By John Mills
When at the start of 1973 we joined what was then the European Economic Community – otherwise known then as the Common Market – we severed a lot of links and trading preferences with the Commonwealth countries. Understandably, old friends such as Australia and New Zealand were upset both emotionally as well as economically as we raised tariff barriers against them and lowered them with our continental neighbours. Now, with Brexit, the situation is beginning to reverse itself again. What is the future likely to hold?
There are certainly positive signs. Several Commonwealth countries have already expressed interest in striking free trade deals with the UK as soon as Brexit makes their implementation possible. The Commonwealth is now much bigger than it used to be in terms of population and economic significance. It covers roughly a quarter of the land area of the globe and a third of its population. Economically, Commonwealth countries are growing much more rapidly than those in the European Union.
Furthermore, they all have English as a primary or at least widely spoken language and most of them share the same legal tradition as the UK. It helps that we have an overall balance of payments surplus with our trade with the Commonwealth compared with a huge deficit – around £100bn a year – with the EU. The Commonwealth as an organisation, which is meeting in London this week, provides bonds of familiarity and friendship. Potentially, therefore there is a large market out there for UK exports.
There is, however, ground to be made up.. Currently the proportion of UK exports of goods and services going to Commonwealth countries is relatively small, a total of 9% compared with 44% going to the EU. Moreover, while UK goods exports to the Commonwealth more than doubled from just under £13bn in 1999 to £29n in 2013, this trend has since reversed – along with falling world trade generally – back to £25bn in 2015. Over the same period, nevertheless, UK exports of services to the Commonwealth tripled from £8.5bn to £22.3bn.
Part of the reason for the relatively small amount of trade the UK does with the Commonwealth reason that most of their markets are relatively far away, although continuing falls in shipping costs may be an offset. Trade barriers which we should now be able to remove are also partly responsible. There is, nevertheless, a way to go. The UK exports much more to Germany alone, at £48.5bn in 2015, than the combined total of £32.8bn to Australia, Canada, India, Malaysia, New Zealand and Singapore. But Australia, our biggest Commonwealth trade partner, and at the other side of the world, shows what can be done. We sold goods alone there totalling £8.6bn in 2015. Our rapidly increasing trade with India, with its rapid growth rate and huge population, provides another encouraging portent for the future. .
We may be starting from a relatively low base, therefore, but as world projections are that 90% of the increase in world GDP during the coming years will be outside the EU, that base is set to grow faster than our markets in the EU, especially if tariffs and other trade barriers with our Commonwealth partners are reduced or removed. This is why our links with the 52 Commonwealth countries are so important. We have strong historical links and current friendships on which to build. Over the coming years post Brexit the UK will need to take advantage of all the trading opportunities it can. We are in the lucky position of having secure foundations with the Commonwealth to nurture and develop.
Labour Leave shares a number of viewpoints from external commentators, both Leave and Remain, without necessarily endorsing any of the viewpoints therein.
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