UNCERTAIN FUTURE OF MONEY intensify their use of trade restrictions as they The financial sector is not immune from the technological jockey for global position. Finally, protecting changes that are transforming other industries. Digital critical inputs and strategic supplies, especially currencies are likely to gain wider acceptance during the pharmaceuticals in the wake of the pandem- next two decades as the number of central bank digital ic, could lead to greater trade restrictions for currencies increase. China’s central bank launched its these industries. digital currency in 2020, and a consortium of central banks, China, the EU, Japan, and other economic working in conjunction with the Bank of International Set- powers will also use their leverage to advance tlements, is exploring foundational principles for sovereign national security goals, further distorting mar- digital currencies. kets. Since 2008, they already have intensi昀椀ed their use of trade restrictions and domestic The introduction of privately issued digital currencies, such as Facebook’s proposed Libra, would further drive accep- market regulations for strategic in昀氀uence. Looking forward, concerns about privacy and tance of digital currencies. The extent to which privately control of data streams as well as trade in issued digital currencies will provide a substitute for the industrial goods and other technologies are use of national or regional fiat currencies, including the US likely to lead to even more activist trade poli- dollar and the euro, to settle transactions will depend on cies for broader national security interests. the regulatory rules that are established. ECONOMIC CONNECTEDNESS The US dollar and the euro are also likely to face threats EVOLVING, DIVERSIFYING from other fiat currencies, the potency of which will depend In addition to trade policies, demand for and on changes in the current international financial architecture the increased ability to deliver services across and the global importance of international linkages. Pri- borders and the use of e-commerce platform vately issued digital currencies could add complexity to the technologies are likely to further transform conduct of monetary policy by reducing countries’ control economic connectedness, including the shape over their exchange rates and money supply. of global value chains, the location of foreign direct investment, and the composition and direction of trade. Despite the fragmenta- tion of the global trading system, trade in a 2030 if countries adopted digital technologies, broad range of services, including 昀椀nancial, which would facilitate expansion of services telecommunications, information, tourism, trade and provide a further boost to continued and others, is poised to increase during the growth in economic connectedness. next two decades. In OECD countries, services account for roughly 75 percent of GDP and 80 New Manufacturing Technologies Shifting percent of employment, but the current value Trade. The con昀椀guration of global supply of services trade globally is only one-third chains in 2020 largely re昀氀ected the importance of that of manufactured goods, suggesting of economies of scale and labor as a source that there is signi昀椀cant room for growth. The of value creation in the manufacturing sector, WTO’s Global Trade Model estimates that leading to the centralization of production in a global trade would grow by around 2 percent- few lower wage locations, especially China. A age points more than baseline growth through large increase in the use of digital technologies A MORE CONTESTED WORLD 49