By Patricia Scotland
Published April 25, 2020
The world is bracing for a massive hit to the global economy in the wake of the coronavirus (COVID-19) pandemic. Experts have warned of a US$1-2 trillion shortfall in global income in 2020, while world trade could contract by between 13% and 32%.
As countries take drastic measures to fight the spread of the disease, we are seeing borders and businesses closed, domestic and international travel scaled back, and a totally transformed way of life due to social distancing. Currently, 2.6 billion people across the world are affected by their workplace closing.
The result is a sweeping drop in economic activity, a much less active workforce, on top of growing global insecurity for the future. Without ample government bailouts, poor developing countries and small states remain the most vulnerable in the face of the pandemic.
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However, history has shown that with the right policies and support measures in place, the Commonwealth as a whole will eventually be able to overcome the economic fallout – though extremely bleak times lie ahead.
In particular, gradually reviving trade flows amongst 54 member countries – worth more than an estimated US$700 billion in 2019 – can play a fundamental role in boosting economic recovery, while harnessing the benefits of Commonwealth ties.
Rapid population and per capita income growth (especially in Asia) are part of the driving forces behind the Commonwealth’s buoyancy. With 2.4 billion people, 60 per cent of whom are under the age of 30, these drivers are unlikely to slow anytime soon – with or without coronavirus.
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Moreover, Commonwealth countries share historical ties, familiar legal and administrative systems, a common language of operation (English) and large dynamic diasporas, which help make trade and investment more convenient and efficient.
While not a formal trading bloc, this ‘Commonwealth Advantage’ enables member states to trade up to 20 per cent more with each other than with non-members, at a 21 per cent lower cost, on average. Our research also shows that these countries invest up to 27 per cent more within the Commonwealth than outside of it – almost tripling investment levels five years ago, which stood at 10 per cent.
The slowing of the Chinese economy (a major trading partner), the decline in tourism and travel, as well as plunging oil prices will certainly cause economic strain to members. However, investment flows to sectors such as e-commerce, digital technologies, cybersecurity, healthcare and biotechnologies could shore up, as business migrates online, and countries race to find a vaccine and other medical treatments.
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Strengthening the connectivity among our countries is therefore critical, so that trade flows remain resilient during times of crisis. Digital connectivity will be especially key, as the need to interact virtually now will transform the way people trade and do business. It is already a major area of focus for the Commonwealth, under its flagship Connectivity Agenda.
While being extremely watchful of the pandemic’s economic impacts, I am cautiously hopeful about the potential for intra-Commonwealth trade to act as a lifeline during the darkest of times. By leveraging the Commonwealth Advantage and robust policy responses, countries can bolster vital trade and investment flows, to eventually emerge at the end of the tunnel.
Patricia Scotland is the Secretary-General of the Commonwealth of Nations, a political association of 54 member states, nearly all former territories of the British Empire.