Opinion: Trade and investment in the Commonwealth: at an inflection point?

[This is an excerpt from an article in The Round Table: The Commonwealth Journal of International Affairs and Policy Studies.]

History indicates that deeper trade integration within the Commonwealth has the potential to yield significant economic benefits. Historical evidence, such as David L. Glickman’s work on the British imperial preference system shows that tariff reductions within the British Empire were used to stimulate intra-bloc trade (Glickman, Citation1947). Empirical studies have examined the impact of the Commonwealth Preference System on exports, and have established the trade creation effect of Regional Trade Agreements (RTAs), which increase trade flows between member countries by an average of 12%-24%. The literature suggests that deeper integration can lead to efficiency and economies of scale gains including trade flows, investment, GDP growth, employment and consumer welfare. These historical insights suggest that deeper trade integration within the Commonwealth can enhance trade and investment, leading to broader economic benefits for member countries. It needs to be acknowledged that in the post war period this was underpinned by several factors including the sterling area, the very different time in the international trading system, and that African and Caribbean primary producers did not have access to sufficient development funds to diversify and were relegated to the periphery of the international trading system.

The challenges today require strategic approaches to enhance trade integration, reduce barriers, and promote sustainable and resilient trade practices within the Commonwealth. Three potential pathways to expand trade among Commonwealth members are:

Firstly, through enhanced trade facilitation:

• Building on existing frameworks for trade and investment, such as the Trade Facilitation Agreement (TFA) and TFA+.
• Implementing general WTO TFA-related measures, digital trade facilitation (e.g., paperless trade and cross-border paperless trade), sustainable trade facilitation for SMEs, agriculture, and women, and other measures such as trade finance and facilitation during crises.

Secondly, implementing trade digitalisation:

• Promoting cross-border paperless trade, artificial intelligence (AI), and blockchain technologies.
• Supporting frameworks such as the UN Framework Agreement on Facilitation of Cross-border Paperless Trade in Asia and the Pacific (CPTA), which provides a dedicated intergovernmental framework to develop legal and technical solutions for data exchange.

Thirdly, focussing on long-term deeper integration:

• Pursuing deeper integration in areas such as merchandise, services, foreign direct investment (FDI), and digital trade which is also inclusive for women entrepreneurs.
• This involves reducing tariffs, harmonising non-tariff measures, and creating a more integrated economic environment to facilitate trade and investment.

These pathways aim to reduce trade costs, enhance market access, and create a more conducive environment for trade and investment within the Commonwealth.

As World Trade Organization Director-General Dr Ngozi Okonjo-Iweala has acknowledged, one of the most encouraging trends in the Commonwealth’s 2024 Trade Review is the remarkable post-COVID recovery of intra-Commonwealth trade, which reached a record US$854 billion in 2022, accounting for slightly under 3% of global trade. This demonstrates the existing and growing importance of intra-Commonwealth trade.Footnote1.

Whatever the geopolitical tea leaves reveal, 2025 brings a new Secretary General with a priority focus which includes trade and investment. Within her first 100 days Shirley Botchwey will preside over the first Trade Ministers meeting outside the UK (in Namibia in June) and the implementation of the Plan of Action for Investment by the Commonwealth Investment Network which aims to support increased private investment into small and vulnerable states. Although it attracted little attention in the post CHOGM media coverage and was scarcely mentioned at the closing Press Conference, the Commonwealth’s investment action plan launched at CHOGM in Samoa to drive resilient economic growth is a key development.Footnote2.

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Econometric estimations using an improved empirical methodology and the latest data confirm the positive impact of Commonwealth membership, with the value of announced greenfield FDI between Commonwealth countries found to be 3.5 times greater, on average, compared to flows between other country pairs over the period from 2003 to 2022. Yet, the resilience of the Commonwealth advantage in investment has been tested recently by a series of global economic shocks – including the US – China trade war, the COVID-19 pandemic and the ongoing conflict in Ukraine – which have severely impacted investment flows worldwide (Commonwealth Trade Review, Citation2024).

Despite the substantial and growing levels of investment in the Commonwealth, inward stocks and flows tend to be highly concentrated geographically and across development levels. The bulk of the investment – both from global sources and intra-Commonwealth partners – originates from a small pool of countries and is directed to a few beneficiaries, chiefly the six developed economies and some mostly larger or more advanced developing members. Diaspora funding is an emerging asset pool Footnote3. attracting the interests of governments especially given the development of second and third generation diaspora business communities in the UK and North America; within the last 12 months the British High Commission in Pakistan has worked with the OPEN network of Pakistan-origin entrepreneurs in London to attract investment in green technology in Pakistan,Footnote4 and the Jamaican High Commission in London have also worked with OPEN to attract investment/collaboration into Business Process Outsourcing (BPO) and related services into the Caribbean.

Many vulnerable countries in the Commonwealth face acute challenges in attracting and retaining investment. Access to multilateral funds by small and vulnerable states is restricted by management resource constraints in those states and their ability to provide the required data and information. Additionally, programmes have tended to lack commercial rigour, with little or no input from the private investment community. There is a lack of project/programme evaluation reports making impact assessment difficult to measure and where these exist, they report a shortfall in meeting original objectives for investment outcomes, particularly in terms of private investment contributions (DKMR Associates, Citation2025). Thus, growing and diversifying intra-Commonwealth investment, leveraging and strengthening the Commonwealth advantage, can help to address these challenges and imbalances.

Arif Zaman is with the Commonwealth Trade and Investment Working Group, Board of the Commonwealth Businesswomen’s Network, and Bloomsbury Institute London, UK.