Wealthsmiths Winter 2020

Page 21


Boris Johnson meets Canadian Prime Minister Justin Trudeau

Trade ties that bind Brexit has cast a spotlight on Commonwealth trade. It could be time to ramp-up an extraordinary economic opportunity, writes Paul Bryant


n 2015, economists at the Commonwealth Secretariat – the intergovernmental organisation which co-ordinates and carries out much of the Commonwealth’s work – discovered a ‘secret sauce’ that somehow boosts trade between Commonwealth countries. They found that trade between members was 20% higher than that with non-member countries, and foreign direct investment flows were 10% higher1, on average. And they couldn’t explain these elevated levels of economic activity with ‘conventional’ trade drivers – for example, the Commonwealth isn’t a formal trading block with tariff preferences between members. According to Brendan Vickers – Adviser and Head, International Trade Policy at the Commonwealth Secretariat – an equivalent force is at work, dubbed the ‘Commonwealth Advantage’, and it results in trading costs between Commonwealth countries being 21% lower than

between member and non-member countries, on average. Further studies concluded that the advantage arises from the deep historical and cultural ties between members, the widespread use of English, similar legal and administrative systems, and economically active diaspora communities2. Vickers says: “We are absolutely convinced this is an untapped opportunity and that countries can exploit this advantage to their benefit. They can use it as a tool to grow trade, create trade resilience, and promote recovery from the Covid-19 economic shock.” It’s fair to say the UK has been slow to exploit the Advantage. While across the entire Commonwealth, intra-Commonwealth trade has grown from 12% of Commonwealth countries’ total trade in 1998 to 18% in 20182, the UK’s intra-Commonwealth trade has remained roughly static as a share of its total trade over the same period – at around 9%3. But it’s probably also fair to say that this situation is