UAE’s New Trade Bloc: Ambition, Global Positioning, and Challenges

The United Arab Emirates (UAE) is intending to establish a new trade bloc, a strategic and interconnected initiative aimed at achieving multiple goals on both the national and the international level. This trade block should not be interpreted in isolation, rather as part of the UAE’s wider economic and geopolitical strategy, which reflects the changing and evolving dynamics of the global trade landscape.

In a fragmented globalization era, where competition and integration attempt significantly increase between the regional trade networks and the multilateral systems, the UAE is poised to maintain its influence and relevance by positioning itself at the forefront of the global landscape. This approach will benefit the UAE on different levels, including advancing domestic priorities while simultaneously enhancing its leverage within the evolving global economic power. Nevertheless, the bloc’s success is not completely guaranteed, as it will need to navigate significant regulatory, infrastructural, and political barriers to translate its potentiality into tangible outcomes.

A new trade initiative poised to reshape the engagement of mid-sized players within the global economy is being developed by a coalition of small and medium-sized economies, led by Singapore, the UAE, and New Zealand. The new initiative, previously known as Future of Investment and Trade Partnership (FIT-P), reinforces rules-based trade, further expanding cooperation in the fast-growing digital economy, which is expected to bring together ten different nations, spanning across the Asian, Latin American, African, and European continents. Additionally, more countries are expected to be included and are currently under consideration, including Malaysia, Morocco, Rwanda, Uruguay, Costa Rica, Panama, Paraguay, and Norway. Even though the membership criteria are still being negotiated, however the inclusion of advanced, emerging, and frontier markets underscores the initiative’s global and inclusive perspective.  The coalition aims at providing an alternative model of economic collaboration, characterized by being more flexible, more pragmatic, and forward-looking at a time when traditional trade blocs often struggle to adapt to evolving and changing realities.

The new FIT-P is set to be officially launched during a virtual ministerial meeting in November 2025, which is expected to be followed by a high-level in-person summit in July 2026. The proposed timeline highlights the initiative’s pragmatic approach, which focuses on advancing in a fast manner, showcasing its momentum while allowing sufficient time to resolve and work on technical details via ongoing dialogues. This phased rollout will enable participating members to coordinate on immediate priorities, form working groups, and set up necessary implementation mechanisms. Although the new initiative is still in its formation stages, its design which focuses on digital trade, investment facilitation, and pragmatic cooperation, is poised to offer numerous economic benefits for its members. These benefits can be evaluated by examining both the stated objectives of the FIT-P and the evidence from comparable international trade agreements.

Situating the FIT-P against earlier experiments in regional and digital trade integration helps to better assess the prospects of the FIT-P. The Digital Economy Partnership Agreement (DEPA), though limited in membership, linking few countries including Singapore, Chile, and New Zealand, is the closest and most ambitious analogue in technical scope, pioneering standards on digital trade, e-signatures, and interoperability. While FIT-P is built on DEPA’s modular, digital-first architecture, it aims at further advancements by linking digital trade rules with investment facilitation and ‘TradeTech’ pilots, yet the challenge lies in the slow diffusion of DEPA’s model, which reflects the difficulty of moving from pilot clauses to broad adoption across diverse economies. On the other hand, while the Asian- Pacific model known as “The Regional Comprehensive Economic Partnership” is broad in its membership, however, it remains shallow in commitments, as it focuses on tariff preferences while neglecting sensitive regulatory areas.

Despite its aspiration to create different binding technical standards in digital economy, however the FIT-P, is at risk of echoing the similar trap of declaratory breadth without regulatory depth.  While the prestige of continental integration is illustrated by the African Continental Free Trade Area, it also illustrates the drag of heterogeneity, as its digital and investment protocols remain slow-moving, often overtaken by bilateral agreements. FIT-P may encounter similar challenge if it seeks to accommodate too many disparate systems, yet it could mitigate this risk by concentrating on a limited set of enforceable digital standards instead of a sweeping agenda.

Combined together, these comparisons suggest that FIT-P’s credibility will depend less on membership size, on the contrary it will depend more on its capacity to deliver enforceable technical standards.

Being acknowledged as a founding member of the FIT-P gives the UAE advantages across several strategic fronts. To begin with, the country’s identity as a global trade hub would be solidified, given that the UAE has poured significant investments in enhancing the services of its various ports, airports, free zones, and logistics platforms that facilitate and ease international trade. By reducing trade frictions, the bloc directly boosts these assets and strengthens the value proposition of hubs such as Jebel Ali, Khalifa Port, JAFZA, and KIZAD.

Second, to advance digital economy and innovation, the FIT-P aligns with the different national strategies. The UAE, initially aiming at increasing the contribution of digital economy to reach 20% of its non-oil GDP by 2030, is promoting smart logistics while integrating new technologies across both its public and private operations. In 2024, the UAE had already exported 52 billion in digital services, ranking 21^st globally, highlighting its potential to grasp a greater share of cross-border digital trade.

Third, new channels of economic engagement will open with regions such as Latin America, Africa, and Europe, where the UAE’s trade presence remains relatively modest despite its rapid growth. By anchoring FIT-P, the UAE will reinforce its strategic, long-established role as a bridge economy which serves into linking the East with the West, the North with the South and vice versa. This positioning is both commercial and diplomatic, enhancing the UAE’s role and reputation as a pragmatic connector in an increasingly fragmented global economy.

