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India looks at Commonwealth boost for small businesses

March 14, 2017 10:02 IST

For many years now, India has given the Commonwealth short shrift so its support for the Commonwealth trade initiative signals a renewed interest in the body.

New Delhi will most probably host a Commonwealth SME (small and medium-sized enterprises) summit in May as the next stage in a bid by the 52-nation association to evolve an ease of trading accord, which is aimed to be formally announced at the Commonwealth Heads of Government Meeting (CHOGM) in London next year.

The current Commonwealth trade turnover is in the region of $700 billion, and the target is to increase this to $1 trillion by 2020.

The Indian high commission in the United Kingdom estimates India's share of this to be roughly $120 billion or a noteworthy 17 per cent.

The conference will be co-hosted by the London-headquarteredCommonwealth Secretariat and the Indian commerce ministry.

The announcement was made by Rita Teaotia, Union commerce secretary, who attended the two-day inaugural meet in London, which ended on Friday. Minister of State for Commerce Nirmala Sitharaman reportedly could not attend the meet because of the ongoing Parliament session.

Dinesh Patnaik, India’s deputy high commissioner to the UK, said: “The strength of the Commonwealth lies in its SMEs. So an accord as envisioned will give them access to investment and technology.”

He also tied in the 5 per cent corporation tax reduction granted to SMEs in India in the recent Budget proposals to India’s interest in the Commonwealth proposal.

The pact envisaged will be far from being a free-trade agreement (FTA). It will be an attempt to deepen and harmonise economic ties by lowering tariffs, port charges, among other steps, to facilitate growth in the turnover.

For many years now, India has given the Commonwealth short shrift. Prime Ministers Manmohan Singh and Narendra Modi have, in fact, skipped CHOGMs.

India’s support for the Commonwealth trade initiative, therefore, signals a renewed interest in the body.

It also re-confirmed India’s preference for a lifting of barriers, as opposed to the protectionism advocated by US President Donald Trump. This is unsurprising, since India’s trade deficit for April-December 2016 was still a significant $76.5 billion.

Concerns remain about the fallout of Brexit on the international economy. The Commonwealth Secretariat said: “Discussions took place on the likely impact of the UK’s withdrawal from the European Union, which could disrupt market access to the UK and Europe.”

More than 700 Indian companies, including Tata group firms, are based in the UK and utilise it as a staging post to sell goods and services to the 500-million-strong EU market.

Referring to the “Commonwealth Advantage”, the organisation’s secretary-general, Patricia Scotland, said: “Because we share common law, common language, common institutions and common parliamentary structures, that has given us a de facto advantage.”  

The accord is being covertly driven by Britain, which is uncertain about how much it can export to the European Union if it comes out of the EU single market after Brexit, which is expected to be complete by 2019.

To avoid violating EU rules about negotiating trade treaties while remaining a member of the union, the British exploration of the Commonwealth alternative is being piloted by the Commonwealth Enterprise and Investment Council.

Lord Marland, its chairman, spoke of developing “a standard of rules” and identifying “common business practices”. These, he added, would give greater certainty to exporters, “in particular SMEs”.

The Commonwealth, comprising mainly former British colonies, of which India is the most populous, has 2.4 billion people living in it.

The UK’s Guardian newspaper reported, though, that in private “many British officials are despairing of the new-found political obsession with the Commonwealth, warning that its mostly small, far-flung and underdeveloped markets are little substitute for lost access to the EU single market".

A survey of British businesses commissioned by the Royal Commonwealth Society and Political Lobbying and Media Relations showed 90 per cent of the respondents think Whitehall should prioritise trade with Australia.

Canada and Singapore are joint second priority with 82 per cent; and New Zealand and India are third and fourth priorities with 79 per cent and 72 per cent, respectively, while South Africa is fifth with 70 per cent.

A Commonwealth-wide FTA is unfeasible. However, there is talk of bilateral FTAs between member nations, as, for instance, between the UK and Australia.

Dr Linda Yueh, adjunct professor at LondonBusinessSchool and fellow of St Edmund Hall, University of Oxford, felt; “As the UK government planned new trade deals after Brexit, it is worth reactivating the long-standing trading relationships embedded within the framework of 52 nations comprising the Commonwealth.”

Ashis Ray
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