Thursday, 26 May 2011

Good God - I agree with a tory

No, despite the title, I have not lost my mind. I've been reading a piece by Ruth Lea on ConservativeHome in which she argues persuasively that we should look less towards Europe and more towards the Commonwealth for trade. Funnily enough, this is something I myself have absent-mindedly thought about for years though the implementation of a more Commonwealth-centric policy could well be tricky.
The Commonwealth as an economic bloc is rarely discussed in Britain. But, as the global economic and political focus shifts to partnerships with non-western economies in the wake of the global financial crisis, this is an opportune moment to re-evaluate the economic potential of the Commonwealth both in the global economy generally and to us as trading partners more specifically. 
The Commonwealth nations, taken together and including the UK, are an economic colossus comprising some 15% of world GDP, 54 member states (53 excluding Fiji, which is currently suspended) and two billion citizens. They will inevitably become more influential and powerful. The Commonwealth spans five continents and contains developed, emerging and developing economies.
Crucially, the Commonwealth in its richness and diversity mirrors today’s global economy in a way that the EU simply cannot start to aspire to. In its global reach it speaks of the future, and should not be regarded as a curious relic of Empire, whereas the EU will continue its inexorable, relative decline. As David Cameron said of Tony Blair, so is the EU. “You were the future once.”

One of the drivers behind the global changes is demographic. The populations of the Commonwealth countries are projected by the UN to expand between 2010 and 2050. So is the US. But the “big 3” EU countries (excluding the UK) are projected to have falling populations: Germany (-28%), Italy (-23%) and even France (-5%), though Japan (-37%) and Russia (-31%) are much bigger fallers. By the way, China’s population is projected to fall by 11%, reflecting the “one child” policy.

Despite the fact that successive British governments have shown relatively lukewarm interest in the Commonwealth, preferring the watering holes of Brussels, British trade with the Commonwealth is already significant. In 2009, total exports of goods and services to the major Commonwealth countries were over £32bn, over 8% of the total, and there was a modest surplus (£1bn). But these exports were dwarfed by exports to the US (£67bn, £24bn surplus) and in particular to the EU (£188bn, £28bn deficit). 
And it can be argued that Britain’s export performance to Commonwealth countries (and indeed the US) is disappointing compared with that of the EU. This is all the more the case when there is arguably a cost advantage, estimated at 10-15%, when trading with Commonwealth as opposed to non-Commonwealth countries. British exports to Germany and France are about 1.5% of those countries’ respective GDPs. The equivalent figures for exports to the US and the Commonwealth’s “big 3” (Australia, Canada and India) are about half that. Britain really ought to be doing better in Commonwealth markets.
I strongly suggest that you go and read the rest of it via the link at the top of this post. One thing that I would say is that one of the main reasons for the 10-15% cost advantage when trading with the Commonwealth is because of the common language and the common judicial and legal systems - a legacy of the Empire. What this means of course is that, if I step off the plane in almost any Commonwealth country, I can be fairly confident that all the local laws and judicial practices are, if not identical, along the same lines as those in Britain.

Personally, I've always thought we might have made a mistake choosing to enter Europe in the first place when we could have created a common market of our own with the Commonwealth. However, now is not the time to be fretting over the past, now is the time to be looking to the future. It's well worth bearing in mind that, even at the moment, there is a huge scope for increased Commonwealth trade whilst remaining in the EU. However, key to this, would be a willingness of the Foreign Office to lobby foreign governments in favour of British businesses. For example, India recently signed a multi-billion dollar deal with the US for modern jet fighter craft. However, they'd originally been looking at purchasing the aircraft from a British firm. The reason they went with the US? The Americans had hundreds of their people lining up to sell the benefits of the American aircraft to the Indian government. We had less than a dozen.

We definitely need to start thinking more about the Commonwealth in our foreign policy and trade. Here's hoping that those in government do so.


  1. But none of that does anything about avoiding wars in our back yard, about immigration, fishing, acid rain, defence... One can't get away from the fact that proximity is important.

    And the EU, as the world's largest economy, can have a loud voice partly because it's members are reasonably similar: reasonably developed, democratic states.

    Yes, you concentrated on trade but even there do you not think that our ministers etc. already do all they can to promote our exports to as many places as possible? And the EU gives us more bargaining power to create trade treaties - such as recent ones with Japan and South Korea - rather than being squeezed out by the US's economic and diplomatic clout.

    There's also the question of whether other Commonwealth countries would want to prioritise links with other members over regional and other relationships.

  2. "As David Cameron said of Tony Blair, so is the EU. You were the future once.”

    Very much agreed.

    Be careful with trade figures as the ONS is sometimes disingenuous with the figures it outputs.

    A few years back i tried to compare EU and ex-EU trade with Britain but could only easily find figures for the value of good in both regions. This suggested a 60/40 EU/ROW balance.

    However, a better comparison would be the value of good [AND] services, a figure only available for the EU, making comparison impossible.

    I asked for those figures and when they arrived it turned out that the trade balance was only 51/49 EU/ROW.

    How much would you be willing to bet that this had no reversed, or that it would be a trend that would continue to accelerate?




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