Ronald Sanders: Scotland’s September 18 Referendum: Its consequences

Sir Ronald Sanders

BRIDGETOWN, Barbados, Thursday September 11, 2014 - If the people of Scotland vote for independence from the United Kingdom on September 18, they will be buying a one-way ticket to their own misfortune, and with consequences that will go beyond their borders affecting Commonwealth countries.

Notwithstanding the arguments of the Scottish National Party, the Scottish economy cannot sustain an independent Scotland that can deliver the welfare system the country now enjoys and pay for all the apparatus required for defense, security and participation in international affairs. Scottish nationalists do the people of Scotland no favour by glibly urging them to go it alone.

If the Scottish voters opt for independence, they will quickly learn what many independent Caribbean countries understand well – being small has very few and limited advantages in a world where military or economic power reigns supreme. Of course, Scotland’s economy is bigger than all of the Caribbean economies, and its wealth and human resources are much greater. In this context, it would have a better chance of survival as an independent State than many Caribbean countries. That argument is true, but even with its greater resources, Scotland will still be a small country with little bargaining power and even less coercive muscle in the international community. It will quickly learn the disadvantages and marginalization of being small and ignored.

Scotland’s reality is that it has a population of 5 million people as against the present 63 million in the UK who share the cost of Scotland’s pension payments, unemployment benefits and free heath care. Scotland would be far better-off by securing greater devolution from the British government and legislature of authority over the key matters that most deeply concern the Scottish people. They have virtually achieved much of this by the fear that separation has engendered in the political establishment in Britain. The leadership of the Conservative and Labour Parties in a desperate effort to avert Scotland’s separation has pledged greater authority to the Scottish Parliament and administration.

The political leadership of Britain has good cause for wanting to keep Scotland in the UK. As I have argued before, it is not only Scotland that will be diminished and made vulnerable by a vote for independence, the rump United Kingdom (UK) will also be reduced in stature as an economic and military power. In turn, a shrunken UK will have a less legitimate claim to its current occupancy of a permanent seat on the United Nations Security Council, and as an influential member of the Executive Organs of international financial institutions such as the World Bank and the International Monetary Fund. Even with the European Union and the Commonwealth of Nations, the UK’s position will be undermined. For instance, in the Commonwealth, the UK, without Scotland, will become a smaller economy than India.

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The financial sector in Britain has already reacted badly to the possibility of Scotland’s independence – re-enforced by recent opinion polls that indicate a sharp rise in pro-independence sentiment. The value of the British pound fell sharply against the US dollar and international investors have been warned to pull their cash out of Britain to protect themselves against the impact of Scotland’s independence.
Undoubtedly, leaders of the UK’s main political parties have been very worried for some time about the impact of a positive vote for independence by Scotland. But, while the vote against such a possibility appeared unlikely, none of the principal political leaders sounded any alarm for fear of creating precisely what is now happening – anxiety that the UK will fragment with a cataclysmic effect on its economy. John Major, a former Conservative Prime Minister, articulated the deep concerns of British political leaders by saying: “The vote next week is about far more than the future of Scotland. It is about the future of every part of the United Kingdom”.

As polls show a distinct swing toward a vote for independence, both the British Conservative and Labour Parties have pulled out all the stops to reverse the trend. The Labour Party has called into actively campaigning in Scotland its former leader and Prime Minister, Gordon Brown – himself a Scot. It has to be hoped that, in the end, the push of narrow Scottish nationalism will be tempered and trumped by the pull of benefits within a wider union.

The rest of the world should be very concerned about a UK that is smaller in economic and military terms and as an influential voice in the world. The UK still has an important role to play in contributing to peace and security in Europe and in the world’s most troubled spots. It will not be able to do so unless it has the means.

For countries in the Caribbean, a shrunken UK has several consequences. One of them is as basic as contributions to the Commonwealth Secretariat and its Fund for Technical Cooperation. At present, the UK pays the single largest share of these costs. If its economy is reduced in size, contributions will have to be recalculated placing a heavier burden on all member states including those in the Caribbean for which the Commonwealth is an important instrument in pursuing their foreign policy objectives. The 12 Commonwealth Caribbean countries also need a strong UK in the European Community and in the Organization for Economic Cooperation and Development as an advocate for Caribbean interests. Belize and Guyana in the Caribbean community also have a vested interest in the UK remaining a robust voice on the UN Security Council because of their border controversies with Guatemala and Venezuela respectively.

