Foreign Affairs CommitteeWritten evidence from Ian Milne, Director, Global Britain

This submission consists of four observations (immediately below) about how the Commonwealth might develop, followed by a mainly statistical paper on the Commonwealth and UK export growth.

1. “The Commonwealth’s structure is based on unwritten traditional procedures, and not on a formal constitution or other code....the Commonwealth is a voluntary association of sovereign independent states, each responsible for its own policies” ......Declaration of Commonwealth Principles, Singapore, 22 January 1971.

Those principles should remain the foundation on which the Commonwealth operates. The Commonwealth should grow organically, “from the bottom up”, and remain an exceptionally efficient light structure (see 2 below). It should absolutely not be subject to “top-down” plans or directives or regulations and the inevitably cumbersome bureaucracies that go with them.

2. In 2009 the UK contribution to the operating costs of running the Commonwealth was £4.6 million—less than the UK contribution to the OECD (£12.5 million). UK contributions to other international bodies were: UN: £76 million; WTO: £6 million; World Bank: £1.2 billion#. In 2009, the UK net cash contribution to EU Institutions was £6,696 million*—a thousand and a half times greater than the UK contribution to the Commonwealth.

3. One way of enhancing the cohesiveness of the Commonwealth might be to invite representatives of those Commonwealth countries which have the Queen as their Head of State to sit in the House of Lords for a fixed term. “Associate” membership of the House of Lords might be offered to representatives of Commonwealth countries where the Queen is not Head of State.

4. India, which will account for half of the labour force of the entire Commonwealth by 2050, might be offered a more prominent role—perhaps even the lead-role—in the Commonwealth.

# Written answer 28 June 2010 by Lord Sassoon to Written Question HL535

*Table 9.2, pp 100–102, United Kingdom Balance of Payments: The Pink Book 2011; www.statistics.gov.uk

The following paper focuses on British export growth to 2050, and why the Commonwealth has the potential to become a valuable component of British trade policy.

The paper consists largely of factual information from which the Committee might be able to draw conclusions or which might be put to other witnesses.

The Commonwealth and British Export Growth 2010–2050

Short Summary

An overwhelming proportion of the world’s GDP growth between 2003 and 2050—nearly 80%—will occur outside of Europe, the United States and Canada.

For the last 40 years, preoccupied with “Europe”, British governments have neglected the Commonwealth. In the next 40 years, by an accident of history, the Commonwealth will be where much of global GDP growth (and hence of growth in propensity to import) will occur.

The United Nations has 192 member-countries. The Commonwealth, which will account for 38% of global labour force by 2050, has 55 members. The European Union, which will account for 5% of global labour force by 2050, has 27 members.

This paper takes growth in Labour Force, here defined as Working-Age (15–64) Population, to be a proxy for growth in GDP, using the latest projections of working-age population from the United Nations.

It concludes that the rest of the Commonwealth will represent a market over nine times greater than that of the rest of the EU by 2050. Competition to export to and invest in the developing world will be fierce. British exporters will need to maximise their strengths: which is why, over the next forty years, the Commonwealth has the potential to become a valuable component of British trade policy.

The Author

Ian Milne has been the Director of the cross-party think-tank Global Britain (www.globalbritain.org) since 1999. He was the founder-editor (in 1993) of The European Journal (www.europeanfoundation.org, and the co-founder (in 1995) and first editor of eurofacts (www.junepress.com > eurofacts) He is the translator of Europe’s Road to War, by Paul-Marie Coûteaux, and the author of numerous pamphlets, articles and book reviews, mainly about the relationship between the UK and the European Union.

His most recent publications are A Cost Too Far? (Civitas, July 2004, www.civitas.org.uk), an analysis of the net economic costs and benefits for the UK of EU membership; Backing the Wrong Horse (Centre for Policy Studies, December 2004, www.cps.org.uk), a review of the UK’s global trading arrangements and options for the future; Lost Illusions: British Foreign Policy (The Bruges Group, December 2007, www.brugesgroup.com), which assesses UK foreign policy since 1945 and suggests how it could become more effective; and Time to Say No: Alternatives to EU Membership (Civitas, October 2011, www.civitas.org.uk).

He graduated in engineering from Cambridge University and in business administration from Cranfield. His business career was in industry and merchant banking in the UK, France and Belgium.

The Commonwealth and British Export Growth 2010–2050

“..an overwhelming proportion of the world’s GDP growth between 2003 and 2050nearly 80%will occur outside of Europe, the United States and Canada”1

Summary and Conclusion

For the last 40 years, preoccupied with “Europe”, British governments have neglected the Commonwealth.2 In the next 40 years, by an accident of history, the Commonwealth will be where much of global GDP growth (and hence of growth in propensity to import) will occur. The Commonwealth, originating in the nineteenth century and functioning in its present form since 1949, is the user-friendly neglected colossus which could enable UK business to fully capitalise on its strengths, focussing on exporting to, and investing in, the growth markets of the future.

