Fashion’s Struggles with AI Hinder Global Trade Progress

The commerce of the future will be marked by the use of Artificial Intelligence (AI) to increase productivity and reduce costs. In this new international landscape, however, fashion could lose its opportunity for growth in the coming decades. The irruption of AI has not reached all sectors equally, and while the media, the financial sector or the electronics industry lead the indicators of intensity of use, fashion has the lowest rates of application of this technology.

According to the latest data published by the World Trade Organization (WTO), AI has the potential to increase the value of trade flows in goods and services worldwide by almost 40% by 2040. It will be precisely the reduction of costs, automation of tasks and, therefore, greater productivity, that will be the main variables accompanying the growth in trade, which will be between 34% and 37%, depending on the scenario, and up to a further 13% in the case of world Gross Domestic Product (GDP).

Looking ahead fifteen years to 2040, however, the growth potential is not the same for all sectors. According to data compiled by the WTO, industries such as electronics, media, telecommunications and the legal sector have the highest AI intensity ratios. Many of the traditional sectors, meanwhile, are in the middle range. The chemical sector, transportation, manufacturing and retail and trade, for example, dominate this level of implementation.

Fashion is at the bottom of the ranking, with the sector currently having a “low” level of AI intensity, along with industries such as paper, construction and plastics, according to the agency. The food sector, meanwhile, also shares with fashion at the bottom of the list.

Fashion currently has a “low” level of AI application

This growth, in addition to depending on the degree of AI implementation, translates in different ways. According to the WTO report, in fact, among the companies that are currently using AI, 90% report tangible benefits related to the commercial exchange of goods, while another 56% benefit from the increased ability to manage risks.

In fashion, a sector whose value chain is spread across the globe, especially in countries considered far-flung, AI implementation would bring increased value in both situations. In a scenario where so-called “low-income” economies, such as those in Asia, where fashion accounts for a large part of production, fail to digitize, the difference in growth could be as high as 14% for high-income economies, and as low as 8% for low-income economies.

“In a scenario with improvements in both infrastructure and AI adoption, low-income economies are expected to benefit even more, with GDP growth of 15%,“ the text explains.

Of all the companies using AI, 90% report trade-related benefits

According to McKinsey data, in fact, by 2023, generative AI alone could add between $150 billion and $275 billion in value to fashion. The difference, as the consultancy explained at the time, would depend solely on the degree of implementation and speed with which the industry adopts this technology.

Back to companies, the WTO also highlights the potential of applications such as AI content creation, which, it says, can enable businesses to scale more efficiently and compete in the global marketplace. However, the agency warns, AI development is concentrated both in a few economies and in a limited number of companies, increasing the current divisions between global companies and the rest.

“The impact of AI on development depends on trade and policy design in this area,“ the report explains. For AI-linked global growth to reach not just across economies, but across all sectors, “the right policies are needed to bridge the digital divide, invest in workforce skills, and maintain an open and predictable business environment,“ it adds.