Beyond the international political role that a strong UK plays for the Commonwealth Caribbean, there are a host of economic linkages including tourism, investment and development assistance that a less well-off UK will certainly be forced to curtail. And, then there is the contention of reparations for slavery. If Scotland were to choose independence in the referendum, Caribbean countries would have to add Scotland to the list of possible litigants. There were many Scottish plantation and slave owners in the Caribbean and they too benefited from huge ‘compensations’ paid to them at slavery’s formal abolition.

Hopefully, good sense will prevail in Scotland on September 18.

The opinions expressed in this commentary are solely those of Sir Ronald Sanders. Sir Ronald Sanders is a Consultant and former Caribbean diplomat. Copyright to this article is held by Sir Ronald Sanders and may not be reproduced, republished, shared, hosted, transmitted, or distributed without prior written permission unless indicated otherwise.

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Ronald Sanders: Scotland’s September 18 Referendum: Its consequences

Ronald Sanders: China will cast a huge shadow as Japan meets CARICOM

Sir Ronald Sanders

BRIDGETOWN, Barbados, Thursday July 2014 - The word will not be spoken in any formal speeches and it won’t be mentioned in final statements and declarations, but it will be talked about in the corridors and it will be at the back of everyone’s mind as Japanese Prime Minister Shinzo Abe visits five Latin American and Caribbean (LAC) nations from July 25 to August 2. The word is “China”.

Animosity between China and Japan has been steadily increasing over the last few years and relations are now tense at best and hostile at worst. From the Chinese side, according to Professor Zhou Yong-Sheng at the China Foreign Affairs University, “Japan can develop as a military superpower and boss around the region again”. He adds “China is no longer the country it is was 120 years ago and, therefore, Japan should not commit the folly of starting a war with its western neighbour”. Those are fighting words and there have been skirmishes in both the sea and air over claims to sovereignty of five small islands known as the Senkaku in Japan and the Diaoyu in China. This had led to a military build-up in Japan that has been criticised by China on almost a daily basis. The heat generated over this was fanned into a flame by the Prime Minister’s insistence on visiting the Yasukuni shrine that venerates Japan’s war dead who China regards as invaders and from the World War 11 occupation of Chinese territory.

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The Japanese leader is visiting the five LAC nations in the wake of a very successful visit by Chinese President Xi Jinping in which he signed agreements that exceed US$10 billion with Argentina, US$5 billion with Venezuela, and US$1.8 billion with Cuba. Additionally, Xi offered to extend a line of credit of up to US$10 billion to members of the Community of Latin American and Caribbean states (CELAC) and to create a US$20 billion fund to finance infrastructure projects in LAC countries. China is also LAC’s second largest trading partner after the United States of America. In 2013, trade reached US$261 billion of which China enjoys a surplus. Nonetheless, Chinese investment, particularly in infrastructure, has helped to boost economies in LAC countries, including the 9 Caribbean Community (CARICOM) countries that have diplomatic relations with China.

The Japanese Prime Minister is very keen to boost trade with Latin America and the Caribbean which, while it nearly doubled over the past decade, still accounts for just 5% of Japan’s foreign trade. He will also want to expand Japan’s stock of foreign investment in LAC which is now lagging behind China at US$60 billion.

The name of the game is two-fold. The first is economic and includes access to LAC resources, such as oil, gas and minerals, as well as investment in large infrastructural projects that would give Japan a sizeable return. In this regard, Chile, Colombia, Brazil and Mexico are the main targets. The second part of the game is political influence particularly in Japan’s quest for a non-permanent seat on the United Nations Security Council (UNSC) for which elections will be held in October 2016. In both cases, Japan comes up against China.

While China is one of the five permanent members of the UNSC, it has been openly campaigning against Japan’s candidacy for the single UNSC seat that will be available to Asia. Japan is contending with Bangladesh whose candidature China avidly promotes in order to block Japan.

It is because of the vote for the UNSC that Japan is particularly interested in meeting the 14 independent CARICOM nations in Trinidad and Tobago on July 28. If they all vote for Japan, Prime Minister Abe would be delighted.

And that is where the challenge and the opportunity arise for the 14 independent CARICOM states. For the five that do not have diplomatic relations with China (they are tied to Taiwan), supporting Japan poses no challenge at all, but the others do have to be mindful of the consequences of supporting Japan for the UNSC. Dealing with this issue will call for skilful diplomacy.

The opportunity for the 14 independent CARICOM nations is the face-to-face meeting with Prime Minister Abe. It presents an opportunity to bargain in the region’s interest just as the Japanese leader will be seeking benefits for Japan.

