COMMONWEALTH FOREIGN AFFAIRS MINISTERS MEETING

Marlborough House, London, 15 March 2023, 0930hrs – 1330hrs

Agenda Item 5 RESTRICTED

CFAMM (LON)(23)(5)

LEVERAGING INTRA-COMMONWEALTH TRADE AND DIGITAL

CONNECTIVITY TO SUPPORT MEMBERS IN A TIME OF CRISIS
Background Information Paper
by the Commonwealth Secretariat

1 Introduction
As the world gradually transitions to the post-pandemic era, there are mixed signals about
global economic and trade growth. In absolute terms, global trade in goods and services are
estimated to have hit record levels in 2022, reaching US$32 trillion.1 The global exports of
the 56 Commonwealth member countries, valued at $4.5 trillion in 2022, are also the highest
on record. However, after two consecutive years of economic recovery from the Covid-19
pandemic, the growth in international trade is set to slow because of weak GDP growth
forecasts and ongoing supply chain disruptions.
In 2023, the global economy is predicted to grow at 2.9 per cent.2 This would represent a
significant contraction from 6.2 per cent in 2021 and 3.4 per cent in 2022. The slower growth
will weigh heavily on international trade, which is estimated to grow at 2.4 per cent in 2023,
a significant drop from the growth of 10.5 per cent in 2021 and 5.4 per cent in 2022.
Amid slower economic growth and a rapidly changing global economic landscape, most
Commonwealth countries are facing two sets of challenges. First and foremost, they must
successfully navigate the difficulties presented by a set of multiple and interconnected
crises that have set back our development progress, especially the achievement of the
Sustainable Development Goals. These include the lingering effects of the Covid-19
pandemic, ensuring food and energy security, assessing the implications of reconfigured
supply chains, managing soaring debt and inflation, and mitigating and adapting to climate

1
Global trade set to hit record $32 trillion in 2022, but outlook increasingly gloomy for 2023 |
UNCTAD. Global merchandise trade grew by 10 per cent from 2021 to an estimated US$25 trillion,
while services traded expanded by 15 per cent to reach a record $7 trillion in 2022.
2
IMF / IMF World Economic Outlook January 2023 Update

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change and financing losses from climate impacts while building resilience to climatic shocks
resulting in natural disasters.
Second, and equally pressing, they need to chart a course of action to concurrently drive
just transitions to more digital and greener economies and societies in the future.
International trade offers numerous opportunities and solutions to overcome these current
and future challenges. Open trade and supply chains helped maintain access to critical
medical supplies during the pandemic and preserved food and energy security during the
Ukraine conflict. International trade will be a key tool as countries look to harness the
benefits of digitalisation and make progress in transitioning towards more sustainable,
greener and circular economies.
In the face of these challenges, the Commonwealth continues to act as a beacon of hope
and opportunity, providing a platform for member countries to work together in the spirit
of friendship and co-operation. The Commonwealth Secretariat stands ready to support
members to manage the current economic and trade challenges and to provide support for
the twin transitions to a digital and greener future by harnessing intra-Commonwealth trade
and digital connectivity.

2 Leveraging intra-Commonwealth trade to support members

Intra-Commonwealth trade is a key component of many member countries’ global trade,
especially Small States and Least Developed Countries (LDCs). This trade is underpinned by
the ‘Commonwealth Advantage’, which makes it easier to trade with other Commonwealth
countries and is rooted in the Commonwealth’s practical similarities: in language, common
law, regulatory coherence, business procedures, and large and dynamic diaspora
communities. When Commonwealth countries trade with each other, bilateral trade costs
are 21 per cent lower, on average, compared to trading with non-Commonwealth countries.
Several estimations and studies over time have shown that the ‘Commonwealth Advantage’
remains strong and resilient and can provide a tailwind to support trade growth in member
countries.
Intra-Commonwealth exports rebounded in 2021 to reach an all-time high of US$768 billion,
up by almost $150 billion from 2020. In 2022, these exports are estimated to have surpassed
$800 billion. Merchandise accounts for more than two-thirds of these exports, while services
contribute about 30 per cent. This share of services is higher than the global average (25
per cent) and there would seem to be significant untapped potential to increase this trade,
especially by delivering a range of services through digital means.
Overall, intra-Commonwealth exports represent 18 per cent of Commonwealth members’
global exports. Commonwealth Small States depend the most on intra-Commonwealth
trade, which represents 31 per cent of their world trade, on average. Many LDC members,
especially Bangladesh and African countries, also have significant exports to Commonwealth
markets.
Intra-Commonwealth exports are forecast to grow steadily over the next five years,
surpassing US$1 trillion by 2026 and converging with a pre-pandemic trend in 2027. While
this growth is positive, it will be challenging to achieve the long-term vision of raising intra-
Commonwealth trade to $2 trillion by 2030.

