Though inflation is easing, the global economy faces multiple challenges –  tight financial conditions, escalating conflicts, persistently high interest rates, increasing climate disasters, and shipping disruptions.

In its key economic report, the UN anticipates a decrease in global economic growth to 2.4% this year from the estimated 2.7% in 2023, surpassing initial expectations.

The World Bank has warned in its latest projections for 2024 as geopolitical tensions weigh on output. It said gross domestic product in the world economy was set to expand just 2.4% in 2024 — down from 2.6%. If the predictions are accurate, it would mark the third year where growth would prove weaker than the previous 12 months.

OPTIMISM ABOUT GLOBAL ECONOMY

“There are clear headwinds right now, but we remain confident in the overall picture,” says H.E. Dr. Thani Al Zeyoudi, Minister of State for Foreign Trade, UAE, adding that the global trading system, after recovering from the pandemic, set new records in 2022 with a total value of $32 trillion. 

“While there was a modest downturn in 2023 to $31 trillion, trade volumes increased, and the WTO predicted a 3.2% growth in trade value in 2024.”

Painting a resolutely upbeat picture, the minister says the global economy is much better than it was a year ago. “Global recession fears have eased, inflation is past its peak, and employment remains robust in the major economies.”

“The trade and GDP growth data gives us reason for optimism.”

TECHNOLOGIES TRANSFORMING TRADE

In the Middle East, advanced technologies, from AI to robotics to blockchain, have the potential to transform trade and unlock a new era of growth, boost supply-chain resilience, and increase operational efficiencies.

The changes are playing out at factories and ports, where they are implementing more advanced technologies.

“We’re already seeing AI automate custom procedures and warehouse management, data analytics and predictive analysis monitor cargo movements and inventories, and blockchain and asset tokenization to enhance trade finance, cross-border payment, and KYC processes,” says Dr. Al Zeyoudi.

As a global trade hub, the UAE’s ports and logistics companies have been developing many of these tools and platforms. 

For example, Abu Dhabi Ports has developed the Maqta Gateway, a suite of digitized trade services built on a cloud-based infrastructure that increases operational efficiency, transparency, and regional interoperability. Maqta Gateway is now integrated with the emirate’s Advanced Trade & Logistics Platform, the single-window platform for trade in Abu Dhabi. 

“ATLP has already enabled more than 100 million digital transactions, saving $50 million in costs and 9,000 tons of carbon emissions,” he says.

But there are more enduring changes that are more broadly affecting trade. For example, UAE Trade Connect, a blockchain-based trade finance platform that connects banks and their clients to reduce fraud and human error, is now regarded as the region’s most successful consortium-led, blockchain-enabled use case. 

“There are countless other examples, such as DP World’s Dubuy platform, a B2B e-commerce platform for Africa, that offer real-world proofs of concept,” he adds.

TRADING SYSTEM OF THE FUTURE

Taken together, the changes mark the biggest shift in how the trading system is managed now. Globally, the UAE has been leading initiatives to champion the trading system of the future.

At the World Economic Forum (WEF) in Davos in January, UAE launched TradeTech Global, a joint initiative by the UAE and WEF, to boost the digitization of international supply chains, enhance customs procedures, improve developing countries’ access to global trading systems, and spur trade growth.

“We are building an important movement to drive the adoption and employment of digital tools such as tech-enabled customs, data-driven supply chains, AI-powered inventory management, and digitized functions such as trade finance and compliance – all of which can spur a new era of trade growth,” says Dr. Al Zeyoudi.

Also part of the initiative is a regulatory sandbox, which will facilitate the design, testing, and implementation of regulatory policies for trade tech deployment, and a TradeTech Incubator to support promising new projects and startups in the trade tech space.

All this is building towards the first TradeTech Global Forum on February 27 in Abu Dhabi, alongside the World Trade Organisation’s 13th Ministerial Conference.

“We must work in harmony to deliver a global trading system fit for the 21st century – and the UAE is ready to play a leading role in delivering meaningful change,” the minister adds.

INTEROPERABLE SYSTEMS

While the UAE is expanding its role, rapidly positioning itself as a global trade hub, interoperability in international trade is the missing piece of the trade-digitalization mission, says Dr. Al Zeyoudi. “For a sector so crucial to the global economy, its processes have remained largely unchanged in half a century; physical documentation still absorbs as much as 20% of all shipping costs.”

Trade Tech report highlights that interoperable systems can increase supply chain efficiency, transparency, and trust, improve data collection, and accelerate the development of global regulations, helping to turn bilateral systems into regional and international ones. 

Interoperability is key to ensuring equitable access to the global trading system. “Without it, technological developments will be uneven and fragment international supply chains, creating new barriers to trade for smaller nations and operators. So, it’s certainly a key priority,” he adds.

The development of an entrepreneurial ecosystem is also high on the agenda. The minister says building on the startup culture already established in the UAE, the launch of the Trade Tech Incubator will help to identify, nurture, and scale emerging trade-tech enterprises. 

“We can create a collaborative cluster of excellence around these tools.

CEPA IS PAYING OFF

Not all countries have benefited equally, but overall, trade has generated unprecedented prosperity. The UAE, which has long understood the connection between trade and growth through the Comprehensive Economic Partnership Agreement (CEPA) program, is creating new market opportunities, establishing integrated trading relationships, and securing supply chains worldwide. 

And it’s paying off. 

The country has signed and implemented CEPAs with India, Indonesia, Israel, Turkey, and Cambodia and concluded deals with eight more nations spanning Asia, Europe, Africa, and South America. 

By the end of the third quarter of 2023, total non-oil foreign trade was $511.9 billion – 12.2% more than in 2022. 

“By reducing or eliminating customs duties, removing trade barriers, increasing market access for services exports, and creating pathways for investments and joint ventures, these bilateral deals not only stimulate long-term, sustainable economic growth but consolidate the UAE’s position as a global economic hub,” says Dr. Al Zeyoudi “Ultimately, our goal is for our CEPAs to enable the UAE to access more than 90% of global trade.”.

But the bigger impact will come by increasing non-oil exports. The country has set a goal of increasing its non-oil exports to $218 billion by the next decade, more than double the $99 billion achieved in 2022.

“It is a key priority for the UAE; it’s a major component of economic growth and diversification efforts,” he adds.