- After a record year for trade in 2021, global trade growth is expected to remain robust in 2022, albeit with some slowing in pace
- A new multilateralism should take hold, with more and more bilateral, regional and multi-party trade agreements
- The signing by the United Arab Emirates of 27 Comprehensive Economic Partnership Agreements is representative of the new era of multilateralism
- The evolution of virtual assets, including central bank digital currencies, is set to reshape global finance, trade and investment
- The full report can be viewed and downloaded here: www.futureoftrade.com
Dubai, United Arab Emirates: Global trade, which hit a record high of $28.5 trillion in 2021is expected to grow steadily in 2022 and beyond as a new era of multilateralism – underpinned by regionalization, trade in services, innovation and sustainable trade – counteracts the impact of the slowing global economy, according to the latest DMCC Future of Trade Report 2022 titled “A New Era of Multilateralism”.
Although trade growth may be somewhat slower in 2022 compared to 2021, overall there is cause for optimism, despite well-reported issues such as the fallout from the war in Ukraine and the pandemic. Pent-up demand from the COVID-19 shock is already boosting trade in goods; a rebound in services trade should follow.
Ahmed Bin Sulayem, Executive Chairman and CEO, DMCCsaid: “After a record year for trade in 2021, we expect global trade growth to remain resilient in 2022, albeit with some slowing in pace. Beyond immediate support from a rebound in pent-up demand following the COVID-19 shock, longer-term changes are also underway that should support cross-border trade for years to come – these include increased regionalism, the strength of trade in services, innovation and climate policy.
“There is a common imperative for the future of trade and building more crisis-resilient economies – financing infrastructure and trade finance gaps. It will be crucial to address both in a way that is environmentally sustainable, as will bridging the digital divide between countries and sectors to bring the benefits of global trade to all.
A new era of multilateralism
Geopolitics, as always, will shape the trade landscape in the 2020s, building on new developments in regionalism, bilateral trade and global investment flows. Nationalist trade policies – as opposed to protectionist policies – should continue to dominate. A new multilateralism is likely to take hold. Old forms of multilateralism are likely to fade, while new forms, such as increased regionalism, will boost cross-border trade in new areas, including digitalization and sustainability.
Bilateral, regional and multi-party trade agreements are on the rise. In the United Arab Emirates, the government aims to sign 27 bilateral Comprehensive Economic Partnership Agreements with key trading partners, including eight this year, in a bid to boost trade and foreign direct investment. Elsewhere, declared offers from China and Taiwan to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, in addition to the UK’s ongoing accession process, offer opportunities for bilateral trade and investment.
Under the new trade paradigm, cross-border trade and investment will become increasingly market-driven rather than efficiency-driven. The intersection between trade liberalization and digital transformation will continue to be a watershed moment, and building compatible and connected networks will be essential.
The evolution of virtual assets, including central bank digital currencies, is set to reshape global finance, trade and investment. Innovative technologies continue to drive productivity gains, sustainable development and growth accelerations around the world. Commerce and technology will continue to seek synergies in 2022 and beyond.
Feryal Ahmadi, Chief Operating Officer, DMCCsaid: “Robust global trade will help build resilience, sustainability and economic growth in 2022 and beyond by providing countries with goods and services. The restructuring of the global value chain will continue to be a source of normalizing trade and reviving the recovery of global growth and cross-border trade, facilitating economic diversification and allowing countries to be less dependent on a number limited number of importers, exporters and sectors.
The Future of Trade 2022 report offers a number of key recommendations for businesses and governments:
Policy recommendations for businesses:
- Increased sharing of information through telecommunications (including through traditional and new technologies). This would help anticipate, cushion and manage unexpected shocks (including geopolitical tensions and natural disasters).
- Streamlining and digitizing trade facilitation processes. Faster and increasingly automated customs procedures and processes should be adopted to help offset the persistent increase in trade costs.
- Expand and diversify business-to-business credit. This would mitigate the risks. Firms and financial intermediaries should coordinate to address exposures within supply chains through improved business-to-business credit.
- In coordination with the government, an increased strategic focus should be placed on economic diversification to support resilience and sustainable initiatives against oil price shocks and climate-related production uncertainty.
Policy recommendations for governments:
- Continue to prioritize filling trade finance gaps, including through export credit agencies, expansion of working capital programs and new facilities to support SME exporters.
- Promoting trade should be a key political priority. Closer trade relations should be favored considering that as bilateral trade flows increase, the bilateral trade flows associated with the country pair tend to decrease.
- State-guaranteed bank loans should be used to buy trade receivables and inject cash into supply chains. Additionally, these secured loans could be securitized and funded by a central bank facility.
- Increase logistics performance. Reduce trade costs through greater efficiency in customs clearance and clearance, improved quality of trade and transport infrastructure, and ease of arranging shipments at competitive prices.
Three tectonic changes
According to the research, the new era of multilateralism will be shaped by three tectonic shifts in the global economy.
First, there will be a natural migration towards lifting barriers as countries become increasingly sensitive to the costs of protectionism, something many countries saw de facto when the pandemic froze global trade.
Second, inflation will continue to rise and central bank policy tightening will become more pronounced to combat rising prices. This makes borrowing more expensive globally, which reduces import demand and deteriorates export competitiveness.
Finally, global trade will be impacted by the climate crisis in terms of economic shocks and the opportunities it will bring. Although government intervention may be necessary to limit potential economic losses, we should see increased growth in demand for durable goods in both developed and developing economies, creating new opportunities for sustainable trade.
Launch of the report
At the launch event, held at Asia House in London, UK, global trade experts participated in a panel discussion to share their views on the report. Speakers included Pascal Lamy, former Director General of the World Trade Organization (WTO), and panelists from Standard Chartered Bank, Oliver Wyman, Hitachi and Pernod Ricard.
The Future of Trade is DMCC’s biennial flagship research on the changing nature of global trade. It examines the impact of technology, global economic trends and geopolitics on the future of trade, with a focus on trade growth, supply chains, trade finance, infrastructure and trade. sustainability. With up-to-date scenarios on how trade will evolve in the 2020s, the report is relevant for any reader involved in trade, trade policy, international investment and how businesses operate with global value chains.
To read the full DMCC report, please visit: www.futureoftrade.com
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Based in Dubai, DMCC is the most interconnected free zone in the world and the main trade and business hub for commodities. Whether developing vibrant neighborhoods with world-class properties like Jumeirah Lakes Towers and the highly anticipated Uptown Dubai, or providing high-performance commercial services, DMCC provides everything its vibrant community needs to live. , work and prosper. Built for trade, DMCC is proud to maintain and grow Dubai’s position as the go-to place for global trade today and in the future. www.dmcc.ae
 United Nations Conference on Trade and Development (UNCTAD)