Commonwealth countries must work together to remove barriers to economic growth
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The global economy is facing a systemic pattern of low economic growth which has been brought on by a dramatic increase in technical barriers to trade since 2005 (notably before the financial crisis) and increased protectionism.
And the direction of travel of global regulation is not positive. The more anti-competitive market distortions damage the competitive landscape and lead to wealth destruction, the more damage is done to consumers and the overall business environment, the less innovation there is and the more entrenched the “new normal” stunted growth becomes.
A new briefing from the IEA calls for the Commonwealth – as a collection of diverse nations with shared values and potentially powerful networks – to use its strengths to ensure pro-competitive and liberalised trade, so that the overall levels of market distortions around the world are lowered, prompting wealth creation in the global economy.
Why has global economic growth stalled?
• There has been a dramatic increase in technical barriers to trade since 2005 largely because we have made little progress through negotiations in WTO rounds, especially in services liberalisation.
• Efforts to reduce protectionism have not succeeded as countries seek to use regulatory protection to damage foreign trade and protect local firms as tariffs have come down
• Liberalising measures have lagged considerably behind restrictive measures
While large firms and incumbents can manage the costs of increased barriers to trade and compliance, smaller firms will be forced to exit the market. This anti-competitive harm ultimately increases inefficiency and costs for consumers.
What can the Commonwealth do?
The Commonwealth is uniquely positioned:
• It is an alignment of nations around concepts such as the rule of law, in particular the English common law.
• Its diversity – containing some of the most developed countries in the world, as well as the smallest micro-states – is a source of strength.
• While not necessarily agreeing to a particular approach, they may subscribe to similar philosophies and broad positions.
Given its position, the Commonwealth can do four things:
• Meet more regularly prior to important global meetings. This will facilitate the networks’ ability to channel, more effectively, their stated shared commitment to trade liberalisation, competition and property rights protection.
• Individually, and as a group, identify the barriers to trade and economic growth they face in other Commonwealth countries. This will lead to the identification of barriers that Commonwealth exporters face and how they will be able to overcome them.
• Improve access to financial services. Commonwealth countries could agree what constitutes good practice in the area of financial services, prioritising the needs of consumers and business. This exercise would identify potential regulatory pathways to create environments that stimulate trade and competition.
• Bring together businesses that can integrate into global supply chains which feature Commonwealth countries. Integrating farmers in this way would be a significant step in ensuring that increased demand for protein can be properly met and would be a positive step for all Commonwealth farmers.
Commenting on the report, author Shanker Singham, Director of the International Trade and Competition Unit at the Institute of Economic Affairs, said:
“The Commonwealth is uniquely positioned to play a significant role in unlocking the pressing problem of today: a lack of wealth creation leading to stalled global growth and the consequent loss of opportunity and hope for people all over the world.
“Its diversity is its strength. If the Commonwealth, with its powerful network effects across the most developed economies and some of the world’s smallest micro-states, can play an active role in improving the environment so that the barriers to growth are overcome, then the competitive markets created will spur economic activity, lifting billions out of poverty.”
Notes to editors:
For media enquiries please contact Nerissa Chesterfield, Communications Officer:[email protected] or 0207 799 8920 or 07791 390 268
To download the report, ‘How the World can benefit from the Network Effects of the Commonwealth’, click here.
Shanker Singham (Director of Trade and Competition Unit) is a leading expert on international trade, and a regular commentator on the UK’s future trade relationships after Brexit. He has advised governments and companies around the world on trade initiatives, including the accession of Poland and Hungary to the EU and of China and Russia to the WTO. Shanker has served as a cleared trade advisor to the United States government and to a host of US political candidates, including working with Mitt Romney on his 2008 and 2012 Presidential campaigns. He was worked at the Legatum Institute, he was head of market access at Squire Sanders and Managing Director of the Competitiveness and Enterprise Cities project at Babson Global. He is the author of A General Theory of Trade and Competition: Trade Liberalisation and Competitive Markets (Cameron May Publishing, 2007) and a Bretton Woods Committee member.
The mission of the Institute of Economic Affairs is to improve understanding of the fundamental institutions of a free society by analysing and expounding the role of markets in solving economic and social problems and seeks to provide analysis in order to improve the public understanding of economics.
The IEA is a registered educational charity and independent of all political parties.
Further IEA Reading: The IEA Brexit Prize: A Blueprint for Britain – Openness not Isolation ; Brexit Prize: Final shortlisted entries ; Globalization and Free Trade