Commonwealth investment summit points to EU alternatives

Jonathan Lindsell, 22 July 2014

It has been a gentle week to ease Philip Hammond into Britain’s top diplomatic job. He has only had to deal with the MH17 airplane crash in Eastern Ukraine, UN escalation with Russia, and the intensification of hostilities in Israel-Palestine. To add to his relaxation, Theresa May announced a public inquiry into the death of Alexander Litvinenko, the former KGB agent poisoned in London. Oh, and Hammond should be reforming the EU.

The Foreign Secretary will not be troubled, then, by the Commonwealth Games starting tomorrow in Glasgow. They are preceded by a two-day business conference run by UK Trade and Investment (UKTI) and the Scottish Government, which features heavyweight speakers Mark Carney, the Bank of England governor, and Alex Salmond, Scottish First Minister. As I write, Mr Salmond is waxing lyrical about the ‘common weal’, a historic understanding of mankind’s shared goodness.

This business conference is attended by over 400 CEOs from many of the world’s most dynamic markets. They are sure to enjoy the Games, but will also get numerous ‘networking opportunities’ built into their schedule. As soon as the business conference finishes, another begins in Glasgow City Chamber with near-identical goals. The Commonwealth bloc is growing faster than the EU or America in terms of population and economy, and Westminster has identified £15 billion worth of projects to which it hopes to attract overseas investment.

George Osborne will buoy the first conference’s mood by announcing £18 million investment to found science and business centres. Doubtless this will impress foreign entrepreneurs and show Britain is ‘open for business’, but is there any need? On Saturday UKTI released triumphal statistics showing Foreign Direct Investment (FDI) is at a record high of £975 billion, of which only £566 billion is European. The rest of the new investment, which created 66,000 jobs across 1,700 new projects, is from America, Japan, and the Commonwealth. Economist Ruth Lea notes this as a clear market indication that ‘#Brexit talk has not hurt investment’.

Britain has been an EU member for over forty years, but despite our historic and familial links across the world, the EU has only negotiated Free Trade Agreements with two major Commonwealth states – Canada and South Africa. We have fewer and weaker formal ties with the former empire than does that titan of international commerce, Switzerland (see p.55).  In fact, Britain used to have preferential trade with Australia and New Zealand, but this had to be abandoned upon European Economic Communities accession. There was worry that cheap antipodean butter, lamb and beef would undermine the Common Agricultural Policy – the former colonies’ trade had to be sacrificed.

Many Eurosceptic groups (e.g. Better Off Out) argue that a sustained effort founding a Commonwealth trade framework would more than replace the EU. Moreover, they argue that independent Britain could have the best of both worlds – an FTA or Norwegian link with the EU, and the freedom to forge new bonds independent of Brussels. More work for Mr Hammond!