On the economic front, like China, Japan has been pledging large regional aid and investment packages to Africa and Southeast Asia, the value of which are US$43 billion and US $20 billion, respectively. It is unlikely that transactions of such sizes will be extended to all of the LAC countries. The LAC nations are a low priority for the Japan International Cooperation Agency (JICA) which provided only US$450 million to the entire region in 2012. This means that the CARICOM countries got only a fraction of that total.

It would be worth drawing that reality to Prime Minister Abe’s attention even as CARICOM leaders describe the plight of their economies and the restricted space in which they operate because of rules made by institutions in which Japan has a powerful voice. The face-to-face meeting with the Japanese Prime Minister offers a golden opportunity to remind him that his country has enjoyed a sizeable trade surplus with CARICOM countries for many years – a trade surplus that is greater than the amount of official development assistance Japan provides.

The value of the trade surplus may not be huge in Japanese terms, but it is large for CARICOM states.

Additionally, the meeting with Mr Abe also provides a chance to lever support from Japan in critical areas such as: providing help to address debt (many of the CARICOM countries now have a debt-to-GDP ratio of over 60%); active support in the Organisation for Economic Co-operation and Development and the Financial Action Task Force for compensation for the high costs that result from compliance with their rules; financing for Climate Change adaptation; advocacy in the IMF and World Bank to make CARICOM states eligible for concessionary loans; and more Japanese investment in renewable energy and infrastructure.

Over all these discussions, of course, China casts a long shadow.

The opinions expressed in this commentary are solely those of Sir Ronald Sanders. Sir Ronald Sanders is a Consultant and former Caribbean diplomat. Copyright to this article is held by Sir Ronald Sanders and may not be reproduced, republished, shared, hosted, transmitted, or distributed without prior written permission unless indicated otherwise.

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Ronald Sanders: China will cast a huge shadow as Japan meets CARICOM

Ronald Sanders: The New Bank of BRICS: What’s in it for small economies?

Sir Ronald Sanders

BRIDGETWON, Barbados, Thursday July 17, 2014 - It is news that should awaken the World Bank and the International Monetary Fund (IMF) from their complacent attitude toward developing countries. It is also news that should confirm to the G20 that what used to be the G7 – a group of the seven industrialised nations – no longer controls the world’s financial affairs.

On July 15 Brazil, Russia, India, China and South Africa (BRICS) established the New Development Bank and alongside it a Contingent Reserve Arrangement (CRA). The two institutions will serve the needs of the five countries for financing infrastructure and industrialisation, and to provide support in the event of a balance of payments crisis.

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The New Bank will be headquartered in Shanghai, with India as its President for the first term of 6 years. It will be capitalised initially with US$50 bn. Each BRICS member state will subscribe an equal share. The CRA) will be funded with US$100 bn. China is contributing the largest share of about US$41 bn while Russia, Brazil and India will put in US$18 bn each and South Africa US$5 bn.

The creation of the New Bank and the CRA is motivated by frustration with the pace of reform of the IMF and the World Bank to give a greater voice to the BRICS. In the Fortaleza Declaration after their meeting in Brazil, the five BRICS leaders – Brazilian President Dilma Rousseff, Russian President Vladimir Putin, Indian Prime Minister Narendra Modi, China’s President Xi Jinping and South Africa’s President Jacob Zuma – stated that international governance under its current structure and power configuration show increasing signs of losing legitimacy and effectiveness. They said “the BRICS are an important force for incremental change and reform of current institutions toward more representative and equitable governance capable of generating more inclusive global growth”.

BRICS represent 42 percent of the world’s population and roughly 20 percent of the world’s economy based on GDP. 

The BRICS are also concerned that the new vision for global economic governance, articulated by the G20 in 2009, has not materialized. And, while Brazil’s President Rousseff was careful to say that the world should not see the Bank and the CRA as a desire by the BRICS to dominate, she made it clear: “We want justice and equal rights. The IMF should urgently revise distribution of voting rights to reflect the importance of emerging economies globally”.

Whether the New Bank and the CRA remain open only to the BRICS or they widen their lending to all other developing countries, their establishment signals that it cannot be business as usual for the World Bank and the IMF, and that decision-making in the G20 will have to change.

BRICS represent 42 percent of the world’s population and roughly 20 percent of the world’s economy based on GDP. Total trade between them is US$6.14 trillion, or nearly 17 percent of the world’s total. Importantly, together they are the world’s largest market and their combined GDP grew by more than 300 per cent in the last 10 years. Those are not figures to be scoffed-at, and the BRICS have now shown that they are serious about demanding change.

