Get policies right and global trade can have an $18t boost, says DMCC report

Deteriorating US-China ties will come to define trade in the 2020’s, plus the pandemic Dubai: A combination of tech-led advances and growth in cross-border services mixed with right sort of policies can boost global trade by $18 trillion – that’s according to the latest Future of Trade report DMCC (Dubai Multi Commodities Centre). Geopolitical tensions, namely the US-China trade war, and economic recovery from the pandemic will define the trade landscape of the 2020s. While COVID-19 caused the “fastest and deepest economic shock” in history, it can significantly re-shape the future of trade by accelerating trends such as digitalisation and the recalibration of global supply chains. Plus, there will be a reconsideration of the role of national security in trade policy. “Despite the evident economic uncertainty of the time, our research shows one thing is certain – the future of trade, and indeed the future of the economic recovery, relies heavily on global cooperation,” said Ahmed Bin Sulayem, Executive Chairman and CEO of DMCC.

Finance and infrastructure

There is currently a $1.5 trillion gap in trade finance, which is predicted to widen to $2.5 trillion by 2025. Similarly, there is a $6 trillion (Dh22 trillion) gap between infrastructure needs and available financing. This is expected to shoot up to up to $15 trillion (Dh55 trillion) by 2040. The key barriers to addressing the finance gap are the perceptions about trade finance and infrastructure investment as being high-risk, and the lack of access for wider groups of investors due to regulatory burden.

Tech as a boost or disruptor

While some technologies have the potential to boost trade, others may disrupt current patterns of production and, by extension, on trade movements. The net effect of technology on trade growth could be about $400 billion. “There is an urgent need for governments to address the fragmentation of global technology policy, to prevent the evolution of separate standards, applications, and systems,” says DMCC.TRADE AND POLITICS* The strategic rivalry between the US and China will be the defining dynamic for global trade in the 2020s – with global trade tensions likely to get worse before they get better. * The US-China trade tensions have given cover for “other actors to implement protectionist agendas”. Protectionist measures were at a historic high in 2019, a situation which has been exacerbated by the COVID-19 pandemic. * WTO (World Trade Organization) reform is highly unlikely in the current climate. In the interim, economies will need to become more innovative to create a new trade order reliant on pluril-ateral, regional, and bilateral agreements. * Global trade tensions have driven a re-calibration of supply chains. * In this environment, the strategic objective of supply chains becomes one of risk resilience in addition to cost efficiency. – ‘Future of Trade Report 2020’ Source: Gulf News