of trade, yet we are about to see the process of trade liberalisation stall, from a UK perspective, by the triggering of Article 50 and the beginning of the process of the UK exiting the European Union.

The prospect of reintroducing tariffs is, rightly, of great concern to business both within the UK and in our trading partners. Many commentators have pointed out that the UK already trades with many partners outside the Single Market under World Trade Organisation rules, but businesses counter that tariffs will make our exports uncompetitive and stifle trade with our European neighbours.

Of particular concern is the timing of the payment of the tariffs themselves. One likely consequence is a rapid expansion in bonded goods warehousing, so that goods can be imported in economic quantities and held with duty suspended until a shipment is requested.

However, exports do not originate at the ports, but in manufacturing centres across the country. How should we develop a national infrastructure to facilitate exports, whilst mitigating the effect of tariffs?

Export finance is known to be an extremely manual process and has been proposed as one of the key targets for disruption using Distributed Ledger Technology. I suggest that the disruption should not start there, but with the clear intention to transform the effectiveness of the UK as a trading nation through investment in both digital and physical infrastructure.

One proposal envisages a network of inland strategic rail freight interchanges, acting as an “extended gate” to the deep water ports. These are large facilities, perhaps providing as much as eight million square feet of warehousing each, with good connections to both rail and the motorways. Several are already operational, including here in Northamptonshire at Daventry, and their expansion is supported by the UK’s Policy Statement on National Networks.

 

Logistics is often described as comprising three flows: of Goods, of Information, and of Funds. The key to maintaining competitiveness is to stay ahead in all three.

A blockchain implementation, providing settlement services, the security against double spending and carousel fraud, whilst guaranteeing provenance and the chain of custody for certified sustainable and Fairtrade goods, could be the operational backbone of such a physical network.

The efficiencies of greater transaction speed and of paperless transactions would be transcended by the unification of the network into a single, logical whole.

The benefit of engaging a diverse range of operators for each terminal in the network need not be compromised; each could bring their skills to bear and drive efficiencies through more traditional approaches to optimising the movement of goods.

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