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The Commonwealth: What's in it for small states?

Sir Ronald Sanders

Sunday, April 15, 2018

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Writing in the British newspaper The Guardian on April 10, my colleague, Professor Phillip Murphy, the director of the Institute of Commonwealth Studies at the University of London, recalled that for those who campaigned for Britain to leave the European Union (EU), “depicting the Commonwealth as a huge potential trading opportunity for the UK was a useful fiction”.

It was a fiction during the campaign and remains a fiction now. The reality is that the Commonwealth cannot replace the EU for Britain, which sells far more goods and services to the 27 members of the EU than it does to the 52 other nations of the Commonwealth. About 54 per cent of total UK exports of goods and services went to the EU in 2017, with the remaining 46 per cent going to the rest of the world, including the United States, 13.1 per cent; China, 4.8 per cent; and Switzerland 4.5 per cent. In fact, 71.8 per cent of UK exports in 2017 were delivered to 15 trade partners — not one of them a Commonwealth country.

The Commonwealth has not been a trade organisation since its former incarnation of the British Empire during which Britain imposed trade on its colonies that largely benefited Britain. The death knell to any preferential basis for trade between Britain and other Commonwealth countries was sounded when Britain joined the EU in 1973. Since then, Commonwealth countries have developed trade links with other countries that none would now sacrifice.

Today, six Commonwealth countries dominate exports to other Commonwealth countries, accounting for 80 per cent. They are: Singapore, India, Malaysia, Australia, Britain and Canada. The other 46 countries account for the remaining 20 per cent, and they include big countries like Nigeria, South Africa, and Kenya in Africa, and Pakistan, Bangladesh and Sri Lanka in Asia. The small countries of the Caribbean and the Pacific account for less than five per cent of all Commonwealth exports.

So, not only is the Commonwealth not able to replace the EU for Britain's exports, it is also not valuable for trade to the majority of its other member countries. Looking to the Commonwealth to increase trade is, therefore, a pipe dream, particularly as global trade growth has declined between 2015 and 2016. Merchandise trade volumes declined from 2.8 per cent to 1.6 per cent, marking the third-consecutive year in which trade volumes remained below three per cent. The value of total Commonwealth trade itself declined in the period 2014 to 2016 by US$200 million in terms of average value in 2011-2013.

The share of global trade in goods for Commonwealth small states particularly has declined. For the Caribbean countries, a progressive decline since 1980 has now reached 0.1 per cent. The figure for the small countries of the Pacific is 0.6 per cent.

This situation is likely to worsen as countries, such as the United States, that are the huge markets of the world adopt increasingly more protectionist policies, encouraging tit-for-tat responses from other big trading nations like China.

Furthermore, with the World Trade Organization under attack from the present US Administration, and the beginnings of a policy to discourage internationally agreed rules, including settlement of disputes in favour of bilateral trade negotiations, the prospects for fair trade and the narrowing of inequalities are dimming. As a 2018 Commonwealth Trade Review recently concluded, “Given this unprecedented decline in global trade, it is extremely challenging to make a medium- to long-term projection for global and Commonwealth trade flows.”

It is against this background that Commonwealth Heads of Government will meet in London on April 19 and 20. Given the mood in the British Government to talk-up the Commonwealth as it prepares to take Britain out of the EU amid growing doubts about its wisdom, Commonwealth trade will undoubtedly be trumpeted by British representatives in whatever guise.

But they are promoting a myth unbecoming of the modern Commonwealth, which still has many virtues and much value if the governments of its member countries can find common ground on which to advance a global agenda that would benefit all countries. The Commonwealth remains ideally placed to play the role of global bridge-builder and ideas-generator. It is as well to remind that its members span every continent and includes countries, rich and poor, and small and large, embracing every religion and ethnic group. Consensus on issues that could be radiated into the many other organisations to which its members separately belong still has the potential for promoting economic development, including trade, peace, tolerance, and the upholding of human rights.

At the London meeting, small states should argue that if trade is to become a matter for the Commonwealth to pursue in ways that are meaningful to them, the emphasis must be placed on trade in services, which has become the primary source of exports of small states with limited commodities. Trade in goods is no longer a means for sustainable growth in the majority of them. However, they have proven that they have the human capacity and the intellectual agility to compete globally in services. What they lack are the technologies to become world-class players.

Therefore, for small states, amongst the matters on which emphasis should be placed at the Commonwealth meeting should be helping small states to harness new technologies, including for e-commerce and financial technology.

High-speed Internet lies at the heart of utilising such technologies. Ways should be identified and pursued in a plan of action that encourages investment in these technologies which can overcome the constraints of small size and remoteness.

And, if governments scratch their heads about sources from which the seed money can come they might consider capitalising a Commonwealth Technology Fund for Small States. The fund would encourage companies and financial institutions to invest in viable and economically sustainable enterprises, utilising technologies that would act as catalysts to improve exports of services, reduce costs of trade, and promote sustainable development.

The investments would not be grants; they would be share purchases and loans to Commonwealth companies to partner with small states in making themselves viable by trade in services in which they have already established a track record.

The question is: Would the big countries of the Commonwealth, which are also members of organisations that have helped to cripple the financial services of small states in the Caribbean and the Pacific, be inclined to help?

Sir Ronald Sanders is Antigua and Barbuda's ambassador to the US, Organization of American States, and high commissioner to Canada; an international affairs consultant; as well as senior fellow at Massey College, University of Toronto, and the Institute of Commonwealth Studies, University of London. He previously served as ambassador to the European Union and the World Trade Organization and as high commissioner to the UK. The views expressed are his own. For responses and to view previous commentaries: www.sirronaldsanders.com.

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