Empire 2.0: Why the Commonwealth cannot save Britain from Brexit

Photo: Gunawan Kartapranata/CC BY-SA 3.0

British government ministers are developing plans for stronger trade arrangements with former colonies to cushion the blow of Brexit. Malaysia and Singapore are far better sticking with ASEAN’s new politics than relics of the old ways.

Editorial

Trade relations with Malaysia and Singapore could be key to British economic policy after , suggest government sources. ASEAN’s two Asian tigers are members of the Commonwealth of Nations, the political bloc of former colonies which the British want to use as a trade buffer after leaving the European Union (EU).

This is a show of arrogance and delusion on the UK’s part, say critics of the idea. The Commonwealth is simply not necessary for the continued economic prosperity of these ASEAN nations. Just 1% of Malaysian and Singaporean exports currently go to the UK.

Britain wants to capitalise on old relationships with Commonwealth nations

The Commonwealth notion of a special link between the UK and its former colonies has gained popularity in British circles. Over 50% of UK businesses prioritise Malaysia as a key market. The expectation is that the country’s former connections could be used as a bargaining tool in bilateral trade negotiations.

“I can assure you that the Commonwealth is ever present in Britain’s thinking, and we strive every day to enhance the benefit and opportunity it brings to so many,” said Paul Rennie, Deputy British High Commissioner to Malaysia. There was little indication of the Commonwealth being relevant before the economic disaster presented by Brexit.

The problem is that the Commonwealth is not a trade organisation, and there is a lack of support outside the UK to transform it into one. Government officials are also concerned about the new “political obsession” with the Commonwealth. The group is made up of “mostly small, far-flung and underdeveloped markets,” say internal sources. For ASEAN members, the risks of such a project are much higher than the potential gains.

Intra-Commonwealth trade in goods and services, 1995-2020 (US$ billion)

Britain has more to gain from ASEAN growth than vice versa

Singapore is the UK’s biggest trading partner in Southeast Asia and accounts for half of all British exports to ASEAN. Malaysia is the UK’s second-largest ASEAN trade partner, with British exports there increasing by 8% in 2013.

The significant potential for growth in the ASEAN market area is well-recognised by trading partners, and the UK is eyeing the opportunities greedily. British ministers need to find a way to cushion the tariff cost created by Brexit of up to 9% of British GDP (US$51 billion).The UK has more to gain from good trade links with ASEAN countries than vice versa.

Fortunately for Britain, both Malaysia and Singapore have already pledged to maintain strong trade relations with the UK. Members of the business community in Singapore are keen to negotiate a bilateral free trade arrangement with the UK after its exit from EU. Dato’ Yasmin Mahmood, chief executive of the Malaysian Digital Economy Corporation said, “there is more receptivity from people who have not thought about Malaysia in the past.”

The AEC has more economic potential than a Commonwealth trading bloc 

The core problem within using the Commonwealth to build preferential trading arrangements is that levels of economic development vary wildly among its member states. The growth of trade in services and foreign direct investment within the Commonwealth is almost exclusively driven by the most developed member states such as Singapore.

Huge reforms which promote flexibility and introduce legal frameworks would be needed to make an agreement work. This means a Commonwealth trading bloc would be extremely difficult to negotiate. Members of the civil service have suggested that Commonwealth free trade agreement would have little value compared to the benefits of EU membership.

Share of Intra-Commonwealth service exports by region, 2009 (%)

ASEAN nations will gain more from committing to the ASEAN Economic Community (AEC) project than getting tangled in another large integration scheme.

The Commonwealth notion may hold soft power but has little use in trade negotiations 

The UK’s growing interest in Commonwealth reform now, when economic trouble may be looming, seems like a sign of weakness. There is little incentive for the Commonwealth partners to bail out Britain. For Malaysia and Singapore, agreeing on bilateral trade agreements with the UK is a much safer deal.

It is time for Britain to face up to the realities: there will be no Empire 2.0 in the form of a strengthened Commonwealth with Britain at its core. In many cases, its trade partners will set the tune of future negotiations, not the other way around.

A better plan would be to use the Commonwealth as a platform for establishing and strengthening contacts between traders and investors. International trade is built around business-to-business networks. Like ASEAN, the British should look for connections between governments, chambers of commerce and other groups promoting private sector corporation. This can be done even without preferential trading arrangements.

Britain must swallow her pride and realise her new position in the world. “They do, of course, need to acknowledge that they withdrew from all the trading relationships with all the Commonwealth countries and approach it with a degree of humility that recognises that,” said Jonathan Marland, chairman of the Commonwealth Enterprise and Investment Council. A revitalised Commonwealth is not the answer, just a tool for building Britain’s weak new economic reality.