For Britain’s cities, Commonwealth trade is not a substitute for access to the EU market
Much of the discussion on the UK’s post-Brexit trading future involves some reference to the opportunities presented by increasing trade with Commonwealth countries. But this approach is unlikely to deliver great results for Britain’s cities, with individual country deals instead providing limited benefits to certain locations.
The trade debate in the run-up to the 2016 referendum on the UK’s membership of the European Union was characterised by appealing claims about the potential for the UK to rediscover its purported global trading heritage. And this potential upside of Brexit for the UK’s exporters has been regularly referenced since; examples include the International Trade Secretary’s pledge to have 40 trade deals with countries around the globe ready to operate from the day after Brexit.
But the reality is different, for two main reasons. Firstly, unlike the EU, the Commonwealth is not a trading bloc, but instead, a collection of countries with very different economies spread across a disparate geography, and with varying existing trade deals with the EU and the rest of the world. Put simply, you cannot do a trade deal with ‘The Commonwealth’ and trade with Commonwealth members cannot easily be substituted in to replace that with the EU.
Secondly, the amount of total trade that British cities do with the Commonwealth countries is very low compared to EU trade. Derby is the city that trades the most with the Commonwealth; 12 per cent of its goods and services go to member states. Glasgow, Gloucester, Norwich and Southend also send more than 10 per cent of their exports to these markets.
When looking at individual countries, these figures unsurprisingly become smaller still. No individual Commonwealth member state accounts for more than 5 per cent of exports from any city. Instead, it is the EU market that predominates in every city, by some distance, with the United States, Chinese and Swiss markets in most cities completing the top four.
Figure 1: Cities with the largest shares of exports to selected Commonwealth destinations, 2017
|Destination||City with the largest share of exports to a selected destination||Percentage share of exports, to a selected destination, 2017|
Source: ONS 2018, Regionalised estimates of Great Britain service exports by NUTS3, NUTS2 and joint authority; HMRC 2018, Regional Trade Statistics; ONS 2018, Regional trade in goods statistics disaggregated by smaller geographical areas; ONS 2018, Business Register of Employment Survey
An independent international trade policy that benefits British cities will not be based on broad claims about this country’s historic trading relationships with the Commonwealth. Indeed, it will have to reject the idea that the Commonwealth is a single economic entity at all.
Instead, while the Government should not shy away from forging trade deals with Commonwealth countries, it should accept that the benefits accruing from these will be limited. It should also realise that these limited benefits will be concentrated in particular sectors in specific cities, rather than spread across the country.
It is trade with the EU that has the biggest impact on British cities’ exporting economies, and striking more Commonwealth trade deals won’t change that reality.
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