Future of Trade 2022 - SlideShare (English)

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DMCC is the world’s leading and fastest growing Free Zone and Government of Dubai Authority for
commodities trade, enterprise and innovation in business service and infrastructure.
The report presents updated scenarios for how trade will develop in the 2020s, relevant for any
reader involved in trade, trade policy, international investment, and the operation of businesses with
global value chains.
The comprehensive research frames the world’s capacity to drive global trade. It looks at multiple
long-term recovery scenarios, and examines underlying issues such as trade finance, digitalisation,
and infrastructure..
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There are growing uncertainties in the global economic
outlook. These have resulted in downgrades to growth
forecasts. Yet increased regionalism, strength in
services trade and innovation, and climate politics
stand to support cross-border trade in the years ahead.
However, global trade growth is expected to remain
resilient in the coming years, notwithstanding issues
such as the fallout from the war in Ukraine and from
the pandemic.

We predict the outlook for trade
to be underpinned and shaped by
3 tectonic shifts:
• A shift towards lower trade barriers
• Soaring inflation and the policy responses to it
• The impact of the climate crisis on global trade

Consumer price inflation in emerging and developed economies
Annual percentage change, end of period
Emerging market and developing economies World Advanced economies
Source: International Monetary Fund

• Slower economic growth in China.
• Oil at record levels. This could fuel sharp
growth inequalities and political tensions. Oil-
price increases can reduce demand for
goods because they reduce wealth.
• The danger of a continued rise in debt
defaults. As a result of the COVID-19 crisis,
global debt levels have surged. In 2020, total
global debt reached 263 per cent of GDP, its
highest level in half a century. More than half
of low-income countries are in debt distress
or at high risk of debt distress, threatening
import demand
Other pivots could disrupt
the status quo in trade
Source: International Monetary Fund
General government debt
Per cent of GDP
Advanced economics Emerging market and developing economies

“You will have multipolar trade alliances emerging, and they will create
their own closed loops once countries have chosen their allegiances
based on who they trust.”
Kai Fehr
Global Head of Trade
and Working Capital,
Standard Chartered
EXPERT OPINION

Source: World Bank World Development Indicators
Exports of goods and services
Annual percentage change
The United Nations
Conference on
Trade and
Development
(UNCTAD) valued
global goods trade
at a record US$5.6
trillion in the middle
months of 2021.

So far, the pandemic recovery has seen a
global boost in the trade in manufactured
goods, particularly durable industrial goods.
The increase in industrial production has
been mirrored almost one-to-one by solid
trade growth.
Strong growth in demand for goods will
prevail, supported by the easing of COVID-19
restrictions, stimulus packages, and recent
rises in raw-materials prices.
Significant strains in global supply chains that
emerged in 2021 have subsided, following the
reversal of pandemic-related factory and port
shutdowns, and weather-induced logistics
bottlenecks, as well as positive signs that the
acute shortages of semiconductors and
shipping containers are being addressed.
Trade shares for the EU, China and the US
Annual percentage change

• The five pillars of the future
of trade
• Increased regionalism
• A significant catch-up in
services trade
• Broad-based innovation
• Commodity and energy
market developments
• Strategic geopolitical
considerations
Export and import growth in services trade
Volume of imports of goods and services Volume of exports of goods and services

The pathways to drive
trade 2022 and onwards
Building greater resilience is
essential.
Although services trade growth
remains muted, the scope for a re-
acceleration is significant. Trade
openness matters in shaping the
strength of economies’ recoveries.
GDP growth has recovered faster
in countries with strong pre-existing
trade links to countries with few
COVID-19 cases, underscoring the
circuitry between trade, economic
growth, and risk management.
Services
Goods
Annual Growth
Quarterly Growth
World Trade
(right axis)
Source: UNCTAD calculations based on national statistics

Resilience Equity Sustainability
Mobilisation of resources Recovery in the tourism sector Innovation
Contributes to economic resilience by
allowing countries to be less
dependent on a limited number of
importers and exporters. Trade and
diversification can also reduce
reliance on vulnerable sectors.
Particularly important for several
smaller developing economies, the
sector is likely to strengthen, raising
its contribution to economic growth
within conducive policy frameworks.
New technology will continue to shape the
trade outlook. Trade policy and
agreements will be critical in shaping
incentives to innovate and invest.
Increasing market size, boosting
competition, comparative advantage, and
knowledge spillovers to take centre stage.
A resilient, equitable, and green recovery in global trade – What pathways
will trade support?

