DMCC research suggests significant policy innovation to create potential USD 18 trillion boost to trade
There is the potential for an USD 18 trillion (AED 66 trillion) boost to trade according to DMCC’s latest Future of Trade 2020 report released recently. Now in its third edition, the report examines the impact of geopolitics, technology, COVID-19 and global economic trends on the future of trade, with a focus on trade growth, supply chains, trade finance, infrastructure and sustainability. The research has identified four key components that, if taken together, could drive trade by USD 18 trillion up to 2030.
Ahmed Bin Sulayem, Executive Chairman and Chief Executive Officer, DMCC, said, “Despite the evident economic uncertainty of the time, our research shows that one thing is certain – the future of trade, and indeed the future of the economic recovery, relies heavily on global cooperation. Finding common ground and collectively making the case for international trade will be key determining factors of success. With this research, DMCC set out to not only identify barriers to global trade but provide solutions to them.”
According to the research, geopolitical tensions and economic recovery from the global COVID-19 pandemic will define the trade landscape of the 2020s. While the pandemic has caused the fastest and deepest economic shock in history, it has already significantly shaped the future of trade by accelerating trends such as digitalization, the recalibration of global supply chains, and a reconsideration of the role of national security in trade policy.
According to a statement from DMCC around the report, in 2020, the global trade order is at a tipping point that will define the decade ahead. However, if businesses and governments are willing to collaborate to overcome some of the barriers at hand, the outcome will be a positive one. These include the implementation of technology that supports trade, the growth of cross border services trade, innovation in trade policy, and the investment in trade related infrastructure.
The report has identified significant gaps in terms of financing. In addition to a USD 1.5 trillion (AED 5.5 trillion) gap in trade finance, predicted to widen to USD 2.5 trillion (AED 9.18 trillion) by 2025, there is a USD 6 trillion (AED 22 trillion) gap between infrastructure needs and the available financing. This gap is predicted to widen to up to USD 15 trillion (AED 55 trillion) by 2040.
The research suggest that there must be significant change in the way both private and public sector actors operate and work together to address the misperception of trade finance and infrastructure as being high-risk as well as regulatory framework to open up to wider investment options. The trade finance gap can be closed by increasing the size of the pool of finance and improving access to trade finance. Technology has a major role to play but needs to be supported by global agreement on the digitalization of trade finance. The infrastructure finance gap can be closed by finding solutions to enable reserves of private capital to enter the infrastructure investment pool. This requires coordination with government, and greater innovation in infrastructure planning and development overall.
The full report can be downloaded here.