The United Nations has 192 member-countries. The Commonwealth, which will account for 38% of global labour force by 2050, has 55 members. The European Union, which will account for 5% of global labour force by 2050, has 27 members.

The UK is a member of all three organisations. It is the founder and headquarters of the Commonwealth, of which the Queen is Head. The common language is English, and the political, educational, financial, legal and accounting principles of most members are based on the British model.

This paper takes growth in Labour Force, here defined as Working-Age (15–64) Population, to be a proxy3 for growth in GDP, using the latest projections of working-age population from the United Nations.4 It concludes that the rest of the Commonwealth will represent a market over nine times greater than that of the rest of the EU (Table 5 below) by 2050. Similar analyses by firms in Germany, France, the United States and China will have reached similar conclusions: competition to export to and invest in the developing world will be fierce. British exporters will need to maximise their strengths: which is why, over the next forty years, the Commonwealth has the potential to become a valuable component of British trade policy.

Salient Points from the Tables in the Statistical Appendix below

In 2010, 99.1% of global population lives outside the UK. By 2050, that percentage will have increased to 99.2 %. Table 1

In the forty-year span between 2010 and 2050 the world’s labour force will increase by 30%, from 4.5 billion to 5.9 billion. Table 2

Over that period, with one exception, every continent on the planet will experience growth in its labour force. The exception is Europe. Table 2

Within EU-27, amongst the five biggest economies, the UK is the exception: its labour force grows between 2010 and 2050, while the labour forces of Germany, France, Italy and Spain all shrink. Table 3

Between 2010 and 2050 the European Union (“EU-27”) experiences a loss in labour force of 16% or 54 million. In effect, over that period, EU-27 “loses the whole of Germany”, since Germany’s entire labour force is currently 54 million. Table 3

The Commonwealth’s labour force will increase by 60% or 825 million between 2010 and 2050. Table 4

From the perspective of British exporters and investors, the labour force of the rest of the Commonwealth (“C-54”) grows between 2010 and 2050 by 822 million, while the labour force of the rest of the European Union (“EU-26”) shrinks by 57 million: a “swing” of 879 million. Table 5

By 2050, 96% of the Commonwealth’s labour force will be in Asia and Africa. Table 6

In 2050, the Commonwealth will account for 45% of the Asian and 45% of the African labour force. Table 7

India alone will account for 50% of the Commonwealth labour force in 2050, compared with 57% in 2010. Table 8

The four Commonwealth members of the Indian sub-continent: India, Pakistan, Bangladesh and Sri Lanka, will account for 67% of the Commonwealth’s total labour force in 2050, compared with 73% in 2010. Table 8

Outside EU-27, between 2010 and 2050, the USA’s labour force will grow by 17% or 36 million: almost as much as the entire 2010 labour force of Italy. Tables 3 and 9

Over the same period, China’s labour force will shrink by 11%, though it will still be three-and-a-half times as big as the USA’s in 2050. Table 9

Russia’s labour force will shrink by 31% between 2010 and 2050; that of South Korea by 31%; and that of Japan by 37%. Table 9

General Conclusions

The USA will become more powerful than it is today, economically, militarily, politically, culturally.

Europe, and the European Union as a whole, will decline economically, militarily, politically, culturally.

Growth in GDP, market size and equity returns will occur outside Europe.

Continental EU will be a shrinking market, relatively unattractive to exporters and investors.

The tax base of Continental EU will shrink: tax rates and public-sector debt will have to increase.

Shrinking and ageing population in Continental EU will mean more demand for state-provided healthcare and pensions, with fewer active people to provide them.

Most EU member-states will see falling demand for houses, schools, factories, shops and capital goods, with falling asset values and investment. This will affect both the tax base and the equity markets on which private pension provision depends.

Sharply-diverging demographics within the EU will make EU-wide “one-size-fits-all” policies (monetary, tax, labour market, agricultural, asylum, immigration, environmental etc) ineffective.

The political rationale of integration into a fading regional bloc—the EU—will become questionable.

For British exporters and investors, the economic rationale of integration into a contracting market—the EU—will become questionable.

STATISTICAL APPENDIX

Table 1

TOTAL POPULATIONS: ALL AGES

millions

2010

%

2050

%

Change

UK

62

13

72

13

+ 10

EU-261

436

7

422

5

(14)

China/HK

1,362

20

1,426

16

+ 64

Commonwealth2

2,159

31

3,239

35

+ 1,080

Rest of World

2,890

42

3,991

44

+ 1,101

World

6,909

100

9,150

100

+ 2,241

1 EU-27 minus UK

2 Commonwealth minus UK

3 Precisely: 0.9 % in 2010; 0.8 % in 2050

Table 2

WORLD LABOUR FORCE1 2010–2050

millions

2010

2050

Change

Asia

2,797

3,388

+ 591

Africa

582

1,311

+ 729

Central and South America

385

463

+ 78

Europe2

501

398

(103)

