“I believe the Commonwealth is uniquely placed to make the case for trade and to catalyse an increase in investment and trade which quite frankly is the single biggest and most important stimulus we can give our economies right now”, David Cameron wrote in The Global in 2010.
Between them, Commonwealth countries traded around $4 trillion worth of goods in 2008- Jayanta Roy Chowdhury
Many believe the Commonwealth is dying a slow death. With a multitude of global and regional multilateral organisations spawning every year, the global grouping of former British colonies is increasingly losing relevance.
Except for Conservative commentators like British economist Ruth Lea and some Facebookers who have launched several pages demanding Commonwealth free trade pacts, few top leaders if any, now talk of forming a Commonwealth trade compact.
Yet two years back, faced with a slowing economy, British Prime Minister David Cameron seemed to suggest a greater role for the Commonwealth than we have seen till now, but with huge economic and political investments in the European Union, Britain has till now refrained from making any leaps of faith.
Many have forgotten that just six years and two months back, in November 2005, at the Commonwealth Business Summit in Malta, the final communiqué urged member countries to consider “the possibility of establishing a Commonwealth preferential, or free trade area” should the WTO’s Doha Round prove fruitless. Doha is still stalemated and the world is still groping around for regional trading arrangements which can help their economies while not placing their sovereignty at risk.
Britain, in the aftermath of World War II wanted the Commonwealth to stay alive not only as a symbol of its former glory, but also as a guarantee of the economic ties it then had with its former colonies.
However, as Britain veered towards membership of the European Union in 1973, its interest in the Commonwealth as a trading and investment forum diminished. With the founder losing interest, the rest of the Commonwealth started looking for other regional groupings.
Canada and Australia started becoming America-centric in their policies and in terms of trade, Asia-centric. India quite naturally started looking eastwards for its economic and political space. African nations looked towards an African Union, Malaysia and Singapore towards Asean.
Things have changed since then. Some economists in Britain are again debating whether the country should remain closely linked with the EU or have looser ties with it, which allows it to join either Nafta or set up a Commonwealth Free Trade Pact.
Whatever the results of the ongoing debate, statistics show it may still make sense for Mr Cameron and other Commonwealth leaders to think seriously on some kind of a closer trade compact. The fact is that despite accusations that it is turning into a nostalgic talking shop, the Commonwealth does continue to do serious business without really realising it:
* Between them, Commonwealth countries traded around $4 trillion worth of goods in 2008.
* Intra-Commonwealth trade accounts for about one-sixth of total Commonwealth members’ trade, with an average for each member of around one-third.
* The share of intra-Commonwealth trade has grown steadily from around 12 per cent in 1990 to around 16 per cent in 2008.
* The Commonwealth dominates trade in some countries; for example more than four-fifths of Botswana’s and Namibia’s imports come from other Commonwealth countries; and more than 90 per cent of the exports from St Vincent and Samoa go to other Commonwealth countries.
* Last year India bought some $53.15 billion of goods from Commonwealth countries and exported $39.65 billion worth. The Commonwealth countries accounts for 21 per cent of India’s total exports and nearly 17 per cent of its imports.
* Most member countries do about a third to half of their trade with other Commonwealth countries.
* Two continental economies within the Commonwealth – Australia and South Africa – continue to sell about 23 per cent of their total exports to Commonwealth nations.
* Studies show trade is easier between the member nations because of shared language, legal systems, corporate culture, etc.
Let me quote another Cameron, a Canadian author whose first name is Brent and who wrote a book, The Case for Commonwealth Free Trade, in 2005: “If the Commonwealth today were an economic bloc, it would be equal in size to the United States; it would have 13 of the world’s fastest growing economies; it would possess most of the world’s leading knowledge economies outside of the US; it would have one third of the world’s population; and would represent 40 per cent of the membership of the World Trade Organisation.”
With the global economic slowdown, on the back of recession in the developed West, the role of the Commonwealth, a grouping which links the first world with the third could well turn critical in a global economic recovery.
The three advanced economies – UK, Canada and Australia –need the markets of Asia and Africa to survive the coming recession, while the less developed and developing economies of Asia and Africa need market access in the West to improve their quality of life.
Under these circumstances, perhaps it does make sense to have a trade, investment and even a financial markets compact between Commonwealth nations. Already these include some of the fastest growing emerging economies – India, South Africa, Malaysia, Singapore and Bangladesh. Energising them by creating an institutional trade arrangement could well act as a catalyst for growth for many member countries.
Being spread around the world and not in a geographically contiguous area is possibly the biggest drawback that the Commonwealth has in transforming itself into a trading agreement. However, in the light of giant regional trade bodies being contemplated such as the Asia-Pacific Free Trade Pact, where countries are separated by huge oceans, the distance between the Commonwealth nations could well be of little importance.
All this leads us to the case for a Commonwealth trading and investment compact. Even if a Free Trade Pact between diverse countries who make up the membership of the Commonwealth seem a difficult and daunting proposition, a move to give a Commonwealth preference to trade and investment flows between member countries could well see respective economies gaining in economic terms.
However, this move needs to start now or else the Commonwealth will be an “also-ran” as various multinational trading arrangements come into being.
What can the crystal ball hold if the Commonwealth were to really manage to come up with something akin to a free trade pact?
The Canadian Brent Cameron whom I quoted earlier, in a separate paper also wrote: “If an agreement were achieved (among Commonwealth nations) and (through mutually beneficial trade and investment flows) it could bring per capita incomes up to a level comparable with the developed world, the Commonwealth would have an economy valued at over US$45 trillion – the equivalent of adding the combined GDPs of the European Union with that of Nafta, then doubling it.” Maybe that’s food for some thought.
Mr Chowdury is business editor of The Telegraph of India, and general secretary of the Commonwealth Journalists Association, India. This is an abridged version of a paper he read at the CJA conference held in Malta last week.