Cameron: Commonwealth Free Trade: Opportunities and Challenges in a globalised world
Speech to the Royal Commonwealth Society
Commonwealth Club
London U.K. Mister Chairman, fellow participants, distinguished guests, ladies and gentlemen –
First, I would like to extend my thanks to Dev Das, Stuart Mole, and the RCS for their kind and gracious invitation to participate in this forum. It is also a great honour for me to be here in this institution – a place that combines the best of the Commonwealth’s past with a view that is very much directed at the future.
In opening a discussion on Commonwealth free trade, its implications for our nations, and for globalisation in general, I thought it best to get right to the heart of the matter. I would like to offer a perspective on what the concept is, and what it is not.
What Commonwealth free trade would be precisely may be hard to pin down. As with any international agreements, the final product is a reflection of what has been negotiated, and agreed to, by the various parties. Governments will inevitably decide the scope and the nature of any agreement. The calculus they use to decide their respective positions is not one of which I, or anyone else here, is privy to. Instead, we are left to function solely on our best hopes and aspirations.
From my perspective, if we lived in a perfect world where all member states were both qualified and inclined to join a CFTA, it would look something like this – 53 member states, with equal status within its councils, adhering to a basic charter that strikes a balance between national sovereignty and coordinating trade and investment flows for the greatest benefit. It would seek reductions in tariffs and trade barriers, spurring growth and opportunity in the developed world, as well as preserving market access and investment options for its more developed members. It would also be a strong voice for broader trade negotiations that appear to be stalled by great power politics.
As radical as it may seem, it is a belief that is founded on hard, established facts.
It is based on the knowledge of a study commissioned for the CHOGM in 1997 that found Commonwealth economies experienced ten to fifteen percent lower costs in doing business with another Commonwealth nation than with a non-member states. It found that a shared language of business and instruction, shared political and legal architecture, and cooperative efforts in various Commonwealth-sponsored activities created what the study’s authors named the ‘Commonwealth Effect.’
At roughly the same time, Jeffrey Frankel of Harvard University isolated key factors that affected trade flows, and determined their impact. The lack of a common language alone caused a reduction in trade of roughly fifty percent – more than the impact of not having a free trade treaty, or sharing a border.
If the Commonwealth were an economic bloc, it would be equal in size to the United States, it would have corporations with financial assets equal to its American and European rivals, it would have thirteen of the world’s fastest growing economies feeding its expansion, it would possess most of the world’s leading ‘knowledge economies’ outside of the US, it would have one-third of the world’s population, and it would represent forty percent of the membership of the World Trade Organisation.
Also bear in mind that if we were able to achieve such an agreement, and were able to bring per capita incomes across the Commonwealth up to a level comparable with the developed world, the Commonwealth would have an aggregate economy valued at over US$45 trillion. To achieve that number, one would need to add the combined GDP’s of the European Union with that of the three NAFTA members – Canada, Mexico, and the United States – then double it.
For small and developing nations of the Commonwealth, such an initiative is a positive reaction to their calls for “trade, not aid” and a genuine response to such programmes as NEPAD, and individual national targets for UN Millennium development goals.
For my own country, it is a means of expanding and diversifying its own exports – 85 percent of which currently go to a single destination.
For Australia and New Zealand, it is an opportunity to build worthwhile trade links outside the Asia-Pacific region, and to maintain a leading role within the area.
For the Commonwealth Caribbean, it is a chance to build a solid foundation for economies struggling with low commodity prices, agricultural trade disputes, the end of the Multi-Fibre Agreement, and a tourism industry hard hit by the after-effects of 9/11.
For India, it is an opportunity to give added impetus to what may prove to be one of the most important economic stories of this new century – a nation with a stable democracy, and established business laws, that still receives less foreign capital investment than China despite having a loan failure rate that is less than half that its Asian neighbour.
For Britain, the promise of Commonwealth trade depends upon where one sits on the question of EU membership. If one is supportive of closer European integration, then an argument can be made for Britain to use its natural affinity with the Commonwealth, and act as a virtual bridge between the Commonwealth and Europe. If one squarely considers themselves a Eurosceptic, then the alternative presented needs no further elaboration. Commonwealth trade may very well be the one thing both sides can agree on.
For all of us, though, it represents a model of globalisation by our own design – not simply the mad rush toward bigger, faster and cheaper. It is a means of reasserting our priorities and concerns about the evolution of the global economy. We cannot stop globalisation, but we can take measures to guarantee some of its outcomes for our common benefit.
This is what the idea of Commonwealth free trade is. Now, let me explain what it is not.
It is not a return to the days of Empire. The vast majority of the Commonwealth’s populace, including here, has not personally known a time of Empire. Ask a young person about empire, and they are more likely to envision the White House than Whitehall. The old Empire may be useful fodder for historians and Radio 4 dramas, but for trade and investment policy in 2006, it makes for rather thin gruel.
Modest moves to enhance trade within the Commonwealth are not far-fetched, either.
At present, Australia has negotiated, or is negotiating FTA’s with New Zealand, Singapore, and Malaysia. New Zealand is doing likewise. Canada, likewise, is pursuing similar arrangements with Singapore and the members of CARICOM. In November of last year, at the Commonwealth Business Summit in Malta, the final communique included a statement that countries should consider “the possibility of establishing a Commonwealth preferential, or free trade area.”
In the last two weeks, it was reported in an Australian newspaper that a summit between Canada’s 13 provincial leaders and Australia’s eight state and territorial leaders is set to take place in Adelaide in 2008. The agenda includes talks on closer economic and trade links, joint promotion of Australian and Canadian life sciences industries, as well as joint trade offices in other countries.
South Australian Premier Mike Rann made the comment that "We have all these MPs who go to Washington …but the country most similar to us in terms of constitutional issues such as federal-state relations is Canada. We are almost mirror images of each other."
Beyond my work on this book, I am also proud to be a Director of a project called the Commonwealth Advantage – a programme to promote Commonwealth investment in Canada as a means of tapping into the huge NAFTA market. It is led by the Hon. Sinclair Stevens, who was Canada’s Trade and Industry Minister at the time of the negotiation of Canada-US Free Trade. It also has the backing of the Canadian Advanced Technology Alliance – the trade association for Canada’s high-tech sector, with over 22,000 members.
Through both the book and the Commonwealth Advantage, I have met people from Canada, the UK, Australia, New Zealand, India, Bangladesh, Pakistan, and South Africa –all who are excited about the potential of Commonwealth trade. Their perspective is one that demonstrates the currency this idea has in every corner of this proud organisation.
Let me conclude my remarks by saying that I am as much a pragmatist as I am an optimist.
Will we see a Commonwealth Free Trade Agreement, with full participation, any time in the immediate future? Probably not. If it were to come to pass, would it resemble that which I advocated in my book? Again, probably not. Would it be devoid of any controversy and debate? Definitely not.
On the other hand, does the promotion of a CFTA push the debate for freer trade among Commonwealth countries? Yes. And does the potential of that trade warrant some closer examination of the idea. Most definitely, yes.
Whether or not Commonwealth free trade will become a reality is not the question for you to decide. Even if we are unable to reach that final destination, every step toward that point represents a higher standard of living for all Commonwealth citizens, and a model of globalisation designed for us, by us – not simply imposed from above.
For me, the mere fact that we are gathered here this evening having this discussion is the achievement of an important step.
Again, I thank you for your time, your patience, and your interest. I look forward to the discussion we will have tonight.