International Trade Working Paper

The International Trade Working Paper series promptly documents and disseminates reviews, analytical work and think-pieces to facilitate the exchange of ideas and to stimulate debates and discussions on issues that are of interest to developing countries in general and Commonwealth members in particular. The issues considered in the papers may be evolving in nature, leading to further work and refinement at a later stage.


A Rising Commonwealth Tide

Emerging Dynamics of Intra-Commonwealth Trade and Investment

This study highlights the emerging dynamics and further potential of intra-Commonwealth trade and investment. The Commonwealth provides tremendous trade and investment opportunities. Its members’ combined global exports of goods and services are valued (in 2013) at US$3.4 trillion, which is about 15 per cent of the world’s total exports. The intra-Commonwealth trade in goods and services is currently estimated at $687 billion and is projected to surpass $1 trillion by 2020. FDI flows between Commonwealth members reached $80 billion before being hit by the global financial crisis of 2008 and intra-Commonwealth flow of remittances is estimated at $45 billion. The results from econometric analysis show that controlling for various factors, Commonwealth members, on average, tend to trade more between them and generate more FDI flows, and compared to other partners trade costs are 19% lower when both trading partners are from the Commonwealth. Simulation exercise also shows that strengthening trade logistics can tremendously expand trade flows in these economies. Since the currently substantial level of trade and investment has been achieved in the absence of any formal trade policy mechanisms, coordinated actions amongst members can enhance it greatly.


Keywords: remittances, FDI, Commonwealth, trade costs, international trade
JEL: F24: International Economics / International Factor Movements and International Business / Remittances; F14: International Economics / Trade / Empirical Studies of Trade; F21: International Economics / International Factor Movements and International Business / International Investment; Long-term Capital Movements; D23: Microeconomics / Production and Organizations / Organizational Behavior; Transaction Costs; Property Rights; F10: International Economics / Trade / Trade: General
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