x Abu Dhabi, UAEMonday 22 January 2018

Gulf-US trade set to flow more strongly

Flows dropped by half in the past 20 years because of increased competition from Asia, but flurry of treaties between partners to lead resurgence, a Barclays banker said.

Trade flows between GCC countries and the United States, which have dropped by half in the past 20 years because of increased competition from Asia, are set to be rekindled in the next three years amid a flurry of treaties between the partners, a Barclays banker said.

The agreements to facilitate trade come at a time when Arabian Gulf countries are spending billions of dollars on infrastructure projects. They will need to import machinery, equipment and expertise from all parts of the world, including the US, the world’s biggest economy, said Baihas Baghdadi, the head of trade and working capital Europe, Americas, Middle East and North Africa at Barclays.

“I definitely believe that the trade flows between the GCC and the US will be the most important area of growth,” said Mr Baghdadi, who is based in Madrid. “Absolutely everything is being upgraded in the region. We are talking about logistics, infrastructure, water treatment, oil and gas. The companies in the US that will benefit will be from those sectors and the US companies are top in class in those fields.” Mr Baghdadi said that the change in the trade flows in the past 20 years have helped the UAE to become the third largest trade hub in the world after Hong Kong and Singapore. Two decades ago China accounted for 2 per cent of the GCC’s trade, but it is now about six times as much, he added.

Trade between the GCC and the US stood at US$130 billion in 2012 while trade between the GCC and China in the same year was $155bn, according to official figures. Trade between China and the rest of the world has proved particularly robust, growing to $3.87 trillion last year. Particularly impressive has been the performance of renminbi trade settlement, which has grown since its launch three years ago to 5.53tn yuan (Dh3.32tn) last year.

“There is a clear change in the trade corridors world wide. If you look at historical trade corridors, they have been north-south while today the trade corridors are going south-south,” said Mr Baghdadi. “Two decades ago, the flows between the US and the GCC countries were accounting for 15 per cent of the entire GCC trade. Today the US is less than half of that while China, Japan, Korea, India today are accounting the same as the US.”

Standard Chartered forecasts emerging market trade to account for more than 30 per cent of global trade volumes by 2030. Emerging market trade corridors are expected to account for 40 per cent of global trade by 2030, up from 18 per cent last year.

Recent GDP growth in emerging and developing markets has far exceeded that of G7 countries, leading to a growing middle class with disposable incomes and an increased appetite for foreign goods.

Trade flows have grown rapidly as GDP in emerging and developing markets expanded by 31.4 per cent between 2008 and 2011, compared with just 5.3 per cent for G7 countries during the same period.