If the Commonwealth is able to harness the benefits of digitalisation and trade facilitation agreements, trade between member states could exceed its current goal of US$2tn by 2030, Commonwealth secretary general Patricia Scotland has said.
Speaking at the launch of the Commonwealth Trade Review 2024 at Marlborough House in London last week, Scotland told the conference that despite the “overlapping and interconnected crises” of the last decade, intra-Commonwealth trade hit a record high of US$854bn in 2022. This represents a 50% growth in value since the association published its first trade review in 2015.
“Achieving the ambitious vision of our heads of government to expand intra-Commonwealth trade to US$2tn by 2030 will require us to take bold steps, but is absolutely achievable,” Scotland said. “In fact, we need to see that, in my view, as a conservative position. They are the least we will achieve, but they are not the sum total of our ambition.”
In an earlier speech, Brendan Vickers, head of the Commonwealth’s international trade policy section, told the conference that if the Commonwealth “adopts an ambitious trade digitalisation strategy”, it could reduce internal trade costs by 15%. Commonwealth members Singapore and the UK both have detailed trade digitalisation laws, and Vickers suggested that the UK’s Electronic Trade Documents Act has “global applicability”.
A report from 2022 estimated that digitalisation could boost Commonwealth trade by US$1.2tn by 2026.
Scotland views AI as another key driver of trade growth, noting that “it’s anticipated that we’ll have more than US$15.7tn added to the global economy by AI [by 2030]”. In her speech, she said this is one of the main reasons she believes the Commonwealth will exceed US$2tn in trade by 2030.
AI is growing in popularity in the trade finance sector, with a plethora of tools on the market and major institutions, including Swift, exploring its capacity to improve the speed and security of transactions.
Despite her onstage optimism, Scotland provided a key caveat to this figure in an interview with GTR on the sidelines of the event, She suggested that the goal was achievable, but only “if we have no more exogenous shocks”.
“Had we not had the Covid pandemic, had we not had the war in Ukraine and Russia, had we not had the level of climactic disasters that we’ve had, I think we would have reached US$1tn before now, and we would have been on track for getting to US$2tn before 2030. All things being equal, I think we are absolutely on track,” she said. The US$2tn target was set by Scotland herself in 2022.
The 2024 Commonwealth Trade Review offers a deeper look at intra-Commonwealth trade over the past year.
It notes that Commonwealth countries, on average, trade 20% more with each other than with non-members and benefit from 21% lower bilateral trade costs within the association, which it calls the “Commonwealth advantage”.
Trade remains highly concentrated, however, with 70% of merchandise exports stemming from five of the group’s 56 members: Singapore, India, Malaysia, Australia and the UK.
This is echoed in the intra-Commonwealth FDI stock, where 77% is held across Singapore, India, the UK, Australia, Mauritius and Canada. The trade review reports that the total stock more than doubled between 2015 and 2022, growing from US$854bn to US$1.7tn.
The 2024 report has a particular focus on food security. It notes that food trade between Commonwealth members is on average 22% higher than with non-members, and around 25% of members’ food imports come from others in the association.
Intra-Commonwealth food exports are forecast to nearly double in the next decade, potentially reaching US$97bn. Additionally, the population of the association is expected to grow by 385 million people by 2033, with a high proportion of the growth in Africa. This increase will require a further US$100bn in food imports to the Commonwealth.
In order to ensure this demand can be met, the report suggests “tapping into the Commonwealth’s large, dynamic and entrepreneurial diaspora” to help modernise trade facilitation.
It also recommends considering a phased Commonwealth Food Supply Arrangement to “ensure access to essential foods during times of crisis”. This could include the creation of a Commonwealth Food Reserve Bank into which large food-producing countries could place food reserves to be withdrawn at subsidised rates by food deficient countries.
Other recommendations include leveraging the World Trade Organization-backed Aid for Trade scheme, which helps “developing countries to build the trade capacity and infrastructure they need to benefit from trade opening”, according to its website.
