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Trade

Gulf states go digital with China

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A model of the BeiDou navigation satellites system is seen at an exhibition to mark China's Space Day 2019 in Changsha, Hunan province, China. (Photo: Reuters/Aly Song)

Author: Mordechai Chaziza, Ashkelon Academic College

The US–China strategic rivalry extends to the struggle for control over the digital economy — particularly digital infrastructure and technological innovation. China’s digital economy is among the most vibrant in the world, ranking second globally in 2021 at US$7.1 trillion. It has become a crucial part of the relations between China and Gulf states including Bahrain, Kuwait, Iraq, Oman, Qatar, Saudi Arabia and the United Arab Emirates (UAE).

The energy sector is still the largest recipient of Chinese investment in most Gulf countries. China’s crude oil imports originate from just nine Middle Eastern nations. Beijing’s oil and gas imports, infrastructure investment and arms sales give it regional influence that runs counter to the United States. The Gulf state economies have historically depended on energy exports for economic prosperity.

But the rise of digital technologies over the past decade has seen Gulf states diversify their economies by developing financial sectors and knowledge-based industries. That means digital cooperation between China and Gulf states could be a game changer for Beijing in its competition with the United States to achieve strategic superiority in the region.

The joint development of telecommunications, smart cities, artificial intelligence and technology-oriented businesses is a complementary endeavour for China and Gulf states. The young population of the Gulf are exposed to the growing presence of Chinese technology, ranging from social networking applications to digital payment platforms.

The Digital Silk Road (DSR) is the technological arm of the Belt and Road Initiative. The DSR Initiative has the potential to add US$255 billion to regional GDP and create 600,000 technology-related jobs in Gulf Cooperation Council countries by 2030. Still, DSR-related projects remain unevenly distributed among the Gulf states.

Tech giants have a role in delivering China’s DSR initiative and continuing the digital development of the region. Huawei is working with Saudi Arabia to develop digital infrastructure for religious pilgrimages. The firm has also partnered with Dubai officials to help update its airport and cooperated with the Dubai Electricity and Water Authority to build fibre optics and video surveillance.

In 2022, the UAE telecommunications company, Du, signed a Memorandum of Understanding (MoU) with Huawei to research, verify and replicate multi-access edge computing applications in the region. That includes leveraging 5G multi-access edge computing applications to live broadcast the Presidential Cycling Cup.

Huawei received permission to offer cloud computing services in Kuwait in July 2022. Alibaba has since pledged to build a ‘Tech Town’ with Meraas Holding, a Dubai-based developer, housing over 3000 high-tech companies. Alibaba has also inked deals to store cloud data in Oman and has a vast e-commerce footprint in Saudi Arabia.

Chinese artificial intelligence company SenseTime opened a regional headquarters in Abu Dhabi in 2019. Abu Dhabi Global Market and the Hong Kong Securities and Exchange have recently worked together to foster financial services innovation in Hong Kong and the United Arab Emirates.

Saudi firm M/s Aramco Asia is in negotiations to sign an MoU with Chinese firm Avic International on drone services and technology development. Chinese telecom firm Huawei is also trying to bid for the expansion of data processing centres in Dammam and Riyadh.

Chinese tech giants have notably participated in developing 5G networks in Gulf states. The United Arab Emirates and Kuwait were the first Gulf states to construct 5G networks. By 2019, the UAE 5G network covered 80 per cent of its cities, and Huawei had deployed more than 1000 5G sites across Kuwait.

China’s growing regional presence has led Washington to pressure Gulf states into picking sides. The United States perceives certain aspects of their digital cooperation with China as damaging to its national security. The Gulf states are aware of US concerns about China’s regional presence and they want to avoid getting caught in a great power conflict.

Despite doubts about Washington’s commitment to their security, Gulf states recognise that there is no substitute for the US military presence to block Iranian aggression. Gulf states are trying to diversify their economic and military support to avoid absolute dependence on Washington or Beijing. Picking sides risks the Gulf states losing their security partnership with the United States or…

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Trade

Fixing fragmentation in the settlement of international trade disputes

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Fragmentation in global trade due to the lack of development in multilateral trade rules at the WTO has led to an increase in FTAs. The Appellate Body impasse has further exacerbated fragmentation, requiring a multilateral approach for reform.

