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New report shows that Commonwealth Least Developed Countries are doing better at trade

The New Times/Rwanda

23 February 2022
A new Commonwealth report released today highlights why Least Developed Countries (LDCs) in the Commonwealth are faring relatively better at global trade than non-Commonwealth LDCs. According to ‘A new programme of action for Commonwealth LDCs’ a significant and growing ‘Commonwealth advantage’ in trade has driven an increase in exports, helping to build, strengthen and sustain trading relationships between Commonwealth LDCs and other member countries.

Speaking about the report, Rt Hon Patricia Scotland QC, Secretary-General of the Commonwealth said:

“Trade can provide a post-pandemic tailwind that supports recovery, especially in Least Developed Countries and Small States, which have been particularly hard-hit. Enabling the Least Developed Countries to access regional and global trade offers real economic and development opportunities and can help to build resilience.”

“Commonwealth member states benefit from the ‘Commonwealth Advantage’, which reduces trade costs while stimulating investment. They can also draw on the mutual support and benefits offered through initiatives such as the Commonwealth’s Connectivity Agenda, Blue Charter, Sustainable Energy Transition Agenda and our other work that helps boost trade recovery in a more inclusive, resilient and sustainable way.  This report is another step forward in bringing Commonwealth member states together in order to enable our whole family of nations to share in the benefits of global trade.”

Four factors seem to have driven export growth in Commonwealth LDCs.

Faster economic growth

Before the COVID-19 pandemic, Commonwealth LDCs’ gross domestic product (GDP) grew at an average annual rate of 5.5% between 2011 and 2019, compared to an average global growth rate of just 2.2% and 4.2% for all 47 LDCs combined.

Higher GDP growth rates in Commonwealth LDCs were accompanied by larger trade volumes. Collectively, global goods and services exports by all 47 LDCs rose from USD 215 billion in 2011 to just over USD 241 billion in 2019, an increase of around 12%.

The corresponding increase for the Commonwealth LDCs was 41%. Their exports grew from USD 57 billion to about USD 80 billion at an average rate of 3.7% per annum, compared with just 0.6% for the 47 LDCs and 1.2% across the world.

A major boost from intra-Commonwealth trade

Commonwealth LDCs relied heavily on intra-Commonwealth trade during 2011-2019, which grew significantly despite the Commonwealth’s 54 members not being a trading bloc. In 2019, the Commonwealth absorbed one quarter (USD 19 billion) of their total goods and services exports (USD 79 billion). During the pre-pandemic years (2011-2019), the share of Commonwealth LDCs in intra-Commonwealth goods exports climbed from 2.18% to 3.4%.

Over the same period, the share of LDCs in world trade stagnated at 1%.The significant and growing Commonwealth advantage” in trade spurred this increase in exports. Historical ties, familiar legal and administrative systems, the widespread use of English and the presence of large and dynamic diasporas, mean bilateral trade costs are around 21% lower, on average for Commonwealth countries compared with the cost of trading with non-Commonwealth countries.

Bangladesh’s strong export performance

Bangladesh, the largest Commonwealth LDC, contributed significantly to this group’s overall trade performance. Bangladesh’s global exports increased by almost 65%, from USD 27 billion in 2011 to more than USD 45 billion in 2019. By the end of 2019, Bangladesh’s share in world trade was 1.5 times higher while it remained largely unchanged for African LDC members and grew marginally (1.15 times higher) for the four Commonwealth LDCs in the Pacific.

Diversified exports – both merchandise and services were drivers of export growth

Commonwealth LDCs’ export growth was driven by both the merchandise and services sectors.
Overall, Commonwealth LDCs’ service exports grew faster than their merchandise exports, increasing by USD 7.5 billion – from USD 9 billion in 2011 to around USD 17 billion in 2019.

Despite the improved performance of services exports during the pre-pandemic period, Commonwealth LDCs still rely heavily on merchandise trade, which accounts for 80% of their exports.Unfortunately, the COVID-19 pandemic reversed many of these trade gains with the services sector being particularly hard hit.

In 2020, services exports from Commonwealth LDCs contracted by 27% and merchandise exports shrank by 10%. While Rwanda and Bangladesh maintained their shares of global exports at 2019 levels, these shares declined for five African members: The Gambia, Lesotho, Malawi, Sierra Leone and Tanzania.

Zambia was the only Commonwealth LDC whose share of global exports increased slightly in 2020, mainly due to rising demand for copper in the transport (electric vehicles), renewable energy and manufacturing sectors.

While there are still many challenges ahead, the new Commonwealth report ‘A new programme of action for Commonwealth LDCs’ identifies possible pathways to help guide Commonwealth LDCs towards progress, recovery and sustainable development. Read the report here.
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