Trade aids economic
diversification
Debt forgiveness Energy market developments
Allows countries to be less dependent
on a limited number of importers and
exporters. Trade and diversification
can also reduce reliance on vulnerable
sectors.
Increases in private and public debt
have left many emerging and
developing market economies
vulnerable. Initiatives such as the
Debt Service Suspension Initiative
have helped stabilise the financial
ecosystem, thus enabling a recovery
in trade and investment.
High fuel prices will continue to elevate
shipping costs. Resource exporters stand
to benefit from elevated energy prices,
which could, in turn, incentivise economic
diversification and transformation into the
non-oil economies within resource-rich
hydrocarbon-dependent economies. This
would boost long-term sustainable growth.
will trade support?

Trade integration Resurgence in sustainable trade Strategic geopolitical considerations
Lower trade barriers and international
cooperation strengthens trade
transparency and economic resilience,
better preparing the world to deal with
future crises. A more inclusive and
coordinated trade environment will
ensure quicker recovery from future
shocks.
Climate change is driving increases
in extreme weather events. Safer
production processes have reduced
the frequency of technological and
industrial disasters. Inequality,
increasing economic fragility, and
geopolitical tensions are raising the
risk of conflicts. A reorientation of
trade to climate resilience can
accelerate the diffusion of
environmental goods and services
and expand the market for
sustainable products.
Countries need to protect their strategic
interests. This will influence trade in a way
that could foster more environmental
sustainability. One illustration of this is the
realignment of India’s Vietnam policy with
a view to promoting trade and investment
in line with the United Nations Sustainable
Development Goals (SDGs).
will trade support?

An increase in trade costs will be a defining characteristic of the trade landscape. Rising prices,
trade costs, and energy costs could erode country financing limits that support trade and could
impair trade financing gaps.
Faster relative export growth: Reductions in trade costs are associated with stronger trade
growth. Policies to reduce trade costs can be effective in boosting integration into the global trading
economy. The increase in trade costs will be a core driver of relative trade performance in the years
ahead. This is particularly true for economies that need to boost competitiveness.
Technology and competitiveness: Certain sectors have the potential for significant cost reduction
through technology and transformation of production processes. Under the expansion of Industry
4.0, manufacturing has the potential for significant reductions in cost, which also applies to labour-
intensive sectors.

Distribution of productive resources: Trade costs affect the distribution of resources devoted to
production and affect the balance between sectors. Without trade costs, countries specialise
according to their comparative advantage. When trade costs are high, specialisation decisions are
distorted, leading to an anti-export bias. For example, if trade costs are high, resources could flow
into agriculture at the expense of other high value-added sectors, such as manufacturing.
Global value-chain entry: The ease with which manufacturers can participate in global value
chains is linked to lower trade costs. Transport costs are therefore a key input. Border procedures
need to be fast, reliable, and cost effective. Global value chains offer significant opportunities for
employment, production upgrading through inward investment, and technology adoption.
High trade costs and currency developments: Currency undervaluation can be seen as a
means to foster domestic manufacturing, largely by facilitating an external trade surplus. Yet,
currency undervaluation can harm a country’s comparative advantage by altering the composition
of exports. Undervaluation may promote specialising away from high value-added manufacturing
and, instead, favour specialisation in broader goods that are more sensitive to price fluctuations.
Currency undervaluation may, in some cases, compromise economic transformation.

• Increased information sharing through telecommunications
(including through both traditional and new technologies). This
would help anticipate, buffer, and manage unexpected shocks
(including geopolitical tensions and natural disasters).
• Streamlining and digitalising trade facilitation processes. Faster
and increasingly automated customs procedures and processes
should be adopted to help offset the persistent increase in trade
costs.
• Broaden and diversify inter-business credit. This would mitigate
against risks. Firms and financial intermediaries should
coordinate to tackle exposures within supply chains through
enhanced inter-company credit.
• In coordination with the government, there should be an
increased strategic emphasis on economic diversification to
support resilience and sustainable initiatives against oil-price
shocks and climate-related uncertainty in production.
• Continue to prioritise filling trade financing gaps, including
through export credit agencies, the expansion of working
capital programmes, and new facilities to support SME
exporters (OECD, 2020).
• Trade promotion should be a key policy priority. Thinner trade
relationships should be prioritised with a view to the fact that,
as bilateral trade flows increase, the associated bilateral trade
flows associated with the country pair tend to fall.
• Government-guaranteed bank loans should be used to
purchase trade receivables and inject cash into supply chains.
Additionally, these guaranteed loans could be securitised and
financed by a central-bank facility.
• Increase logistics performance. Reduce trade costs through
greater efficiency of customs and border clearance, improved
quality of trade and transport infrastructure, and ease of
arranging competitively priced shipments.
For government For business
Recommendations