3 Leveraging digital connectivity to build resilience

The COVID-19 pandemic accelerated the drive for the digitalisation of international trade
and the provision of government services and generated new business models. To benefit

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from this digital transition, Commonwealth countries need to narrow existing digital divides
between countries and within countries.
While access to internet is high in Commonwealth developed countries (up to 95 per cent of
the population) and in some developing members, large sections of the population in LDCs
and Small States are still offline. Most Commonwealth LDCs and some developing country
members lack the basic elements necessary to expand their digital economies and
participate effectively in digital trade. On average, more than three quarters of individuals
in Commonwealth LDCs are without access to the internet. Fewer than 20 per cent of the
population uses the internet in six of the 14 LDC members of the Commonwealth.
These digital divides are exacerbated by major affordability gaps. For example, the cost of
5GB of fixed broadband in Commonwealth LDCs (31.2 per cent of gross national income [GNI]
per capita) was nearly 4.5 times higher than in developing countries (7.2 per cent) in 2021,
and 26 times higher than in developed countries (1.2 per cent). In the case of mobile
broadband, the average cost of 2GB of data, when measured as a percentage of GNI per
capita, is more than 2.5 times higher in Commonwealth LDCs (8 per cent) than the
developing country average (3.1 per cent) and 16 times higher than in developed countries
(0.5 per cent).
These stark differences in digital connectivity are constraining the growth and development
prospects of many Commonwealth member countries. Considerable effort is required to
build digital ecosystems and develop the foundational elements of digital infrastructure,
literacy and skills necessary to enhance connectivity in Commonwealth developing
countries, and especially in LDCs.
The Commonwealth Secretariat is supporting members to improve digital connectivity and
harness the power of digital technologies in several ways.
The International Trade Policy Section undertakes analytical and policy-oriented work to
assist member countries to grow and diversify their economies through digital trade and
identify the most effective policy options to better harness the benefits available through
participating in the digital economy. The Section’s recent work in this area includes
advocating for additional resources and donor support to enhance the participation of
developing countries in digital trade through a newly invigorated Aid for Digital Trade
agenda. It has also initiated work highlighting where and how to enhance capacity building
to expand the participation of developing economies in digital trade and the digital
economy, including by making capacity building – tailored to the specific needs of individual
developing countries - an inherent part of digital economy agreements.
The Trade Competitiveness Section supported member countries to undertake e-commerce
readiness assessments and develop digital trade strategies. The assessments covered
reviews of the legal and institutional framework, identification of gaps in supply side
capacity and trade-related infrastructure deficiencies, analysis of ICT penetration
(connectivity, coverage, and access to internet), readiness of payment and delivery systems
to support e-commerce, and potential gains from e-commerce. This informed the
development of strategic roadmaps and approaches to develop and expand e-commerce.
Technical support has been extended to Sri Lanka, Cameroon, and the Organisation of
Eastern Caribbean States (OECS).
The Commonwealth Connectivity Agenda (CCA) undertakes work in five clusters, namely
Physical Connectivity, Digital Connectivity, Regulatory Connectivity, Supply Side
Connectivity and Business-to-Business Connectivity. Each cluster has country leads to guide

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the work of the CCA workstreams. This work has now intensified through the provision of
pan-Commonwealth and regional support to members. This includes advisory, capacity and
consensus building as well as peer-to-peer learning and exchanges. These clusters support
the development of digital economies through sharing of best practices, improving
regulatory coherence, encouraging participation in global value chains, and supporting
greater interface between public and private sectors.
Each of the clusters feature inclusive, sustainable development objectives and initiatives,
with business-to-business connectivity as a cross cutting element. Work is underway to assist
industrial development by adapting Manufacturing 4.0 technologies. A foundational
Policymaker’s Guide was digitally produced and is available for all members, and a pilot
Manufacturing 4.0 implementation programme has begun, focusing on capacity building for
Commonwealth developing and Small Island Developing States members.
Besides this in house support, the Secretariat has signed several memoranda of
understanding (MoUs) with multilateral institutions operating in the international trade
space. These MoUs enable joint analytical work and technical support through partnerships
with the World Trade Organization, United Nations Conference on Trade and Development,
International Trade Centre and the WTO’s Enhanced Integrated Framework for LDCs.

4 Conclusion
There are numerous opportunities to leverage intra-Commonwealth trade and digitalisation
to build resilience in member countries. Commonwealth countries can leverage digital
technologies, utilise trade agreements and trade preference schemes, promote services co-
operation and improve connectivity to boost their trade, and the Commonwealth’s youthful
population offers an important and promising dividend for digital transformation.
The full and effective implementation of existing and new bilateral and regional trade deals
involving Commonwealth members could potentially support greater merchandise exports.
There are also untapped opportunities in the services sector, especially for digitally
deliverable services, while technological change means that activities within industrial firms
increasingly involve the provision of services. The rapid rebound in goods trade and the
gradual revival of the tourism sector will also require more support services, from transport
and logistics to communications and finance.

5 Open questions for discussion

Foreign Ministers may wish to:

• Highlight the key challenges their country faces for economic and trade recovery;

• Discuss how to support Small States and LDCs during this time of crisis;

• Identify the growth opportunities for intra-Commonwealth trade and investment,

especially digital trade, and how can these be realised;

• Examine how countries can co-operate on digital regulations and standards;

• Adopt practical recommendations for the Secretariat to support member countries

with their economic and trade recovery and building resilience.