Fragmentation in Global Trade

Fragmentation in global trade is not new. With the slow development of multilateral trade rules at the World Trade Organization (WTO), governments have turned to free trade agreements (FTAs). As of 2023, almost 600 bilateral and regional trade agreements have been notified to the WTO, leading to growing fragmentation in trade rules, business activities, and international relations. But until recently, trade dispute settlements have predominantly remained within the WTO.

Challenges with WTO Dispute Settlement

The demise of the Appellate Body increased fragmentation in both the interpretation and enforcement of trade law. A small number of WTO Members created the Multi-Party Interim Appeal Arbitration Arrangement (MPIA) as a temporary solution, but in its current form, it cannot properly address fragmentation. Since its creation in 2020, the MPIA has only attracted 26 parties, and its rulings have not been consistent with previous decisions made by the Appellate Body, rendering WTO case law increasingly fragmented.

The Path Forward for Global Trade

Maintaining the integrity and predictability of the global trading system while reducing fragmentation requires restoring the WTO’s authority. At the 12th WTO Ministerial Conference in 2022, governments agreed to re-establish a functional dispute settlement system by 2024. Reaching a consensus will be difficult, and negotiations will take time. A critical mass-based, open plurilateral approach provides a viable alternative way to reform the appellate mechanism, as WTO Members are committed to reforming the dispute settlement system.

Source : Fixing fragmentation in the settlement of international trade disputes

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WTO ministerial trading in low expectations and high stakes

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The WTO’s 13th Ministerial Conference is set to focus on e-commerce transparency, investment facilitation, and admitting new members. However, progress may be hindered by disputes, especially regarding fisheries subsidies.

The World Trade Organisation’s 13th Ministerial Conference

The World Trade Organisation’s (WTO) 13th Ministerial Conference is set to take place in Abu Dhabi on 26–29 February, with expectations of deals on electronic commerce transparency, investment facilitation for development, and the admission of Timor Leste and the Comoros as WTO members. Despite these positive developments, the expectations are relatively modest compared to promises made at the 12th Ministerial Conference, which included addressing fisheries subsidies and restoring a fully functioning dispute settlement mechanism by 2024.

Challenges in Dispute Settlement and Agricultural Trade Reform

However, challenges remain, especially in the deadlock of dispute settlement since December 2019 due to a US veto on the appointment of Appellate Body judges. Progress in restoring the dispute settlement mechanism has stalled, and discord continues regarding India’s grain stockholding policy as a potential illegal subsidy. Restoring a fully functioning dispute settlement mechanism hinges on addressing US concerns about perceived bias against trade remedies in relation to China’s state subsidies.

Geopolitical Tensions and the Future of Trade Relations

The likelihood of reaching agreements amid geopolitical tensions between Western democracies and China appears slim, with issues surrounding subsidies and global supply chains causing rifts in trade relations. As nations focus on self-reliance within the global value chain, opportunities for trading face obstacles. Advocacy for open markets and addressing protectionist sentiments remains crucial for fostering resilience to external shocks and promoting economic growth.

Source : WTO ministerial trading in low expectations and high stakes

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Trade

Getting Vietnam’s economic growth back on track

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Vietnam’s economy grew 8% in 2022 but slowed in 2023 due to falling exports and delays in public investments. The economy’s future depends on structural reforms and reducing dependency on foreign investment.

Vietnam’s Economic Roller Coaster

After emerging from COVID-19 with an 8 per cent annual growth rate, Vietnam’s economy took a downturn in the first half of 2023. The drop was attributed to falling exports due to monetary tightening in developed countries and a slow post-pandemic recovery in China.

Trade Performance and Monetary Policy

Exports were down 12 per cent on-year, with the industrial production index showing negative growth early in 2023 but ended with an increase of approximately 1 per cent for the year. Monetary policy was loosened throughout the year, with bank credit growing by 13.5 per cent overall and 1.7 per cent in the last 20 days of 2023.

Challenges and Prospects

Vietnam’s economy suffered from delayed public investments, electricity shortages, and a declining domestic private sector in the last two years. Looking ahead to 2024, economic growth is expected to be in the range of 5.5–6 per cent, but the country faces uncertainties due to geopolitical tensions and global economic conditions.

Source : Getting Vietnam’s economic growth back on track

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