Concerns over spare capacity have
amplified the effect of geopolitics,
making the market highly sensitive to
anything that could be perceived as a
supply threat. The impact of higher oil
prices on trade will fuel sharp growth
disparities and associated political
tensions. The largest oil-exporting
countries (Iran, Russia, UAE,
Indonesia, and Kazakhstan) are likely
to benefit in terms of a positive terms-
of-trade adjustment. China, South
Korea, and Japan are significant oil
importers and play a major role in the
global oil market in their respective
choices of oil providers.
Oil price rises are likely to continue
Dollars per barrel
Source: International Energy Agency
Europe Brent Spot Price FOB Cushing, OK WTI Spot Price FOB

Meanwhile, the United States and Russia together
produce 30 percent of the world’s oil. Production rises
and/or sanctions could rapidly shake the landscape.
Cross-border trade and investment will be shaped by
which countries have primary resources and which
don’t. The nature of any oil-price change – whether
it is demand- or supply-driven – is significant
for global trade balances, particularly when
financial interdependence is high.
The number of the last
seven US recessions
that were preceded by
considerable increases
in oil prices
5

As a result of the COVID-19 crisis, global debt levels have surged. In 2020, total
global debt reached 263 per cent of GDP, its highest level in half a century. The build-
up has been broad-based, with rapid growth in both government and private debt.
More than half of low-income countries are in debt distress or at high risk of
debt distress; some countries have already defaulted, while debt
restructurings have been completed or are underway in some
countries. The global public debt ratio jumped to a
record 99 per cent of GDP. Private debt from
non-financial corporations and households has
also reached new highs. Debt increases are
particularly striking in advanced economies,
where public debt rose from around 70
percent of GDP in 2007 to 124
percent of GDP in 2020. Global debt levels stemming
from the pandemic-induced
global recession of 2020
US$226tn

“Tension between the US and China
was accelerated by the pandemic and
now this invasion of Ukraine by Russia
— all these trends are raising serious
concerns about a decoupling world.”
José Manuel Barroso
Chair of Goldman Sachs International
FT, 22 May, 2022
Although liberalised trade has been the basic
premise in the last 70 years, the pandemic
reshaped trade policies in many countries. The
reasons are both to ensure enough supply and
to mitigate price increases in certain instances.
A new era of geopolitical polarisation has
begun. The degree to which the great powers
cooperate – rather than compete – with each
other will have a decisive influence on how
dominant multilateralism is likely to be. There
have been periodic political backlashes against
globalisation for some time, and this trend is
likely to persist in multiple forms. They will be
heightened by the economic impact associated
with the COVID-19 crisis, aggravating policy
tensions across and the oil-price development.

Corporate talk of deglobalization has hit a new high
Mentions of nearshoring, onshoring and reshoring on company earnings calls and investor conferences* (monthly)
© FT
*data from 9,000 companies globally
Source: Sentieo

Both the economic and political landscapes will shift
considerably in the coming years, with implications for global
cross-border trade and investment. Middle powers and
regional trade agreements will lead to a greater regionalism.
Regionalism and a new multilateralism are likely to give rise
to a new trade order.
Old forms of multilateralism are likely to fade, while new
forms, such as increased regionalism, will drive
cross-border trade in new sectors, including
predominantly in digitalisation and
sustainability. It may pertain to certain
sectors that are the most innovative
and where there is an overlap in
priorities of the maj
Estimated account of world
trade attributed to the Regional
Comprehensive Economic
Partnership involving the
Asia-Pacific region.
30%

A new multilateralism in trade is likely to be characterised by:
 Deeper digitalisation. How digital and information gaps will be recalibrated, giving rise to
exponential growth and a more equitable and inclusive global economy through increased
transparency, information exchange, and innovations that enhance connectivity.
 Greater regionalism. Likely reductions in interregional knowledge and cross-border FDI
flows would correspond with increases in intraregional flows.
 Re-shoring and near-shoring. Moving production home or nearby will take place
alongside the continued dominance of the world’s trading hubs.

