“I have behind me not only the splendid traditions and the annals of more than a thousand years but the living strength and majesty of the Commonwealth and Empire; of societies old and new; of lands and races different in history and origins but all, by God’s Will, united in spirit and in aim” – Queen Elizabeth II
The genesis and the history of the Commonwealth is as important as its presence and its equally brighter future, particularly, in the context of a changing world order which is increasingly becoming multi-polar as opposed to unipolar world order where one supreme global power or a block, dictating terms for all.
The Commonwealth (formerly the British Commonwealth) was a vital global network, or rather group of networks, in the mid-twentieth century. Commonwealth (CW) members, including Australia and New Zealand, collaborated in the running of the Sterling Area and the Commonwealth Preference Area.
Myriads of networks
However, the CW members also had links to other networks and other sources of influence including the USA, continental Europe and Japan. During the 1950s and 1960s, there was a gradual change in the network relations of Australia and New Zealand with a diminishing importance of bilateral ties with Britain.
CW countries have diverse political and economic autonomies. At the early stage, Britain and the `white dominions’ of Canada, Australia, New Zealand and South Africa were sovereign powers and they could exercise sovereignty either to cooperate or to deny cooperation to their whims and fancies. From 1947 onwards, Asian and African countries, including India, Pakistan, Sri Lanka (Ceylon), Malaysia, Ghana and Nigeria, gradually acquired the ‘dominions’ state. The rest of the CW, the colonies and various protectorates was still accountable to the Colonial Office.
The origins of the important trade and currency institutions post-1945 could be traced to the Great Depression of 1929-39, resulting in the strengthening of the economic ties between the countries of the British Empire. Facing increasing protectionism in the rest of the world and also rising unemployment, the Empire linked together for defensive purposes. In September 1931, Britain left the Gold Standard. With the exception of Canada, the self-governing Empire countries continued to peg their currencies to sterling because Britain was their most important economic partner.
Between 1931 and the recommencement of dollar convertibility in 1958, the Sterling Area was a separate financial world strongly influencing its members to trade with each other. Tariff policy was also important. In 1932, the United Kingdom introduced tariffs on many food imports from non-Commonwealth countries. However, continued to admit Commonwealth primary produce duty free. For their part, British industries already enjoyed the benefit of tariff preferences in the dominions (newly independent British colonies in the CW). At the Ottawa conference of 1932, the CW countries, including Canada, committed to maintain this system of reciprocal tariff concessions. Perhaps, this would have been one of the earliest attempts of financial integration of CW.
CW preference system
Albeit the Commonwealth Preference system came into being in the 1950s and the 1960s, it did not disappear until 1977. Under the auspices of the Sterling Area and Ottawa agreements, CW countries had privileged status in their economic dealings. However, it is obvious that CW economic network was dissolved, paving the way for a new `one world’ regime, controlled by the IMF and GATT, in the late 1950s and early 1960s. In fact, the world economy may also be considered as a set of overlapping networks dominated by GATT, the IMF and the EEC. For UK, leaving the CW led to joining an alternative preferential trading network in Europe.
Unlike the European Union, where most countries are at a similar level of economic development, especially before 1914 the imperial economy was set up along vertical lines, with Britain at the top. Conventionally, the rest of the Empire exported primary products to Britain, to be turned into manufactures for export to the Empire and the rest of the world. This balance was maintained through Britain’s trade surplus with the rest of the Empire, and the rest of the Empire’s surplus with the rest of the world.
However, specialization had its limits. By the First World War, Canada, Australia and India had started to develop capabilities in industries such as steel and textiles, as governments in the rest of the self-governing Empire gave local firms a measure of tariff protection against British goods. A further challenge to UK domination was that the capabilities of British companies relative to American, European and Japanese firms were questionable, particularly from the inter-war period onwards. Countries in the remainder of the Empire/CW were efficient producers of food and raw materials. Their distinctive capabilities were reaffirmed by their trade surpluses with the rest of the world, and by the imposition of tariffs and quotas on much of their produce by the United States, Japan and continental European countries.
During the international economic crises of the 1930s to the 1950s, it was relatively difficult for CW countries to trade with the rest of the world. Economic complementarity within the CW was fortified by the crisis of the 1930s, and in some respects extended by the disruptions arising from the Second World War.
By 1945, CW members faced substantial reconstruction or development costs. However, these countries lacked the necessary purchasing power. The primary requirement was for manufactures, such as capital equipment, that were not readily available within the CW due to low levels of investment during the depression and wartime destruction of plant. These manufactured goods could be obtained from hard currency sources, particularly the USA. However, Britain and the dominions could not offer sufficient exports to earn the dollars that were required. Accordingly, the CW invoked strategies that would meet the shortfall of materials.
There were two principal strategies; a consolidation of trade ties between soft-currency CW members (that is, excluding Canada) and the use of import controls to reduce dollar expenditures; and the use of collective bargaining power to increase the inflow of hard currency, especially US dollars, into the Sterling Area. The bilateral Ottawa trade agreements and the procedures of the Sterling Area made up a useful basis for action to address the problems of the early post-war years.
In many respects the Commonwealth network became more inward-looking during these decades, albeit the ultimate objective of Britain, Australia and, of course Canada was to engineer a return to a `one world’ system from a position of strength. However, the common belief was that trade liberalization would have to wait until reconstruction had been completed.
From the very beginning, this attitude was a major stumbling block to trade liberalizations and accompanied wealth creations in CW countries. However, as of now, the global environment is quite different and conducive to make CW a fully-fledged Commonwealth Union, linked, invariably, to “Global Britain” and for the benefit of all, befitting to the true meaning of the term Commonwealth (Old English word ‘Commonweal’, for common good).
(to be continued…)
