Building capacity to help Africa trade better

Secretary-General highlights challenges posed by trade fragmentation


Secretary-General highlights challenges posed by trade fragmentation

Secretary-General highlights challenges posed by trade fragmentation
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Trade governance structures must be “fit for purpose” to address the changing global landscape and benefit Commonwealth member countries, Secretary-General Patricia Scotland has said. The comments were made at a conference in London, ahead of the publication of a new book by the Commonwealth Secretariat on trade fragmentation.

“Trade is increasingly fragmented across countries. This presents challenges for the architecture of regulation that governs and controls trade, taxation and investment relationships across borders,” the Secretary-General said.

The conference, ‘Harnessing the Commonwealth Advantage in International Trade’, organised jointly by the Commonwealth Secretariat, The Wealth Forums and Pinsent Masons, saw speakers analyse a number of pressing challenges and opportunities that countries around the world must tackle, such as the rise of protectionism, the implications of Brexit and the major shifts taking place within international trade.

The Secretary-General reflected on the rise of regional and bilateral trade agreements, otherwise known as trade fragmentation, as well as knowledge gaps that exist as a result of limited data in certain countries. Her speech to the conference, on 13 July, also emphasised taking advantage of the technological advancements that are transforming how trade takes place, such as the rise of new web-based platforms.

“We are facing a changing global landscape and the challenge ahead of us is to ensure that our trade, finance and investment governance structures are fit for purpose as we approach the third decade of the 21st Century,” she said.

The Commonwealth Secretariat’s forthcoming e-publication on trade fragmentation will address the profound shift in how many countries have become ever more reliant on international trade for their economic growth model.

The Secretary-General added, “A particularly acute need for Commonwealth member states transitioning from the classification of being a ‘least developed country’ to that of being more developed, and to achieving the Sustainable Development Goals, is access to adequate finance.

“As a family bringing together some of the most economically-advanced and least developed countries, the Commonwealth provides a richly diverse yet sympathetic context within which to explore these issues.”

Global trade expanded by just 1.9 per cent in 2016, down from 2.4 per cent in the previous year – compared to an annual average growth rate of 6 per cent between 1980-2007.

Commonwealth member countries however enjoy a measurable trade advantage, tending to trade on average around 20 percent more compared to other trade partners, as well as benefitting from lower trade costs.

The Commonwealth Secretariat supports its member governments to respond to global economic and trade challenges and opportunities. Find out more about their work.

Future Fragmentation Processes: Effectively Engaging with the Ascendancy of Global Value Chains

Leveraging the power of trade to expand formal employment opportunities, generate greater value addition, assist diversification processes and develop productive capabilities is an aspiration of all Commonwealth governments. These objectives were conveyed clearly at the Commonwealth Trade Ministers Meeting convened in March 2017.

There are areas of mutual interest and where enhanced co-ordination between member countries could enhance trade gains. Because the ability to transmit tacit knowledge through Commonwealth trade, finance and investment networks is inherent in the trade cost advantage shared by members – which exists without formal collaboration – it suggests the sharing of already known best practice could further enhance the gains from more concerted action.

In order to engage effectively with contemporary trade, which manifests as global value chains (GVCs), it is incumbent on governments to better understand corporate strategies. The achievement of structural economic transformation within the context of GVC trade entails system-wide approaches, more cognisant of innovation systems, as opposed to more siloed approaches towards sectoral development. Concerted action is required to facilitate interactions between private and public agents, so as to effectively enable societal upgrading processes.

In this publication, as well as taking stock of past performance, we reflect on potential dynamics and future fragmentation processes. The chapters collated in this publication provide for a more careful examination of GVCs within which our members specialise at the sectoral level: manufacturing, services and commodity trade, including within the realm of the oceans economy. Given that the overwhelming majority of the 52 Commonwealth member countries are small states, 45 are oceans states and around one-fifth are least developed countries, understanding how dynamics are unfolding at the sectoral level is critical to encouraging more gainful GVC participation.

Through a more inductive approach, one that involves learning from experiences across the Commonwealth of existing GVC participation, a clear set of policy measures becomes apparent. These include overcoming barriers to entry, informational asymmetries and unfair competition, and stimulating innovation. Finally, important knowledge and data constraints for small states in the Pacific and Caribbean are highlighted.

Downloads (PDF)

Section 1: Global developments

Section 2: Thematic issues


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