• Firms should further combine the advantages of domestic inputs
to production with the opportunities offered by offshoring and
international trade, with a particular view to diversification for
sustainability.
• Firms should upgrade investment in, and the promotion of, digital
technologies that can improve information systems for risk
management (such as with applications of the Internet of Things.)
• To ensure robust and resilient production, risk management and
production models should shift from just-in-time systems to
having a greater focus on long-term strategic considerations and
effective partnerships.
• Companies should not only diversify supplier connections but
also use and further build long-term relationships, which are
associated with faster recovery after shocks.
• Governments should maintain an open trade and investment
environment; in so doing, it is critical that policymakers provide
(time-limited) support to key sectors to recover from the
COVID-19 crisis.
• Governments should prepare for the next crisis (and the next
pandemic or significant climate event) by incentivising firms to
integrate risk awareness, risk management, and resilience
strategies into core business models.
• In collaboration with the private sector, the government can
collect and share information on potential bottlenecks upstream
in supply chains. Stress tests for specific supply chains are an
example of this.
• Governments should enhance systems to better assess oil-
price dynamics based on analytics and machine-learning
models, such as stream learning and usage of the Google
Index.
Recommendations

Looking ahead, the continued build-up of transparent, interoperable and connective networks will
be of primary importance to the global trade outlook. Digital scalability will promote both digital
transformation and improvements in structural economic growth.
Digital transformation will reduce the costs of engaging in international trade, changing
both how and what we trade, and contributing to growing competitiveness. Well-established
policy areas, such as with trade facilitation, will be disrupted, but, equally, developed and
streamlined with digitalisation. New issues such as cross-border data flows can, however, raise
new challenges.

There exists a continued digital divide
between high income and middle-income
economies, in terms of access to and
uptake of digital infrastructure and
technologies. Broader digital infrastructure,
digital access, and funding digital-skills
development are important areas to tackle
in order to close the access gap.
More internet penetration leads to a greater
degree of trade openness; on aggregate, a
10 per cent increase in bilateral digital
connectivity raises goods trade by nearly 2
per cent and services trade by more than 3
per cent.
Fixed broadband subscriptions (per 100 people)
China United States European Union
East Asia & Pacific World
Source: World Bank
United Kingdom

There are opportunities for countries to use
technology to diversify their supplier base.
Technology will continue to offer opportunities
to restructure supply lines (as an example, 3D
printing will facilitate reshoring and/or providing
complementary supply sources). New
technologies may also prompt companies to
seek greater internal flexibility, including work
practices and the use of virtual technology,
transient outsourcing, and pop-up enterprises,
also known as asset-light strategies.
Technology will continue to
offer opportunities to
restructure supply lines

Looking ahead, blockchain technologies will continue to
streamline the ways in which organisations can track
and verify the authenticity of trade documentation,
reducing transaction time and cost. Blockchain-based
trade finance will continue to increase and grow in
importance for developing and emerging economies.
This will, in turn, help unlock access to blockchain
finance, particularly in Africa .
The reduction of data entry
requirements made possible
through Blockchain adoption.
80%

The ability to shift activities online and to engage in digital trade depends on a range of factors or
digital enablers:
• Closing the digital divide. There exists a continued digital divide between high income and middle-income
economies, in terms of access to and uptake of digital infrastructure and technologies Broader digital
infrastructure, digital access, and funding digital-skills development are important areas to tackle in order to
close the access gap.
• Fostering effective cross-border usage of data. Digital trade is underpinned by the cross-border
exchange of data. Data are at the core of new and rapidly growing business models around cloud
computing, the Internet of Things, and 3D printing.
• E-commerce data availability. The availability of consistent e-commerce statistics is currently limited.
Business-to-business transactions account for the bulk (82 per cent) of e-commerce. However, the share
that is international, and therefore forms part of digital trade, has not yet been determined. Given this, there
is a need to agree on measurement methods for cross-border e-commerce.
• The depth of use of robots. In terms of robot density, Singapore, Canada, and Australia are above the
world average (of 74 units), with Singapore having the highest level by far, at 918 units per 10,000
employees in 2019. The electronics industry (particularly semiconductors) is the primary driver for industrial
robots. Some consumer electronics segments have also witnessed a positive demand shock from the
COVID-19 crisis.

