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The Actuary The magazine of the Institute & Faculty of Actuaries

Fresh calls to target Commonwealth countries post-Brexit

The UK should leave the EU customs union and focus its attention on trying to secure trade deals with Commonwealth countries according to the Free Enterprise Group.

Commonwealth 'too big an opportunity to ignore' ©iStock
Commonwealth 'too big an opportunity to ignore' ©iStock

Their Reconnecting with the Commonwealth report argues that out of the 28 EU nations, the UK is the largest export destination for countries such as Australia, Canada, India, New Zealand and South Africa.

In addition, the top 10 Commonwealth export destinations for the UK account for 8% of its trade in goods and services, more than double what it sells to China, suggesting that deals could be struck with such countries relatively easily as Brexit commences in 2019.

In the foreword to the report, Australia’s ex-PM, Tony Abbott, said: “Brexit means that Britain is back. The country that gave the world the English language, common law and the mother of parliaments is once more to seize its destiny as a global leader.

“Brexit gives Britain the chance to do its own trade deals where consumers benefit from global goods and services and workers benefit from being able to compete more fairly in the markets of the wider world.

“The best way to ensure that free trade has few losers, even in the short-term, is to begin with much freer trade between like-minded countries with comparable standards of living.

“Free trade agreements with economically advanced Commonwealth countries are the obvious place for Britain to start.”

The percentage of Commonwealth imports into the European market, including Russia and Switzerland, destined for the UK are:

Source: Free Enterprise Group
Source: Free Enterprise Group

The UK also represents 34% of all Canada’s exports to the EU according to the research used in the report, with Germany a distant second, implying that once the CETA trade deal is functional, it would be in Canada’s economic interest to secure a similar agreement with the UK once it leaves.

This analysis paints a similar story for other Commonwealth countries, with roughly a quarter of Australian (23%), New Zealand (26%), Kenyan (22%) and Sri Lankan (26%) exports to the EU destined for the UK.

It is also argued that the UK is the fifth largest economy in world, as well as a p5 UN member, making a trade deal with Britain a ‘geo-strategic’ prize for both emerging and developed economies.

Report co-author, James Cleverly MP, said: “The government must publish a plan to utilise the “Commonwealth Advantage” and build our trade links with the Commonwealth.

“A market of 2.3 billion people and some of the fastest-growing economies in the world is too big an opportunity to ignore.”

The report offers a five-phase proposal for the UK:

Phase one – Attempt to secure a free trade agreement (FTA) with the Commonwealth’s open economies of Australia, Canada, Singapore and New Zealand
Phase two – A FTA with the largest Commonwealth export destination: India, although this is expected to take significant time
Phase three and four – The UK will need a number of African, Caribbean and Pacific (ACP) deals to mirror or better the existing EU options, which will likely be lost after Brexit, unless grandfathering rights can be secured
Phase five - As the second largest service economy, the UK should join the under reported Trade in Service Agreement (TiSA).