Growth in South-South trade, globalised value chains, regional trading blocs, increasing digitalisation and rising protectionism — world trade has changed dramatically since the Commonwealth was founded seven decades ago.
While not a formal trading bloc, Commonwealth members have always enjoyed mutually beneficial trade links. Commonwealth countries trade around 20 per cent more between themselves than externally and generate 10 per cent more investment with each other than with non-members. Within the Commonwealth, bilateral trade costs are, on average, 19 per cent lower. Building on this long-shared history of economic partnership, Intra-Commonwealth trade is projected to reach US$700 billion by 2020. To ensure this level of growth is sustainable, and the benefits widely felt across all member countries, the Commonwealth is introducing a new trade strategy that aims to increase cohesion and target new opportunities.
Priority areas
The most recent Commonwealth Heads of Government Meeting (CHOGM) took place in April last year and trade took a central role in the discussions. Launching the Commonwealth Connectivity Agenda for Trade and Investment (CCA), the CHOGM chose to focus on six priority areas: digital, physical, regulatory, supply side and business-to-business connectivity, and sustainability and inclusivity.
“These areas were chosen because they represent the building blocks of success in the Fourth Industrial Revolution,” explains Kirk Haywood, Legal Adviser Trade & Lead for the Commonwealth Connectivity Agenda, Trade, Oceans and Natural Resources Directorate. ‘The objective is to ensure that the Caribbean is not left behind. As Caribbean governments deal with the issues of today, the Agenda provides a pathway to future-proof their economies by seeing what is going on in other Commonwealth countries so that lessons can be learned from both the success and failures of others.”
As the Agenda is rolled out, over 75 ministries and regulators from 35 Commonwealth countries will collaborate on establishing good regulatory practices, supporting medium and small-sized enterprises in agriculture and fisheries, engaging with the private sector and attracting investment in digital infrastructure to better build digital economies.
It’s the last component that can be a sticking point in the Caribbean where digital capacity is not as fully developed. Haywood says Saint Lucia is above average in terms of the number of internet users in the country (52 per 100 people compared with the Commonwealth average of 43 per 100) and fixed broadband subscription (15 per 100, above the 10 per 100 average). However, the country under-performs in other areas, such as firms using email to interact with clients and suppliers — 54 per cent of companies, compared to a Commonwealth average of 67 per cent.
“This mixed picture, which is not unique to Saint Lucia, means that there needs to be targeted actions by all stakeholders,” says Haywood. “The pace and scale of the digital revolution will eventually touch every sector that is involved in exports and growth. For the Caribbean, where creating globally competitive manufacturing and agriculture sectors remains a challenge, and which has a workforce that is highly educated relatively to other developing countries, the current digital revolution presents significant opportunities.”
For Saint Lucia, which exports around 55 per cent of its digitalised products to other Commonwealth members, the biggest opportunities lie in targeting the Asian market as well as the ‘green tech’ agriculture niche. There is also a need to implement new training systems to build digital skills in all industries.
Haywood says the country can learn from its Commonwealth colleagues in devising the best strategies and infrastructure for growth. “The CCA brings the best knowledge from regions of the world the Caribbean has not traditionally been able to hear from directly. Here the experiences from Africa, Asia and the Pacific have particularly good lessons for the Caribbean.
“Once we know what policies work and what doesn’t, then we need to encourage domestic reform. No organisation outside a country can force a country to reform, but the Commonwealth — both the Secretariat and the other members — can act as partners along that journey to ensure that those who are willing are able to undertake the reform journey.”
Disparity
The Commonwealth comprises 53 countries, adding up to a plethora of trade opportunities. Spread across the globe, the member countries include developed nations, such as Britain, Australia and New Zealand, alongside emerging economies such as South Africa and Small Island Developing States in the Caribbean.
This disparity of development almost ensures an uneven playing field, and such an imbalance can be the death knell for mutually beneficial trading relationships. The answer, according to Dr Brendan Vickers, Adviser and Head, International Trade Policy Section, Trade, Oceans and Natural Resources Directorate, is to adopt a regional approach. “The Commonwealth is an extremely diverse group. SIDS especially face structural challenges. These include diseconomies of scale, limited human resource capacity, inadequate infrastructure and disproportionately high trade costs.
SIDS need to strengthen regional integration to address the constraints to small market size, take advantage of growing South-South trade; build or deepen comparative advantages in services trade; and, more strategically, direct Aid for Trade resources towards diversifying and developing competitive export sectors. They need to build their productive capacity and tackle supply side bottlenecks to improve their participation in world trade.”
Shifting landscape
Multilateral trade has fallen out of favour in recent years, fuelled by a new spirit of nationalism. In the global context, this is evidenced by President Trump’s desire to pursue bilateral trade rather than multilateral agreements, the WTO struggling to retain its influence, and Britain withdrawing from the European Union. Regionally, CARICOM is not faring much better as it engages in endless back and forth about the merits and implementation of the CSME.
“The Commonwealth and its member countries are concerned by the rise in global protectionism and have called on countries to resist such measures,” says Vickers. “The Commonwealth has always championed free trade in a transparent, inclusive, fair and open rules-based multilateral trading system as the foundation for economic growth and sustainable development. Despite the challenges, there have been some important outcomes for the multilateral trading system; these include the Trade Facilitation Agreement, which most Commonwealth members of the WTO have now ratified, and the broader WTO-led Aid for Trade initiative, which Caribbean countries can use to help strengthen their institutional, policy and governance capacities for trade.”
The trading environment has always fluctuated according to attitudes, politics and economic need. Making the Caribbean ready and resilient is a core part of the Commonwealth’s Connectivity Agenda. Before next year’s WTO Ministerial Conference, the Commonwealth Secretariat will convene a regional consultation for Caribbean members where they can discuss and debate the Agenda’s key issues.
Vickers says: “The technology-driven Fourth Industrial Revolution is escalating the fragmentation of production processes; trade in intermediate goods and services is growing; and cross-border relationships between firms, governments and other stakeholders are shifting. All of these are contributing to fundamental — and probably irreversible — changes in the character and composition of global trade.
“Working in partnership with the CARICOM and OECS Secretariats, the Commonwealth is assisting Caribbean member countries to assess the implications of these new dynamics for their national and regional trade policies, and how Caribbean countries can meaningfully participate in this shifting global trade landscape.”
