GLOBAL TRADE FINDS FRESH HOPE WITH NEW US-CHINA DEAL

The United States’ agreement with China in December on Phase 1 of a trade deal is a welcome development that will unlock trade flows across the world.

The deal will require structural reforms and other changes to China’s economic and trade regime in the areas of intellectual property, technology transfer, agriculture, financial services, and currency and foreign exchange, according to the Office of the United States Trade Representative.

The global economy has been weighed down by trade disagreements between the world’s two largest economies, crimping growth across the commodities, manufacturing and services industries.

The United Nations Conference on Trade and Development (UNCTAD) noted in its latest report that merchandise trade is predicted to drop by 2.4% to USD 19 trillion, after significant growth rates in 2018 (9.7%) and 2017 (10.7%). Trade in services is predicted to only increase by 2.7% to USD 6 trillion, a considerable deceleration from 7.7% in 2018 and 7.9% in 2017.

Real global economic output (gross domestic product) is now expected to grow by 2.3% this year, 0.7 percentage points less than last year. Equally crucial, it should boost the Chinese economy, which is a key trading partner of many emerging economies, including Saudi Arabia.

Amid the backdrop of slow global growth, Saudi Arabia’s exports in the first nine months of the year stood at SAR 738.9 billion, while imports stood at a shade under SAR 400 billion, according to data gleaned from the General Authority for Statistics.

The export figures for the first nine months of the year is a 9.2% decline compared to the same period last year, but it is understandable given lower oil prices, Saudi Arabia’s decision to maintain oil production cuts as part of a wider agreement with other OPEC producers, and a retooling of the overall economy.

Beyond the short-term blips, Saudi trade is expected to secure a big boost amid a focus on diversification of trade, and developing a non-oil manufacturing and industrial hub in the country.

Saudi Arabia emerged as among the top 10 developing economies in UNCTAD’s latest Business-to-Consumer E-Commerce Index. The kingdom was ranked 49th globally in the overall rankings, an improvement of three places, out of 152 nations.

The recently concluded GCC Supreme Council summit in Riyadh also focused on trade, noting that the region must strengthen strategic relations and economic co-operation with France, Russia, the European Union, the European Free Trade Association (EFTA), the South American Common Market (MERCOSUR ) and other countries as well as the international and regional organisations active in the EU and America.

The GCC Supreme Council also focused on improving strategic relations and economic co-operation with a number of Asian countries, including China, Pakistan, India, Japan, South Korea and the Association of Southeast Asian Nations (ASEAN).

Indeed, Saudi Arabia has been paying close attention to its neighbouring emerging markets. In October, the kingdom signed a number of memorandums of understanding (MoUs) with the Indian government in several areas including energy, civil aviation, medical product regulation, security co-operation and defence.

Meanwhile, the Saudi Logistics Hub, a government initiative mandated to drive growth in the kingdom’s thriving logistics sector, has been on a global roadshow to promote the country’s infrastructure in the UAE, Jordan, Egypt, China, Japan, India, and Germany.

“Saudi Arabia currently commands a 55% share of the logistics market in the GCC region. Over the last decade, the country has invested more than USD 100 billion in its transport and logistics infrastructure, resulting in a comprehensive nationwide network,” according to the company. “In 2019, Saudi Arabia saw a 47% increase in the number of new foreign transport and logistics companies establishing operations,” according to the Saudi Arabian General Investment Authority (SAGIA).

Saudi Arabia is also forging closer trade ties with its neighbour, the UAE. Non-oil trade exchange between the two countries has reached AED 417.6 billion over the past five years, according to Sultan Bin Saeed Al Mansouri, UAE’s minister of economy.

Non-oil exchange between the UAE and Saudi reached AED 107.4 billion in 2018, a surge of 35% over 2017.

In November, the two countries agreed to issue joint tourist visas, speed up the flow of traffic at the entry ports, and signed four new MoUs in the areas of health, culture, space and food security.