For two days last week, on March 9 and 10, trade ministers from Commonwealth countries met in London to explore ways of boosting intra-Commonwealth trade and investment. It was the first time that the Commonwealth, which is not a trading bloc, but a loose organisation of 52 predominantly former British colonies, would meet to develop a trade agenda. But that overarching goal apart, the meeting also took place against the backdrop of Britain’s epochal decision to leave the European Union.
Since the Brexit vote last year, Britain’s future trade relations, not only with the EU, but the rest of the world, have dominated policy discussions. Obviously, Britain wants a new comprehensive trade arrangement with the EU, but also seeks a wide-reaching free trade agreement with the US. However, also critical in these discussions is the question of how Brexit would affect trade relations between Britain and the rest of the Commonwealth. It is a question that Britain and other Commonwealth countries are asking, but so are business people, development agencies and academics.
Last month, for instance, the Commonwealth Secretariat invited me to take part in an event, tagged “Technical Consultation of Independent Experts”, to discuss the implications of Brexit for the Commonwealth and developing countries. The seminar was organised by the Commonwealth Secretariat, the Economic and Social Research Council and an organisation called Governance and Economic Integration through Free Trade Agreements (GIFTA). But why is the Brexit-Commonwealth issue a major talking point in government circles and within the trade and epistemic communities? Well, in my view, it is driven both by nostalgia about a lost past and hope that it can be regained!
First, the past! Before the UK joined the European Economic Community (EEC), the forerunner of the EU, in 1973, its key trade allies were Commonwealth countries. However once Britain joined the EU, it tore up the previous trade agreements with its Commonwealth partners, because EU rules prevented it from having separate trade arrangements with non-EU countries! Fortress Europe, as some described the bloc, thus kept Britain away from its Commonwealth allies. And many of them felt let down!
In a recent interview, the Australian high Commissioner to the UK, Alexander Downer, whose father was high commissioner in London in the 1970s when Britain joined the EEC, said: “My father was very upset about it. He thought this was Britain turning its back on its greatest friends who had come to its aid in two world wars”. Indeed, New Zealand was so upset about being locked out of its traditional British market that it resorted to tariffs to protect its industry, until it realised that this was a counter-productive measure.
But, inevitably, Britain’s membership of the EU led to a significant reduction in trade between it and other Commonwealth countries. For instance, the exports of African Commonwealth nations to Britain and the other EU Commonwealth countries, namely Cyprus and Malta, fell from 40% in 2000 to 18% in 2013, according to a Commonwealth report. This decline is obviously not unconnected to the fact that Britain, as well as Cyprus and Malta, being part of the EU, could not undertake unilateral trade measures and are bound by the EU’s rigid and stringent rules on food imports, which restricted African exports.
Yet, that said, it’s also true that Britain, as an EU member-state, has been the strongest advocate of Commonwealth and African interests in Brussels. It is, without a doubt, the strongest pro-development and particularly pro-Africa member of the EU, pushing, for instance, for the reform of the Common Agricultural Policy (CAP) that creates barriers to African farm exports to the EU. It’s because Commonwealth countries saw Britain as a strong ally in Brussels and a strong link to the EU that they wanted it to remain in the bloc. But the British people decided differently, and voted to leave the EU. This, thus, inevitably triggers the question: what does Brexit portend for the Commonwealth and particularly its African members?
Well, the common view is that Brexit would deny Commonwealth and African countries a strong voice at the EU table, someone who would advocate and protect their trade interests in Brussels. But, at the same time, Brexit presents huge opportunities for Commonwealth members, including Britain itself. It is partly in this sense of potential opportunities that there are intense discussions about the implications of Brexit for the Commonwealth. And the evidence is encouraging!
Last year, the Commonwealth’s flagship trade report, “The Commonwealth in the Unfolding Global Trade Landscape”, of which I was a technical reviewer, showed that there is a “Commonwealth effect”, resulting from shared legal and linguistic heritage, which enables two Commonwealth countries to trade on average 20% more with each other than with non-Commonwealth partners. Since the Brexit vote, British politicians have used this finding to underpin their call for a new era of trade relations with other Commonwealth countries. And a key priority for British ministers is a free trade agreement (FTA) with an African free trade zone. Specifically, Britain wants to enter into FTA negotiations with the proposed Continental Free Trade Area (CFTA), an Africa-wide free trade zone.
This is a post-Brexit imperative, of course. Although the UK strongly supported the EU’s Economic Partnership Agreements (EPAs), once it leaves the bloc, it will no longer be part of the EPAs. Some argue that the UK could adopt the EPAs unilaterally, but a bespoke deal with the CFTA is the country’s preferred trading arrangement with the continent. This is why British ministers are keen to start talks about working closely with an African free trade zone, and, indeed, kicked off informal discussions at last week’s trade ministers’ meeting.
Now, Britain has stressed that it will continue to provide development assistance to African countries. But its approach to future trade relations with the continent would be based on a genuine commitment to free trade and open markets. Indeed, according to a recent report in the British media, Britain would, in future, use its aid fund to promote trade reform and tackle barriers to trade in recipient countries. Specifically, it would use its £1.3 billion Prosperity Fund to promote competitiveness in developing countries by improving business regulation, increasing the efficiency of markets and bolstering free trade. The thinking among British ministers and officials is that, in a post-Brexit world, helping to build well-regulated and competitive markets in middle-income countries, like Nigeria, is the best way to reduce poverty in these countries and help them to trade and attract foreign investment.
But would African countries accept the British overtures, and embrace its pro-free trade and free market approach? Specifically, would Nigeria, which has unwisely refused to ratify the EU-ECOWAS EPA balk at the idea of an FTA with Britain that requires it to accept substantial tariff-dismantling and market-opening commitments? In a piece for the Africa@LSE and International Growth Centre blogs last year, I argued that Brexit offered Africa the best of both worlds: the opportunity to trade with the world’s largest single market, the EU, and the opportunity for greater trade with an open post-Brexit Britain. But to take advantage of these opportunities, African countries should, I urged, ratify the EPAs to cement their economic ties with Europe, and enter into free trade agreements with Britain.
This is really an imperative for Nigeria. The country needs meaningful and ambitious FTAs to lock in trade and market reforms and reverse its lagging productivity and competitiveness. What’s more, Nigeria must prepare for a post-Brexit world in which trade and market openness shapes the external relations of the EU and the UK, its major trading partners!