Commonwealth sees $1trn trade on the near horizon

Conferences, Seminars, Forums, News, Trade and Commerce — By on April 13, 2018 at 9:03 PM

Baroness Scotland.

Commonwealth sees $1trn trade on the near horizon

By James Brewer

Trade and fresh investment within the 53-member Commonwealth is on track to exceed $1trn by 2020 — and could even climb to $1.5trn, new research has forecast.

The growth trend was welcomed by the Rt Hon Patricia Scotland QC, Commonwealth secretary-general, as she addressed a meeting ahead of the 2018 Commonwealth heads of government conference in London.

She cited her secretariat’s research which identified a sense among the grouping that, after an unprecedented slowdown in world trade in recent years, intra-Commonwealth trade in goods and services together with productive ‘greenfield’ investment is expanding fast and is expected to exceed $1trn by 2020.

From left: Richard Moir, Lord McConnell, Baroness Scotland, Alan Winters, Chris Southworth.

Greenfield investment is the flow of foreign direct investment defined as productive, as distinct from developments such as mergers and acquisitions. Intra-Commonwealth initiatives account for one quarter of all such investment globally, creating, it is said, 1.4m jobs through 10,000 projects.  Global foreign direct investment stock in the Commonwealth exceeds $5trn.

Top provider of greenfield investment to Commonwealth nations is the UK, and top destination is India.

Proactive policy measures can trigger even greater gains, the Commonwealth secretariat’s economists said, while noting worrying uncertainties in the overall picture.

All this is taking place against a background of a decline in the share of world trade taken by Commonwealth countries, the result of a surge in performance of the economies of large outside countries led by China.

In a panel discussion during the event, there was broad optimism over prospects for the Commonwealth as the UK prepares to leave the European Union.

Chris Southworth on the podium.

Baroness Scotland said that after the Brexit vote, the City was waking up to the potential in the Commonwealth.

Chris Southworth, secretary-general of the International Chamber of Commerce (UK), endorsed that view by saying that the vote had been “an electric shock” to business, much of which had failed to recognise that the opportunities for new trade openings had been there all along.

They were speaking at a West End hotel during presentations with the theme The Commonwealth Prosperity Agenda: Towards a Common Future.

The April 11 meeting came ahead of the biennial Commonwealth summit which is expected to attract around 5,000 participants from government, business and civil society.

It followed the launch of the Commonwealth Trade Review 2018, Strengthening the Commonwealth Advantage: Trade, Technology, Governance, only the second time such a review has been published, the first being in 2015.

Secretary-general chats during reception.

The secretary-general said: “My focus is to put the ‘wealth’ back into Commonwealth, and just as important, putting ‘common’ into Commonwealth.”

In 2015 Commonwealth secretariat researchers had found that there was a 19% advantage in countries trading with one another. “We have an opportunity to disaggregate that 19% and see what it is made of,” said Baroness Scotland. Factors such as commonality of law and similarity of regulatory structures could be exploited. “That would be recognising the wealth as what is hidden in the Commonwealth. Brexit has put the highlight on this.”

She stressed the importance of regulatory convergence taking place outside the negotiated framework of trade agreements. “Put simply: similar regulatory frameworks reduce trade costs.”

Deepening trade was central to increased prosperity, and the opportunities should be used to empower women and young entrepreneurs.

Commonwealth countries collectively had in general been far less protectionist towards all trading partners and far less protective towards each other. Member states were investing three times as much in each other than the global average, and this total could reach $870bn “under certain conditions. There are measures which can significantly increase intra-Commonwealth trade and investment”.

Plenty of trade analysis.

Against a rather lacklustre global trading landscape, intra-Commonwealth exports of goods and services had fallen slightly in 2016 to $560bn but had risen to 20% of Commonwealth countries’ total trade with the world, and assuming the impetus was maintained could reach $700bn by 2020.

Forty-two Commonwealth members have ratified the WTO Trade Facilitation Agreement which contains provisions to improve the speed and efficiency of customs and border procedures.

The secretary-general said that digital technologies were transforming trade-led sustainable development prospects for many of the poorest nations. Universal broadband digitisation could add up to $1trn to the gross domestic product of the Commonwealth as a whole.

Mr Southworth insisted: “We have to connect development priorities with trade priorities. There is no part of public policy any more that is not affected by trade.”

Prof Alan Winters, who is director the UK Trade Policy Observatory, a partnership between Sussex University and Chatham House, said that Commonwealth countries were no less restrictive in services trade than others. “We are a microcosm, more or less, of the world system.”

Key trade report.

He said of the Commonwealth family: “It could probably never be a trade bloc. So intra-Commonwealth trade is not an objective in itself. Our objective is to trade more. Our policies are even-handed and essentially to keep calm, stay collaborative and stay within the rules. We can talk easily with each other, debate, analyse.”

Lord McConnell of Glenscorrodale, co-chair of the all-party parliamentary group for the United Nations sustainable development goals said while there are huge challenges there were prospects for increased trade. He said that of the 17 UN goals agreed in 2013, goal 17 was a commitment to global trade, “and was specifically included because trade is about partnership.”

Among items for consideration by the heads of government is the development of the Commonwealth Blue Charter. Baroness Scotland said: “We have 17% of the world’s oceans, and opportunities to exploit our oceans are as important as to exploit our lands.” A note for the meeting says that “by agreeing to protect the health of oceans and marine life, and to use the precious resources they yield in responsible and sustainable ways, we will be sharing more fairly the benefits they bestow and preserving these for future generations.”

Trade director Paulo Kautoke at the mic.

Asked about interest among outside countries in applying to become Commonwealth members, Baroness Scotland said there was “a queue of people who want to join. Many of them have no connection with any part of the [former] British Empire. When I ask them why they want to join, it is the good governance agenda, the values espoused in the [Commonwealth] Charter.” The Charter outlines the values and aspirations which are said to unite the Commonwealth: democracy, human rights and the rule of law.

Baroness Scotland is keen to stress that the 2.4bn people of the Commonwealth represent “a glorious spectrum of diversity and talent.”

Commonwealth secretariat director for trade, oceans and natural resources Paulo Kautoke introduced Baroness Scotland to the meeting.  The event was moderated by Richard Moir, chief executive of London Wealth Forums, and was followed by a networking reception.

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