Digital commitments within trade agreements have expanded. Increasingly, they have included issues of
market access and the governance of the cross-border movement of digital goods and services. Eighty-six
countries, accounting for 90 per cent of global trade, are currently engaged in WTO negotiations on a Joint
Statement Initiative on e-commerce.
Digital provisions in trade agreements are likely to continue to expand in breadth. Digital commitments can
be divided into three categories:
• Market access. Provisions covering customs duties, valuation issues, movement of service providers, and
access to data.
• Rules and regulations. Provisions that include covering intellectual property rights, protection of personal
information, and consumer protection competition.
• Trade facilitation commitments. Provisions that would include commitments covering paperless trade, e-
signatures, and digital authentication.

If greater digitalisation is to promote sustainable cross-
border trade and investment, it will require a
multifaceted, coordinated, and targeted policy
approach. Both businesses and government should
respond to potential future shifts in innovation and
technology, and align strategies and policies to gain
competitive advantage.
Any policy response to virtual currencies will need to
strike a balance between addressing risks and abuses,
while also avoiding over-regulation that could stifle
innovation (He et al., 2016). The initial focus should be
on the most pressing concerns – including financial
integrity, consumer/investor protection, and tax evasion.

• Businesses should help multiple parts of government to
effectively implement and manage digital (single-window)
systems and platforms to ensure efficient interactions between
importers, exporters, and authorities.
• Firms should collaborate with government to scale up
investments significantly in order to provide and build out the
adequate digital infrastructure to ensure accessible and
affordable connectivity.
• Expanded investment is needed in production processes for
additive manufacturing (3D printing) in order to reduce costs –
particularly in processes that use fine or small particles that can
considerably increase raw-material costs.
• Firms’ resources should be devoted to developing production
processes that promote economies of scale in innovative
technologies that increase productivity in the long-term, including
in additive manufacturing.
• Governments should facilitate imports of core equipment and
services through regulatory authorisation, trade facilitation, and
reduced import duties on information and communications
technology (ICT).
• Governments should adapt and reprioritise public and private
development strategies to meet the growing demand for goods
and services in the digital economies, with a view to enhancing
trade facilitation.
• Information and communications technology should be
integrated at all levels of education, and, in particular, should
embrace industrial collaboration between companies,
governments, and academic institutions.
• Governments (and businesses) need to incentivise ICT use
among smaller firms to enable their effective integration into
global digital value chains. This would include enshrining
privacy and data protection standards.
• New types of trade agreements should be conceptualised to
enable market growth of digital currencies; in time, this would
promote interoperability between payments systems to operate
in conjunction with each other.
Recommendations

Green finance, both public and private, will continue
to expand, representing an opportunity for investors
and providers of environmental goods and services to
scale up.
Much of the global economy is covered by
governmental net-zero commitments. This probably
means increasing levels of regulation introduced in
the coming years.
Global spend required on
energy and land-use systems to
achieve net zero by 2050.
US$275tn

Global carbon-trading markets should be reinvigorated by COP26 agreements that put in
place some of the guidelines for how the markets will operate. But the voluntary market
has remained lightly regulated, which should allow for innovation. Reporting standards
remain a key hurdle to overcome.
Expansions of trade in its current form will have a negative impact on the climate through
greater emissions, more pollution, and increased environmental degradation

A raft of new technologies, such as carbon capture
and storage, hydrogen, and AI are expected to
become mainstream in the medium term, with exciting
possibilities for climate change and trade. There are
also potential opportunities for new trade in captured
carbon from future capture and storage techniques.
Semiconductors will be at the forefront of the green
and digital transitions. As such, their production and
supply chains will become increasingly politicised as
governments look to safeguard their supplies and use
them to boost their domestic economies. The global trade in
semiconductors has
more than doubled in
the last 20 years.