Fourth, the attractiveness of the UAE as an investment hub could be boosted by the FIT-P. Due to its developed infrastructure and healthy regulatory environment, the country is often used as a regional investment base by many multinationals. A larger FIT-P market enhances predictability and scale, placing Dubai and Abu Dhabi as prime locations for headquarters, light manufacturing, and value-added processing. Joint ventures in digital platforms—such as regional payment systems or blockchain-based customs solutions—would complement the provisions already included in several of the UAE’s Comprehensive Economic Partnership Agreements (CEPAs). Practically speaking, the application of these previously mentioned measurements could help in attracting additional foreign direct investment (FDI) into into logistics, fintech, and advanced services, which in turn would cement the UAE’s role as a starting point for cross-border commerce, where in 2024, FDI inflows reached a total of $45.6 billion.

Fifth, some of the concrete gains are reflected in both trade facilitation and the increase of efficiency. Every layer of friction—be it inconsistent customs procedures or the lack of digital documentation—undermines competitiveness. By prioritizing interoperability and mutual recognition of electronic contracts, FIT-P has the potential to produce significant cost and time savings. World Bank studies estimate that harmonized regulations and enhanced digital connectivity could lower trade costs by up to 20% for goods and up to 30% for services.  For the UAE, a major and high re-export economy, such reductions could save billions of dollars and enhance throughput across its ports. FIT-P’s digital provisions, combined with an increase in digital trade projection estimated at 12.3% annually between 2023 and 2028 in the UAE, could materially raise the digital economy’s contribution to GDP growth.

Yet, the same ambition that allows FIT-P to project the UAE’s leadership also raises difficult questions about execution, underscoring the need to confront them.

One of the most prominent risks lies in the institutional depth, whereas many regional and cross-regional often start with ambitious declarations and frameworks, yet struggles to implement and secure enforceable commitments.  In the absence of clear mechanisms, the bloc risks becoming a symbolic entity, characterized as a loose coalition with minimal and limited effectiveness.  Harmonized digital rules, streamlined customs procedures, and reliable dispute resolution, all contributing to tangible results, are some of the foundational elements for businesses to regard/view this bloc as credible and serious.

Another challenge arises from the diversification of its members, as legal systems, income levels and political environments vary across nations, hence, agreeing and aligning on a unified regulatory framework for digital trade or investment protection will require extensive and substantial technical work, while some nations will offer political compromises. Without planned coordination, the bloc will remain rhetorical, failing to implement any tangible frameworks.

Overlapping with existing agreements is yet another risk, as many prospective members already belong to existing regional trade blocs, each with their own bilateral agreements addressing similar issues. Hence, without clear added value, FIT-P or its equivalent, will face redundancy and limited uptake. Finally, the geopolitical factor cannot be ignored, as major powers may regard the bloc as a threat, as it might attempt to bypass or reduce their influence. To guarantee smooth operations, the UAE will need to maintain its neutrality, positioning the coalition as a complementary, rather than a competitive bloc. Combined, these challenges indicate that the economic impact of the FIT-P will not depend solely on its vision, it will also depend on the ability of its participating members in overcoming different institutional, regulatory, and geopolitical barriers—setting the stage by 2030, for a range of possible outcomes, each with significantly different implications for the UAE’s trade and investment profile.

By 2026, under the most optimist scenario, the bloc could achieve tangible harmonization of trade rules, including common standards for digital documentation, e-signatures, and streamlined customs procedures. With $817bn in non-oil trade in goods during 2024, an estimated reduction of 10-15% in transaction and compliance costs, could help the UAE save up between $81.7 to 122.5 billion annually. Beyond efficiency gains and benefits, this would also encourage a larger participation from small and medium-sized enterprises, which make up for more than 60% of non-oil GDP as of mid-22, according to released data from the UAE government. Such projected improvements will play a vital role in reinforcing the country’s role as a logistics and re-export hub, as well as simultaneously boosting and stimulating growth in emerging sectors, such as fintech, e-commerce, and advanced services. When combined with the goal of increasing the digital economy’s share of GDP to 20% by 2030, the bloc will successfully provide an enabling framework for diversification and innovation.

Under a less optimistic scenario, a more moderate outcome would involve incremental progress, as discrepancies in regulatory readiness, infrastructure capacity, and political priorities across member states could slow the pace of integration. Although globally connected firms in the UAE would still benefit from reduced friction in trade in investment, smaller firms across the bloc might face a slower transition, postponing the benefits they might receive. The UAE, though still maintaining a remarkable momentum in building and developing its TradeTech ecosystem while expanding its CEPAs, would face fierce competition from other hubs, including Singapore, challenging the country’s leadership in shaping trade norms.  By 2030, the bloc’s contribution will remain highly positive but mostly modest, with non-oil GDP diversification advancing at a steady pace, yet falling short of the UAE’s most ambitious targets.

Finally, under the least optimistic and most cautious scenario, the bloc might face fragmentation as a divergence in national regulations, accompanied by reluctance in digital standards harmonization and possible conflicts with pre-existing free trade agreements, may undermine trust and slow progress. Hence, instead of playing a role in reducing costs, this could play a contradictory role in adding new layers of complexity to cross-border trade. Applying this to the UAE means a decline in trade volume growth as well as a reduction in FDI as the country would be perceived as a less favourable investment destination for multinationals who prefer predictable rules. With digital services exports already valued at $52 billion in 2024, the UAE risks losing momentum in growing its global market share. Hence, the FIT-P will barely remain a platform for mutual dialogue, rather than becoming a true engine and a driving force of economic transformation.

To sum it up, all the mentioned scenarios highlight an interesting and important point: while the UAE is characterized by a strong strategic vision, robust infrastructure, and a proven track record of trade leadership, the economic outcomes of the FIT-P will greatly depend on effective execution.

If proven successful, the bloc may deliver numerous tangible outcomes and benefits, including generating billions in savings, expanding market access, attracting new investments and reinforce the UAE’s position as a global hub connecting Asia, Africa, and Europe. Conversely, if the bloc fails to achieve its objectives, the benefits would be limited, hence delaying the UAE’s ambition to play a central role in a new rules-based trading order.

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