Free-trade deals are the surest way to raise global prosperity

In an era of increasing globalisation, it is worth considering that as far back as 1860 some countries were already experimenting with free-trade agreements to increase prosperity. In January that year, the Cobden–Chevalier Treaty between France and the UK axed tariffs on a range of goods; the idea was so popular that it ushered in what American academic and diplomat Stephen Krasner called a "golden age of free trade" in Europe . Fast forward to the present day, and news that the UAE's non-oil foreign trade hit a record Dh1.4 trillion ($381.5 billion) in the first six months of 2024 shows how a series of free-trade deals the Emirates struck with international partners in recent years is bearing fruit. According to Sheikh Mohammed bin Rashid, Vice President and Ruler of Dubai, the figures reveal that exports in six months have equalled what the UAE used to export in an entire year before the Covid-19 pandemic. In the past couple of years, the UAE has signed a series of comprehensive economic partnership agreements, or Cepas , with fast-growing economies in Asia, the Middle East and Africa ; these have helped to boost volumes of non-oil foreign trade. In fact, the Emirates' Cepa programme is expected to grow the country's exports by 33 per cent and contribute more than Dh153 billion to gross domestic product by 2031. However, this was not an overnight success – considerable planning and negotiating has gone into striking these deals. They are also a result of a wider strategy to strengthen ties. Although the UAE signed its first Cepa relatively recently – with India in February 2022 – the country’s Cepa approach has long been embedded in strategic frameworks such as Projects of the 50, its programme for sustainable development. Nor are these agreements the country’s first foray into free-trade initiatives; in 2007, the UAE became a signatory to the World Trade Organisation’s Information Technology Agreement, a treaty signed by 78 states that seeks to eliminate tariffs on IT products. As the UAE continues to complete deals to remove or reduce tariffs and customs duties, improve market access and set up dispute resolution mechanisms, a number of economies are moving in a worrying direction. Under presidents Donald Trump and Joe Biden, the US has taken strong action against what it perceives as trade threats to its economy, such as May’s introduction of tariffs on more than a dozen Chinese imports, including 100 per cent duties on electric vehicles from China . There are reasons why some countries are currently wary of trade liberalisation or integrating their economy with foreign partners. The financial crisis of 2008 and the Covid pandemic both fuelled suspicion of globalisation and the perceived weaknesses of integrated supply chains. Acute shocks, such as the Houthi attacks on international shipping in the Red Sea, can also make countries more insular in their trade politics. However, this comes at a cost. In April, the International Monetary Fund warned policymakers that they should avoid protectionist measures “as these are likely to trigger retaliation from trading partners and can generate welfare losses”. In fact, it is trade liberalisation – such as that seen with Cepa deals – that offers the most rewards. In 2017, the World Bank suggested that the rapid globalisation seen since the 1990s grew average incomes by 24 per cent globally, leading the global poverty headcount ratio to fall from 35 per cent to 10.7 per cent. In April, the WTO said increased international trade between 1995 and 2022 “has coincided with a sharp reduction in global poverty”. The benefits that come with responsible free trade are clear, and so more Cepas are in the works . These will drive growth, further diversify the economy and boost the UAE’s domestic sector. Local manufacturing is a good example of this; earlier it was announced that the UAE’s industrial sector would receive an additional $6.3 billion in funding, backed by major companies. For these companies to export profitably, unfettered access to foreign markets will be vital. Of course, free trade requires much planning and balancing of relations. But if managed correctly, the kind of economic and political ties forged by such Cepa deals can generate more prosperity for all.