As the world economy moves into a new post-COVID
era, sustainability concerns will increasingly require
companies to take environmental impacts into account
when considering all stages of their operations. This has
been clearly signposted by governments around the
world and it appears inevitable that more environmental
regulations will become the new normal.
There are, however, clear opportunities for those
operating in the environmental goods and services
sector; demand for these products is expected to grow
significantly as the decade progresses.

• Adopting low-carbon behaviour as a matter of urgency will give
companies a competitive advantage over late adopters.
• Businesses should conduct more detailed risk assessments on
exposure to climate risk, in coordination with governments.
• Companies should prioritise green investments that aid
resilience, generate returns, and protect against future changes
to the risk environment.
• The private sector should work with governments to leverage the
market to help fight climate change and scale up actions and
ambitions.
• Governments should agree to reporting standards for green
finance to boost investor confidence. They should ensure
regulations and standards are cohesive.
• Governments should meet their commitments on green finance
to drive investments, innovation, and adapting to climate
change in the sustainability sector.
• Advance notice of planned regulations should be given to allow
companies enough time to adapt their strategies and aspects
of their business models.
• Scaled-up infrastructural investment is required to allow green
technology to flourish at scale to safeguard sustainable trade.
Recommendations

The relationship between infrastructure and cross-
border trade will continue to be a primary driver for
global economic growth .
Persistent structural gaps within and between the
world’s economies will decisively influence trade in
the years ahead. At the centre is the need to close
the gaps through structural change. Infrastructure –
and renewed investment in infrastructure – will
lower costs in transportation. But the spike in oil
and commodity prices will impair the trade
financing gap significantly.
Most governments do not
have adequate resources on
their own to fully finance
their infrastructure needs

A declining availability of private trade-credit lines has had
a knock-on effect on low- to middle-income countries,
which has, in turn, coincided with a growing infrastructure
gap. This has meant that the lack of trade finance has been
an obstacle to trade growth, as well as keeping poorer
nations poor.
The gap between countries with good infrastructure and
those without is significant, estimated to reach US$15
trillion by 2040. There are expectations that the
increasingly uneven nature of the economic
recovery will result in an even larger
infrastructure funding gap.
Estimated portion of global
trade covered by credit or short-
term payment guarantees
80%

The trade finance gap was measured at US$1.7 trillion in
2020. Similarly, for infrastructure, there is a need for more
resources, with the largest shortfall seen in emerging and
developing economies that actively engage in cross-
border trade. Developing countries need to invest
approximately 4.5 per cent of GDP to achieve
infrastructure-related Sustainable Development
Goals (SDGs) and stay on track to limit
climate change.
of GDP
Investment needed by developing
countries to achieve infrastructure-related
Sustainable Development Goals (SDGs)
4.5%

Estimates project that half of SME trade finance requests are
rejected, compared with only 7 per cent for multinational
corporations. Some 68 per cent of companies in a survey
also said they did not seek alternatives after being rejected.
Trade finance is a significant concern for SMEs in
developing countries, and particularly in emerging
market economies, as they account for an
ever-increasing share of global trade
Estimated trade
finance requests that
are rejected for SMEs
50%

Fintech continues to help close the trade finance gap
by providing services to segments of the globe that
were often cut off from traditional financial support. A
key mechanism is connecting micro, small, and
medium-size enterprises to investors, lines of credit,
and business data. Estimates suggest that providing
services to individuals without bank accounts could
generate US$200 billion in global bank revenues.
Demographics will provide momentum for fintech in
emerging markets, which comprise more than 85 per
cent of the world's population, yet produce less than
half of that in global economic output.

Crucially, trade finance can contribute to
accelerating economic recovery through improving
market access. Industrial policy measures and
affordable access to finance will help build greener
digital economies. At the core of these
endeavours will be increased partnerships
between the public and private sectors.

