The Commonwealth Launches Trade Review Report
Brian Mureverwi, tralac intern, comments on the launch of a new flagship trade report from The Commonwealth Secretariat
The Commonwealth Secretariat is launching its inaugural Trade Review Report on 27 November 2015 under theme, “The Commonwealth in the Unfolding Global Trade Landscape: Prospects, Priorities, Perspectives”. The Review, which covers trade issues in the 53 Commonwealth countries, was prepared by the Commonwealth Secretariat, highlighting the important linkages between trade and economic development. It is relevant and timely in the context of the growing contribution of developing countries to global trade, the intensification of global value chains, the proliferation of regional trading arrangements and stalled multilateral trade negotiations.
The Commonwealth member countries span Africa, Asia, the Americas, Europe and the Pacific, and are diverse. Thirty-one of the members are classified as small states – countries with a population size of 1.5 million people or less.
Since 2000, the combined total exports of goods and services of Commonwealth countries have almost tripled, from $1.3 trillion to $3.4 trillion, accounting for 14.6 per cent of global exports in 2013. Almost half of total Commonwealth exports come from its developed members, comprising Australia, Canada, Cyprus, Malta, New Zealand and the UK. The share of developing countries in the total trade of Commonwealth members has increased, from 36 per cent in 2000, to just above 50 per cent in 2013. This has been mainly driven by the Asian members, which account for more than four-fifths of the exports of all Commonwealth developing countries.
The combined exports of 18 Commonwealth African members have also recorded a significant increase, contributing about 10 per cent of total Commonwealth exports ($300 billion) in 2013.
Intra-Commonwealth trade is estimated at $592 billion (in 2013),and is projected to surpass $1 trillion by 2020. Although it is not a trading bloc, historical ties, shared values, long-established trading relations, familiar administrative and legal systems, the use of largely one language as the means of communicating with foreign partners and a strong diasporic community all contribute to increased trade flows among members.
Econometric results suggest that, when both bilateral partners are Commonwealth members, they tend to trade 20 per cent more, and generate 10 per cent more foreign direct investment inflows than otherwise. This ‘Commonwealth effect’ implies bilateral trade costs between Commonwealth partners are on average 19 per cent lower, as compared with non-Commonwealth country pairs.
An increasing number of final goods are being produced through production networks involving different countries. Some Commonwealth members have taken advantage of this, but many African, Caribbean and Pacific countries, being predominantly natural resource-based exporters, have limited ability to gainfully link to global value chains (GVCs). While GVCs present export opportunities through specialisation in specific tasks, which is more manageable for many Commonwealth members given their limited capacity, most Commonwealth ACP countries, being predominantly natural resource-based primary product and processed commodity exporters, are at a disadvantageous position in terms of linking into these chains. For small states in particular, participation in GVCs is constrained by their inherent characteristics and associated trade challenges, for example their small market size, their remoteness from global commercial centres related to GVC hubs, their lack of competitiveness, among other factors.
Climate change is one of the most important challenges facing the international community, with important implications for trade, growth and sustainable development. The resultant economic, social and environmental consequences are likely to be most severe for the world’s poorest and most vulnerable economies, especially SSA, LDCs and small states. These countries have the least capacity to manage and adapt to changing circumstances. Many Commonwealth members have high export concentrations in a range of climate-sensitive sectors, including agriculture, resource extraction, fisheries and tourism. Over the medium to long term, climate change can significantly affect their trading capacity and competitiveness, and more broadly, their sustainable development prospects.
The shifting nature of the trade landscape implies a need to provide more intensive attention to broad priorities for improved trade performance. The Review highlights five priorities: building productive capacity; effectively managing trade policy and negotiations; addressing implementation gaps; promoting private sector development; and securing a trade-supporting global architecture. Limited and undiversified productive capacity is one of the most important constraints facing many Commonwealth developing countries. Good trade strategies and improved market access are meaningful only if business enterprises, including women-led and small and medium-sized ones, can make use of them. Poor infrastructure – including insufficient and unreliable power supplies and weak road and port infrastructure, all part of weak productive capacity – continues to inhibit private sector development. This message of the Review is very important for African countries, as they prepare to start negotiations to establish the CFTA.
» Download the full report: Commonwealth Trade Review 2015 (PDF, 4.66 MB)
Reproduced with permission from The Commonwealth Secretariat.