Wednesday, March 12, 2008

Crossing the pond

Brent Cameron has produced, through Ruth Lee's think tank Global Vision, a new paper, “Building the Transatlantic Bridge: The potential for Canada-UK trade” (already mentioned on Centre Right). Coming from the author of 'The Case for Commonwealth Free Trade' it is pretty apparent where he is coming from.

And he doesn't disappoint. For those of us who see the growth of intra-Commonwealth trade as a positive and beneficial thing in itself, and if formalised an ideal alternative to our currently trade options he provides some interesting points and statistics.

He reminds us first that Globalisation is no state of being but merely a process, something that often seems forgotten in the general debate about international trade. What is more a process, the results of which are by dint of their being in the future intrinsically unknowable.

“If nations and corporations are truly concerned about their future, they will focus not on the nature of globalisation, but what they can get out of it”.

Well quite.

Most interesting however is not this general point but some specifics about intra-Commonwealth trade. One straw in the wind is the volume of trade between the UK and Canada (well he is Canadian). He points out that volumes of exports from Canada to the UK in 2004 increased by 25% on the previous year, yet, and this is important, no formal free trade agreement exists.

In a paper produced by Sariana Lundan and Geoffrey Jones,

“Commonwealth countries trading with one another experienced business costs that were 10-15 percent lower than similar dealings with non-Commonwealth countries of comparable size and GDP”.

How to explain this positive anomaly? The authors believed that it could be primarily explained by,

“a common language of business, education and scientific research, common legal and political structures and historic links. That is we do business in English, according to rules based on the Westminster model, and interpreted by jurisprudence by the British tradition. Those shared attributes reduce impediments to trade, and therefore, also the overhead in conducting business”.

As a committable to this Jeffrey Frankel estimates that a lack of free trade agreement reduces potential trade by upwards of 33% (similar to the negative impact of using separate currencies). He further suggests that geographical and linguistic distance each have the potential to limit trade by up to 50% each. (Which must explain the dearth of trade between us and the Cambodians – OK there may be other forces at work there).

But Cameron asks,

“What does this say about Commonwealth trade? Quite simply in terms of trade between Canada and the UK, the use of English nullifies the impact of the ocean that separates us. The use of a common language and legal structures has more of an impact on our bilateral trade than the adoption of a single currency has had for the eurozone.

Just as important, if the impact of the 'Commonwealth effect' is greater than the impact of a trade treaty, then a de facto free trade deal already exists – whether or not Brussels cars to negotiate with Ottawa or not”.

The key point in all of this is that this is happening with or without the say so of the EU, the WTO or any other multilateral multinational body setting rules and regulations in lace. This is a true invisible hand guiding individual companies and people in a mutually beneficial way.

What we in the UK have is a massive evolved advantage that we can recognise officially or not. As Cameron concludes about the future of Commonwealth Free Trade,

“Whether it exists in some official capacity, as I would hope to see, is a point to be debated and discussed. What cannot be denied is that it exists unofficially, and that it impacts business decisions around the world every day”.

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