• Make a stronger strategic case for the role of blending finance in
building resilient and sustainable market systems and business
modes.
• Pivot away from individual transactions towards greater use of
blended-finance funds and facilities.
• Coordinate with multilateral development banks’ trade finance
facilitation programmes through advocacy and mobilisation.
• Further re-orient transactions at the portfolio level to create larger
deals (through structured funds), to increase diversification and
reduce risks.
• Strengthen transaction advisory and business-development
advisory services as a key component of that ecosystem to help
generate blended-finance transactions.
• Policymakers need to strengthen the investment ecosystem
and align it with climate-change mitigation policies to mobilise
green investment, particularly in the renewable energy sector.
• Promote trade tools that are advantageous for women-owned
SMEs and women-led exporting firms (implementing reforms
that reduce fees and charges).
• The automation of the border process is important for women-
led micro, small, and medium-sized businesses, not only
because of cost reduction, but also by eliminating formalities
that subject women entrepreneurs to discrimination.
• The promotion of greater standardisation in blended finance
would simplify and lower transaction costs, as well as promote
transparency and growth.
• Closer coordination with pension funds and sovereign-wealth
funds would mobilise finance to close the trade finance and
infrastructural gaps.
Recommendations

To inform the research for DMCC’s Future of Trade 2022 report, DMCC organised six global
roundtables between January and March 2022 to capture the views of global business leaders on
the key trends, drivers, and challenges impacting the future of global trade. We canvassed the
views of 104 individuals representing a range of industries and organisations. They included some
of the world’s largest companies as well as SME’s; trade policy practitioners; sustainability experts;
technology specialists; academics; and other professionals.
As part of the dialogue, we asked three broad questions at each roundtable:
What will be the main force reshaping global trade in the next five + years?
What is the greatest threat to global trade growth over the next decade? And;
Which technology will have the biggest impact on global trade in the next five + years?
DMCC’s Future of Trade 2022 Global Roundtable Series

Participants across all roundtables were generally
positive regarding the outlook for global trade. Many
noted that trade was recovering strongly from pre-
COVID-19 levels and largely expected trade to grow in
the future.
Geopolitics, Digitalisation, and Sustainability were
considered the three major forces that will shape
global trade over the next five-plus years. Geopolitics
was the most popular answer amongst respondents
(29 percent), followed by digitalisation (26 percent),
and sustainability (16 percent).
What do the global trade hubs say?
Question 1: What will be the main force reshaping
global trade in the next five + years?
16%
26%
1%
29%
5%
9%
6%
8%
Sustainability Digitalisation Access to capital Geopolitics
Regionalisation Protectionism Regulation Something else?

US-China tensions and Ukraine war cause geopolitical concern
Roundtable participants in Houston, China, and London believed that geopolitics would be the main force shaping
global trade over the next five-plus years. Participants in Houston, for example, were near unanimous in their concern
about the potential for US-China tensions to undermine global trade and business. Participants in China were also
concerned about US-China tensions, but to a lesser extent than their US-based counterparts. Some participants in the
China roundtable believed that tensions would not heavily impact trade because it will be too difficult to decouple the
US-China trading relationship.
Roundtables in China, London, and Dubai took place after Russia’s invasion of Ukraine, and the conflict featured in
several participants’ answers as to why geopolitics will be a major force reshaping the future of trade.
The future of trade will be digital
Participants frequently championed digitalisation as a driver of future trade growth, with 26 per cent of participants
selecting it as the biggest force shaping the Future of Trade. Digitalisation was said to make trade and business more
efficient, and also encourage greater lending by financial institutions to SMEs and green projects, by enhancing
transparency.
The Future of Trade will be sustainable
16 per cent of participants believed sustainability would have the biggest impact on the future of trade. Participants
agreed that supply chains are becoming more ethical and sustainable, with decisions relating to them no longer being
taken solely based on commercialism. But participants also acknowledged there could be increased costs associated
with decarbonisation and reconfiguring supply chains along sustainable lines, which in turn could encourage inflation
and dampen trade.

Question 2: What is the greatest threat to global
trade growth over the next decade?
13%
29%
16%
11%
10%
8%
13%
US-China tensions
Nationalism and the drive for regionalism
Rising transport and input costs to trade
Carbon pricing
Data localisation policies
Lack of access to finance for SMEs
Something else?

