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Global trade in AI-enabling goods, including raw materials, semiconductors, and intermediate inputs, reached $2.3 trillion in 2023, while exports of digitally deliverable services surpassed $4.5 trillion.

Despite the scale of these digital transactions, physical supply chain bottlenecks and hardware tariffs continue to dominate the global economic discourse. The digital economy accounts for over 15 per cent of global gross domestic product and has grown 2.5 times faster than physical output over the past decade.

Bhargav Prajapati, a research analyst at Washington, D.C.-based Capital Trade, specialises in economic and quantitative analysis for United States trade litigation. Prajapati assesses market structures and the impact of foreign pricing practices in anti-dumping and countervailing duty investigations.

His research interests and commentary also provide a critical lens on how artificial intelligence is reshaping comparative advantage, global supply chains, and international commercial policies.

Measuring the Digital Trade Shift

The transformation of international commerce often remains obscured by legacy metrics focused on physical logistics.

'When we think about trade, we think of containers, ports, factories, semiconductors, steel or automobiles,' Prajapati notes. The physical components of commerce are highly visible, making supply chain disruptions or tariff implementations immediately apparent to market observers.

In contrast, digitally delivered services lack this physical footprint, complicating traditional economic measurements. Developing economies surpassed the $1 trillion mark in digitally deliverable services exports in 2024.

Artificial intelligence is projected to boost global trade in goods and services by 34 to 37 per cent by 2040, reflecting lower trade costs, higher productivity, and varying degrees of policy and technological catch-up.

As economies evolve, analytical frameworks must adapt to quantify these intangible flows accurately. 'Digital trade requires us to pay much more attention to services, intermediate inputs, and cross-border flows of knowledge,' Prajapati explains.

Establishing accurate metrics is a prerequisite for developing functional economic policies.

Valuing Novel Cross-Border Services

Artificial intelligence spawns entirely new categories of borderless industries that challenge classical economic classification. 'A customised AI-driven healthcare service, for example, combines many things at once – software, data analysis, professional expertise and digital delivery – in a single transaction,' Prajapati states.

Financial services firms can incur substantial upfront costs developing proprietary AI systems, but accounting treatment depends on the nature and stage of the expenditure rather than the economic value a model ultimately creates.

In 2025, the U.S. Financial Accounting Standards Board updated its guidance for internal-use software, while explicitly declining to create specific rules for AI-model training costs. China's Ministry of Finance, meanwhile, introduced provisions effective in 2024 that allow qualifying corporate data resources to be recognised as assets when existing accounting recognition criteria are met.

Determining the origin of economic value becomes complex when a service utilises dispersed cloud infrastructure and multijurisdictional data.

Consequently, Prajapati suggests, 'Our frameworks need to move beyond simply measuring what crosses a border and become better at capturing where components such as knowledge, intellectual property, data and specialised human capital contribute to the value of a service.'

Navigating Supply Chain Interdependence

The digital ecosystem relies entirely on a vast, physical foundation of specialised hardware and energy resources.

'A country may have leading AI companies, but they still depend on other countries for semiconductors, critical minerals, information and communications equipment, equipment for data collection, transfer, and processing, or even energy inputs,' Prajapati observes.

Governments applied nearly 500 quantitative restrictions to AI-enabling goods in 2024, with a significant portion targeting exports to control the outflow of critical technologies.

The highly integrated nature of these multinational operations can complicate conventional transfer-pricing analysis. The Transactional Profit Split Method may be appropriate in highly integrated value chains where parties make unique and valuable contributions and a reliable one-sided method is unavailable.

Furthermore, under the OECD framework, profits from these intangible assets are allocated based on the actual performance and control of development activities rather than mere legal ownership.

Strategic resilience is therefore paramount for national economic stability amidst global technology shifts. Prajapati emphasises, 'Competitiveness in AI will depend not only on capital and talent, but also on the resilience and diversification of the underlying supply chains.'

Modernising Trade Defence Mechanisms

Traditional trade defence mechanisms were engineered for physical commodities, leaving gaps in digital market oversight. 'Digital markets raise different questions about pricing, subsidies, market power, data flows and even where a service is produced,' Prajapati notes.

The World Trade Organization's subsidy rules can apply to government support for artificial intelligence. Although qualifying research subsidies were temporarily protected under the original agreement, those provisions expired in 1999 and were not renewed.

Concurrently, where cross-border data rights are transferred as intangible property between related entities, the transaction may, depending on its structure, become subject to the Commensurate with Income standard and potential periodic adjustments. Digital trade tools are now being deployed to transform non-tariff barriers into precision regulations.

Artificial intelligence can support customs risk analysis and compliance checks, while blockchain can strengthen traceability and verification of supply chain and trade records. Unilateral enforcement approaches in these complex areas risk creating fragmented global standards.