North America

236

274

+ 38

Oceania

23

32

+ 9

World

4,524

5,866

+ 1,342

1 Working-age (15–64) population

2 EU plus Russia and other Europe, of which EU 333 million in 2010, 280 million in 2050, reduction 54 million by 2050

Table 3

EUROPEAN UNION LABOUR FORCE1 2010–2050

millions

2010

2050

Change

UK

41

44

+ 3

Germany

54

39

(16)

France

41

39

(2)

Italy

39

30

(9)

Spain

31

27

(3)

Other EU

127

101

(26)

Total EU—27

333

280

(54)

1 Working-age (15–64) population

Table 4

COMMONWEALTH AND EU LABOUR FORCES1 2010–2050

millions

2010

2050

Change

C—552

1,382

2,207

+ 825

EU—273

333

280

(54)

1 Working-age (15–64) population

2 The 55 Commonwealth members as at 2010

3 The 27 EU members as at 2010

Table 5

BRITISH EXPORT MARKETS: COMMONWEALTH (EXCL. UK) VERSUS EU (EXCL.UK): LABOUR FORCES1

millions

2010

%

2050

%

Change

C- 542

1,341

29.6

2,163

36.9

+ 822

EU-263

293

6.5

236

4.0

(57)

Rest of World

2,890

63.9

3,467

59.1

+ 577

World

4,524

100.0

5,866

100.0

+ 577

C- 54/EU—26

4.6 times

9.2 times

1 Working-age (15–64) population

2 The 54 Commonwealth members (excl. the UK) as at 2010

3 The 26 EU members (excl. the UK) as at 2010

Table 6

COMMONWEALTH BY CONTINENT: LABOUR FORCES1

millions

2010

2050

Change

Commonwealth in Asia

1,038

1,522

+484

Commonwealth in Africa

256

588

+332

Commonwealth in RoW2

88

97

+9

Total C’wealth

1,382

2,207

+825

1 Working-age (15–64) population

2 RoW = Rest of World

Table 7

2050 LABOUR FORCES1: COMMONWEALTH AS A PROPORTION OF WORLD

millions

Asia

Africa

RoW2

World

Commonwealth

1,522

588

97

2,207

World

3,388

1,311

1,167

5,866

Commonwealth/World

45%

45%

8%

38%

1 Working-age (15–64) population

2 RoW = Rest of World

Table 8

Commonwealth Members’ Labour Forces1

millions

2010

2050

Change

India

781

1,098

+317

Pakistan

110

224

+114

Nigeria

86

192

+106

Bangladesh

107

149

+42

Tanzania

24

70

+46

Uganda

17

58

+42

Kenya

22

56

+33

UK

41

44

+3

South Africa

33

38

+6

Ghana

14

30

+15

Mozambique

12

29

+17

Canada

24

26

+2

Malaysia

18

26

+8

Cameroon

11

24

+13

Malawi

8

24

+16

Australia

14

17

+3

16 most populous (above) in 2050

1,322

2,105

+783

39 least populous (not listed) in 2050

60

102

+42

Total: 55 C’wealth members

1,382

2,207

+825

1 Working-age (15–64) population

Table 9

SELECTED NON-COMMONWEALTH LABOUR FORCES1

millions

2010

2050

Change

China2

979

875

(103)

USA

212

248

+36

Indonesia

156

184

+28

Brazil

132

137

+5

Mexico

73

80

+7

Russia

101

70

(31)

Turkey

51

62

+11

Japan

82

52

(30)

South Korea

35

24

(11)

Switzerland

5

5

(0.1)

Norway

3

4

+0.4

1 Working-age (15–64) population

2 China + Hong Kong and Macao

Notes and References

1. In The New Population Bomb, by Jack Goldstone, George Mason School of Public Policy, in Foreign Affairs, January/February 2010 www.foreignaffairs.com. This article also cites a World Bank prediction that “by 2030 the number of middle-class people in the developing world will be 1.2 billion.........larger than the combined total populations of Europe, Japan and the United States”.

2. “The Commonwealth’s structure is based on unwritten traditional procedures, and not on a formal constitution or other code....the Commonwealth is a voluntary association of sovereign independent states, each responsible for its own policies” ......Declaration of Commonwealth Principles, Singapore, 22 January 1971. Founded in 1931 (though the concept originated in 1884), headquartered in London, the Commonwealth has 55 members, mainly but not exclusively former British dominions and colonies. www.thecommonwealth.org. See also Global Britain Briefing Note No 38, The Commonwealth: Neglected Colossus? www.globalbritain.org > Briefing Notes.

3. Growth in labour force is not the only driver of growth in consumer demand, and growth in consumer demand is not the only driver of growth in GDP. Nevertheless, the associations are strong in developed economies, less strong in poor and developing countries.

4. Population Division of the Department of Economic and Social Affairs of the United Nations, World Population Prospects: The 2008 Revision http://esa.un.org/unpp . This is the world’s most authoritative source of demographic data.

[Published at www.globalbritain.org as Global Briefing Note No 58 on 5 March 2010]

11 January 2012

Prepared 14th November 2012