A new report from the Commonwealth Secretariat has found that Commonwealth countries are estimated to have lost up to USD345 billion worth of trade in 2020, including USD60 billion in intra-Commonwealth trade.
Released on July 13, the 2021 Commonwealth Trade Review on Energising Commonwealth Trade in a Digital World: Paths to Recovery Post-COVID is described in a press statement as providing a timely and comprehensive analysis of the pandemic’s impact on the trade and investment flows of Commonwealth countries.
The statement noted that the COVID-19 pandemic has taken a heavy toll globally, substantially impacting all Commonwealth members’ economies and leading to USD1.15 trillion in foregone gross domestic product (GDP) in just one year. It was shared that, compared to pre-pandemic growth trends in 2020, Commonwealth economies contracted by approximately 10 per cent.
In addition, most Commonwealth countries experienced a significant decline in overall foreign direct investment (FDI) inflows in 2020, with a loss of USD153 billion to the Commonwealth.
“Given the linkages between trade and investment and the role of foreign direct investment in supporting cross-border trade, these disruptions could limit trade prospects for Commonwealth countries,” said the statement.
The review finds that the economic fallout from COVID-19 varied across Commonwealth regions and shows that the drop is higher for developing Commonwealth countries, where exports have contracted by approximately 10.1 per cent.
“In absolute terms, Asian economies suffered the largest decline in exports (at USD146 billion), followed by African (USD20 billion), Caribbean (USD4.2 billion) and Pacific members (USD1.3 billion). However, relatively Caribbean Small Island Developing States (SIDS) underwent a greater slump. Their global exports shrank by almost 20 per cent. These SIDS largely rely on the exports of services, particularly travel and tourism, which were hit hard in this pandemic.
“For FDI the drop affected all developed and developing countries but to a varying degree, with Australia and Rwanda notably experiencing a 50 per cent decline in inflows compared with the pre-pandemic (2017-2019) average.”
According to the statement, only eight Commonwealth developing countries recorded higher overall FDI inflows in 2020 compared with this previous average.
Speaking ahead of the report’s launch, Secretary-General of the Commonwealth Rt Hon Patricia Scotland QC said, “Our Commonwealth members can harness the ‘Commonwealth advantage’ to provide a post-pandemic tailwind that supports recovery, especially in small states, who have been particularly hard-hit.
“We know that trade can offer positive solutions to manage the pandemic and it’s an essential tool for building back better,” she highlighted. “Commonwealth members can draw on the mutual support and benefits offered through initiatives such as the Commonwealth’s Connectivity Agenda, Blue Charter, Sustainable Energy Transition Agenda and our other work that helps boost trade recovery in a more inclusive, resilient and sustainable way.”
The statement added that a reassuring finding from the Trade Review is that the Commonwealth trade advantage has remained strong and resilient, and is now estimated at 21 per cent, on average. On the investment side, this advantage has almost tripled since the 2015, to around 27 per cent.
The review also touched on pathways to post-COVID trade recovery and resilience building, stating that each Commonwealth member country has its own unique pathway and policy options for trade recovery, although access to vaccines plays an indispensable part for them.
“The broader outlook for Commonwealth countries’ trade recovery is inextricably linked to global economic prospects as well as the structure of their economy, the composition of their exports and their inherent characteristics and vulnerabilities, especially for LDCs (least developed countries) and small states,” the review said. “Trade recovery must be framed overall by the importance of ensuring inclusive trade for women and youth and especially promoting women’s economic empowerment.”
It noted that, since a rules-based global trading system offers the best framework to enable trade recovery, World Trade Organization (WTO) members should work collectively to strengthen and reform trade multilateralism.
“In the short term, consideration could be given to avoiding protectionism and improving vaccine production and distribution, strengthening the enabling environment for e-commerce, addressing fisheries subsidies and improving food security. As part of a broader reform agenda, it is paramount to find a solution to the dispute settlement impasse and to identify practical ways for trade multilateralism to support greater environmental sustainability, especially in light of the sustainable development goals (SDGs) and global commitments to addressing the climate crisis.”
Also among the points put forward in the review is that the global tourism and travel sector has been the hardest hit by COVID-19, and that the Commonwealth’s tourism-dependent small states have been severely affected.
“Many Commonwealth members have implemented response and recovery plans for the tourism sector based on industry body guidelines, with two broad categories of measures discernible: first, short-term, immediate crisis management responses that include stimulus and relief packages; and second, measures that focus on medium- to long-term recovery, especially to make the industry more resilient.”
The study highlighted that embracing digital and technological options will be a crucial component of a future tourism recovery strategy.
“Commonwealth countries can leverage digital technologies to support recovery, depending on their levels of ICT adoption and digital connectivity,” it said. “In the short to medium term, digital trade, especially e-commerce and delivering certain services online, can provide a pathway for mitigating several economic losses from COVID-19 and support the opening and resumption of many activities, although some online activity may decline with the roll-out of vaccines and treatments.”
“In the longer term, growing digital trade, investing in digital capabilities, upskilling and training the workforce, and harnessing some of the frontier technologies linked to Industry 4.0 can help transform economies, build resilience to future shocks and better integrate sustainability into supply chains.”
The review noted that digital trade, however, requires developing an appropriate and enabling regulatory system, including policies and regulations governing areas like data protection and privacy, data processing, cyber-security, e-transactions and digital signatures, and consumer protection.
While Commonwealth developed countries have implemented most of these, it was shared that many developing countries still lag in terms of legislative or regulatory progress in this area. “Nonetheless, many Commonwealth countries are engaged in efforts to develop, co-operate, co-ordinate or harmonise rules and standards for digital trade through bilateral or regional trade deals and initiatives at the WTO.”
“The policy landscape for digital services, especially across borders, is rapidly evolving, with implications for negotiating commitments on trade in services under the WTO and other trade agreements.”
The report also highlighted a compelling case for directing more donor support to enhance developing countries’ participation in digital trade.
“A dedicated – and additionally funded – Aid for Digital Trade agenda provides an opportunity to mainstream support for enhanced digital connectivity and adoption into Aid for Trade (AfT) as part of a comprehensive approach to inclusive digital transformation. This could initially focus on supporting infrastructure, digital skills, e-government and financial inclusion in developing countries and LDCs.
“Commonwealth countries should also strive to digitise trade facilitation by adopting paperless trade solutions and consider making permanent any temporary digital trade facilitating measures introduced during the pandemic.
“The post-COVID recovery is an opportunity for Commonwealth countries to make progress with many of the SDGs, but especially SDG 12 – namely, ensuring sustainable consumption and production – including through trade policy and trade agreements and promoting circular economy principles. The adoption of digital technologies can support this transition to sustainable growth and development, the creation of green jobs and strengthened regional and local supply chains.”
The review added that, taken together, these inter-related measures provide a set of pathways towards recovery in Commonwealth trade.
“As the world begins to tide over the COVID-19 pandemic, Commonwealth countries can look to use their global and intra-Commonwealth trade as essential tools for building back better and promoting a more inclusive, resilient and sustainable future.”