'The goal should be to develop clearer and more consistent rules for digital trade while preserving fair competition without unnecessarily restricting innovation or cross-border services,' Prajapati argues.

Fostering International Regulatory Coherence

Avoiding digital economic fragmentation requires multilateral coordination on digital governance and industrial policy. Prajapati emphasises, 'Countries need to create a regulatory climate where rules that govern cross-border flows of data, privacy, cybersecurity, and digital services are compatible with each other.'

Foundation-model markets remain highly oligopolistic, reflecting substantial entry costs and economies of scale, although rapid innovation and falling model prices continue to create competitive pressure.

Jurisdictions are advancing legislative frameworks to manage emerging technologies. In the European Union, the AI Act entered into force in 2024, while the revised Product Liability Directive explicitly covers software and AI systems.

A separate proposed AI Liability Directive was later withdrawn, leaving AI-related harms to be addressed through existing and revised legal frameworks rather than a dedicated agentic-law regime.

Uneven adoption of these standards could permanently fracture global markets and limit widespread economic benefits. 'The optimistic scenario assumes broad adoption of these technologies; if access remains concentrated in a small number of economies, the result will be greater digital divergence as opposed to global synergy,' Prajapati warns.

Optimising Global Trade Logistics

Beyond the goods themselves, intelligent systems are systematically dismantling logistical friction and administrative barriers at international borders. 'Now it can help identify potential buyers, translate communications and product information, and make that initial matching process much faster,' Prajapati states.

Agentic commerce increasingly relies on APIs, tokenisation and cryptographic authorisation, allowing AI agents to transact securely on users' behalf while preserving verifiable evidence of identity, intent and payment authority. Emerging frameworks such as Visa's Trusted Agent Protocol are designed to operate across existing web and payment infrastructure.

Financial enterprises are backing agentic-payment infrastructure to modernise transaction networks. Rather than relying primarily on cryptocurrency smart contracts, emerging systems from major payment networks use tokenisation, agent authentication, and cryptographic records of consumer intent.

Protocols such as Mastercard's Verifiable Intent are designed to bind machine-initiated actions to verifiable authorisation while operating across existing payment infrastructure.

These operational optimisations lower the prohibitive search-and-match costs that historically sidelined smaller enterprises from international markets. Prajapati concludes, 'For smaller exporters, that can make the difference between viewing a foreign market as inaccessible and being able to compete in it.'

Empowering Developing Economic Markets

Advanced economies dominate the tertiary trade space due to abundant capital, but strategic capacity building can integrate emerging markets.

'Developing countries need to invest in the foundations that make digital services exportable: reliable electricity, high-speed broadband, cloud access, digital payment systems and strong cybersecurity,' Prajapati outlines. Global institutions are working to bridge these critical digital divides with targeted financial and technical support.

Programs such as the International Telecommunication Union's Digital Infrastructure Investment Initiative are bringing development finance institutions, governments and investors together to mobilise capital for digital connectivity in developing economies.

Organisations also provide actionable guidance on open-source technology and interoperability, serving as key science and technology resources for emerging economies. Furthermore, targeted efforts are expanding the use of communication technologies to support microenterprises and e-business operations.

With these foundational elements secured, nations do not need to replicate entire technological ecosystems to succeed in the digital economy. Prajapati adds, 'They can sell long-term particular services, build expertise, and integrate into global digital value chains in much the same way countries historically entered manufacturing supply chains.'

Adapting Future Policy Frameworks

The exponential growth of the digital service economy demands a total recalibration of how policymakers govern global commerce. 'The most important shift is to stop treating trade primarily as the movement of physical goods across borders,' Prajapati asserts.

Foundation model developers face intense economic incentives to vertically integrate with downstream applications and upstream compute providers, potentially creating anticompetitive ecosystem lock-in.

Ensuring trust in this digital expanse requires open standards and immutable verification systems. Cryptographic protocols that bind transaction terms to payments are establishing an evidentiary foundation for automated contracting.

Systems integrating privacy-preserving biometric infrastructure are also emerging to assure that a verified human remains the authorised principal behind autonomous actions.

Recognising these underlying mechanisms is crucial for maintaining leverage in international trade negotiations and fostering sustained economic growth. 'The countries that adapt their trade policy and measurement systems to that reality will be better positioned to compete in the next phase of globalisation,' Prajapati concludes.

The ongoing evolution of international commerce is increasingly shifting toward intangible, borderless digital services. While legacy frameworks remain anchored to the physical movement of goods, the underlying mechanics of global economic power are being rewritten by artificial intelligence and digital infrastructure.

Acknowledging and regulating this trade revolution will define the resilience and competitiveness of modern economies. Ultimately, establishing cohesive, multilateral standards for digital transactions can help ensure that the next era of globalisation fosters inclusive growth rather than fractured divergence.