This is the first piece in a three-part series, “Cardano & international trade in Developing Countries”, a piece dedicated to understanding the influence Cardano (ADA) blockchain will have in developing countries in the future. The first article focuses on challenges in international trade of developing countries and solutions offered by Cardano’s blockchain.
International Trade in developing countries
Developing countries in Africa, Latin America and other areas have long suffered under the huge trade deficits their economies face. The main issues rise from the tariff rates placed on exports from developing countries, subsidies and overall market barriers. Cardano’s blockchain is strategically placed to allow easier international trade between the developed and developing countries. The blockchain 3.0 network faces competition from Stellar (XLM) in its quest to take over the developing regions.
In this article we focus on the impact that Cardano (ADA) will have on the upcoming economies trade industry. By focusing on the main problems highlighted in a publication by the Ministry of Foreign Affairs in Denmark, we show how the upcoming Cardano main net will solve this problems as well as adding investment value to the countries to promote fair world trade.
Problems in International Trade to be solved by Cardano
High tariff rates
One main issue developing countries face is high tariff barriers on their exports making it very expensive to export their products. Countries in Latin and South America have for the past few years found it very difficult to transport their manufactured goods to UK or the US citing high tariffs as a major cause. This in turn deteriorates the manufacturing industry in the respective countries. The tariffs are high due to the complex processes and a lack of trust involved in recording, transport and competition systems of these goods.
Cardano looks to overpower the adoption of other blockchain technologies to solve this problem through its own crypto-practical blockchain. The IOHK-developed network aims to provide a multi layered platform that reduces the costs involved in international payment processes. The high trade tariffs will reduce sufficiently enabling manufactured goods to be transported overseas easily and efficiently.
Non-tariff elements of international trade
Cardano (ADA) will also solve the non-tariff barriers associated with the regional trade between countries. The blockchain offers a quality assurance mechanism that reduces the technical difficulties associated with the trade between the countries. Cardano looks forward to the start of rolling out its blockchain in parts of Africa, Latin America and South America. The company has already signed an MOU with Ethiopian government to test the blockchain in the agricultural ministry. This will reduce the logistical challenges and data storage smoothening the overall flow of exports from the farms to the shelves.
Regulatory pressures from foreign governments
Legal pressures are one of the most common issues that developing countries face in any sector of development. Cryptocurrencies are currently facing regulatory pressures as governments still try to understand the benefits from blockchain technologies. Foreign governments hugely influence the trade decisions in developing countries making it difficult for fair trade to take place.
The intimidation to pass laws favoring the foreign country’s trade deals using sanctions and conditioned grants has long been a killer factor in developing economies. Governments in developing economies are then strong-armed to put up laws as the middleman to control trade.
Using Cardano’s decentralized platform through its proof of stake consensus mechanism, traders can push their goods across borders easily. A trustless peer to peer system will allow a trader in Brazil to contact and carry out free trade with a supplier in Kenya without much fuss from both governments.