‘Nationalism and the drive towards regionalism’ was seen as the greatest threat to global trade (29 percent), followed by rising transport
and input costs (16 percent). 13 percent of participants believed US-China tensions were the greatest threat, with over 70 percent of
participants who gave this answer based in China or the US.
Regionalisation a key trend to watch, particularly in ASEAN
Nearly a third of respondents argued that ‘nationalism and the drive towards regionalism’ was a threat to global trade growth.
Participants in ASEAN were more likely to cite regionalism as a factor shaping future trade, than participants in other roundtables.
ASEAN participants argued that supply chain shortages and geopolitics were driving regionalisation. Some businesses see ‘reshoring’
as a means of improving supply chain resilience in order to navigate US-China tensions and protect against future pandemics.
Rising input costs will present manufacturers with tough choices
Inflationary pressure caused by rising transport and input costs was regarded as the second greatest threat to future trade by
participants (16 per cent). Participants noted that manufacturers will either need to internalise increased costs, or pass them along to
consumers, which could reduce global demand.
Carbon pricing and carbon borders also considered a threat
11 percent of participants cited carbon pricing as a threat to global trade. While participants believed the global energy transition offered
opportunities for global businesses. There was broad agreement amongst participants that the global regulatory environment on climate
change would be “messy”, with diverse regulations on carbon pricing and climate change across different jurisdictions making trade
more difficult. Participants in Zurich were particularly concerned about the impact of the EU’s Carbon Border Adjustment Mechanism
(CBAM), citing concerns that it was seen outside the EU as a ‘veiled’ form of protectionism, possibly encouraging protectionist
retaliation from other regions and undermining Europe’s growth prospects.

21%
17%
16%
19%
9%
3%
15%
Artificial Intelligence
Big data
Blockchain
Automation
Additive manufacturing
Crypto/Central bank digital
currencies (CBDCs)
Something else?
Participants’ answers to this
question were split relatively
evenly across a range of
technologies. Indeed, one
participant from the Dubai
roundtable noted that several
technologies were emerging that
would mutually reinforce one
another and create a supercycle
for global trade.
Question 3: Which technology will have the biggest
impact on global trade in the next five + years?

AI holds the most promise for boosting global trade
Participants believed that Artificial Intelligence (AI) held the most promise in terms of boosting global trade, with 21 percent of
responses selecting this technology in comparison to the others. AI was seen as key to interpreting the ‘tsunami’ of data that global
digitalisation is creating. The perception was that AI will help companies create efficiencies that reduce costs, boost trade, and
enhance sustainability. At the same time, AI was seen as a key tool to plugging the SME-finance gap and the green financing gap, by
matching lenders with SMEs and green projects.
Data needs to move freely to enable technologies
Automation (19 percent) and big data (17 percent) were the next most popular choices amongst participants when asked about key
long-term supports for trade growth. Ten percent of participants cited data localisation as the greatest threat to global trade, noting
that many emerging technologies that could boost trade, will need high quality data to be able to move freely across borders.
Blockchain will be transformative for global trade
16 percent of participants believed that blockchain would have the biggest impact on driving global trade growth. The integration of
blockchain within global finance will increase money velocity and thereby trade volumes, but also increase efficiency and security,
allowing banks to grant more trade finance. Blockchain was also cited by several participants as the key technology underpinning
many transformative technologies relating to global trade, including AI, big data, and automation.
Participants less convinced by the impact of crypto-currencies and CBDC’s impact on global trade
While participants were enthusiastic about the potential for blockchain to drive global trade, only a handful (three per cent) pointed to
cryptocurrencies and CBDC’s as having the greatest future impact on global trade. Participants were sceptical about the utility of
crypto-currencies in facilitating trade transactions. They believed central banks would not accept crypto-currencies as legal tender,
nor would suppliers bill for crypto payments, due to crypto-currencies’ volatility and vulnerability. Participants instead, believed that
Central Bank Digital Currencies (CBDCs) would have greater use in trade transactions.

Conclusion
The outlook for trade remains resilient, notwithstanding the multitude of downside risks and challenges in the years
ahead. Continued policy support, pent-up demand by households and business in the retail and manufacturing sectors
are likely to support the outlook for trade.
International policy coordination in relation to boosting trade for more vulnerable economies remains critical to address
in forums such as the upcoming G7 Summit, as developing and emerging economies may take longer to recover.
On balance, the politics of trade encompasses a range of risks, including tensions in the US-China trade relationship
and indications of a ‘new age of protectionism.’ Although protectionism is likely to be kept at bay – economic
nationalism is likely to take centre stage when it comes to the setting of trade policies.
Alongside these challenges, a sustainable future for trade needs to be established, as well as how policy, innovative
finance and stakeholders in private and public sectors coordinate to tackle trade finance and infrastructure gaps that
continue to widen
following the COVID-19 pandemic.

Future of Trade 2022 - SlideShare (English)

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