Other developing countries, including those in CARICOM, should applaud the BRICS for creating their two new institutions. They have all endured the harsh terms, rigid conditionalities and unyielding dictates of the IMF and the World Bank. They would welcome any move that rattles the Washington-based institutions, which are controlled by the US and Europe, and encourages them to reform and to be more flexible in the treatment of developing countries that are confronted with crises.

At the same time, the BRICS would make a serious error if they kept the Bank and the CRA as a closed shop for their subscribing members only, or for other large developing countries such as Mexico and Indonesia that might be encouraged to join. For the two new institutions to command support from the wider community of developing countries, they should not repeat the mistakes of the IMF and World Bank.

The New Bank could be a much needed source of financing to developing countries for infrastructure, industrialization and productive development that many nations, such as those in the Caribbean Community (CARICOM), are now denied. Except for Haiti, CARICOM countries (13 of them) have been ‘graduated’ from access to concessional financing by the World Bank. The CRA could also allow developing economies to draw on pooled reserves in the event of balance of payments crises on terms that are more appropriate and more sympathetic than those now applied by the IMF.

While the IMF and the World Bank may be aroused by the BRICS creation of the New Bank and the CRA, they will continue to be influential players in the wider world economy.

Risk management, a high-quality loan portfolio that improves development but keeps default to a minimum, surveillance and profits are all crucial to any bank’s successes, and they will be vital to the New Bank’s survival – so standards will have to be high. But within those important parameters the BRICS should devise ways in which they could allow other developing countries, particularly small and medium-sized ones, to buy into the New Bank and the CRA on terms they can afford. Arrangements should also be made for borrowings by developing countries on less onerous and more sympathetic conditions than the requirements of the IMF and World Bank.

In other words, the BRICS institutions should create competitive conditions for lending that would cause the Washington-based financial institutions to soften their criteria for lending and their terms and conditions, thus giving developing countries particularly small and vulnerable economies, more acceptable access to financing and a better chance to survive and prosper.

While the IMF and the World Bank may be aroused by the BRICS creation of the New Bank and the CRA, they will continue to be influential players in the wider world economy. It is significant that the BRICS remain members of the IMF and World Bank where, undoubtedly, they will use the alternative of their new institutions to try to leverage larger voting shares for themselves.

Small economies, in particular, should not be left as mere spectators to the competition between the Washington-based financial institutions and the newly created BRICS Bank and CRA.

The opinions expressed in this commentary are solely those of Sir Ronald Sanders. Sir Ronald Sanders is a Consultant and former Caribbean diplomat. Copyright to this article is held by Sir Ronald Sanders and may not be reproduced, republished, shared, hosted, transmitted, or distributed without prior written permission unless indicated otherwise.

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Ronald Sanders: The New Bank of BRICS: What’s in it for small economies?

Ronald Sanders: Why join the Commonwealth?

Sir Ronald Sanders

BRIDGETOWN, Barbados, Friday July 11, 2014 – The Institute of Commonwealth Studies at London University held a colloquium on Thursday July 10 on the subject of “Why join the Commonwealth?”. I was invited to be a lead speaker. What follows below is a very much shortened version of my remarks given the space restriction of this column.

In recent time the relevance of the Commonwealth has been widely questioned. Many critics claim that the association is marginal to the interests of the majority of its member-states and that it has become virtually unknown among their peoples. In part, this is why the question arises of why join the Commonwealth.

But, far from having no role the 53-nation Commonwealth is today more needed than it has been since its heyday of fighting for an end to racism in Southern Africa, the independence of Zimbabwe under majority rule, the freeing of Nelson Mandela and the ending of apartheid. It is up to its leadership to make it relevant again; the potential and space for a role certainly exists.

It is more than a cliché to remind that the membership of the Commonwealth is representative of the world. It is drawn from every continent; it embraces every race and every religion; it is made up of big countries and small ones; it encompasses rich nations and poor ones. Further, its member-states are also members of virtually every regional, economic and trade organisation in the world. But, even more importantly, in the inter-governmental Commonwealth and its councils, leaders of all its member-states have access to each other for free and frank discussion in ways that are without equivalent in any other organisation.

Quite realistically, the Commonwealth is a network of networks; decisions made within it have the scope to resonate globally and to cause an impact beyond its own councils. That is the considerable ‘soft’ power that the Commonwealth has when used purposefully.

It should be noted that its present 53 member states, including Britain, chose to be part of the Commonwealth voluntarily, and to remain part of it. Two of these member states – South Africa and Pakistan – were withdrawn from the association by their governments at the time, but subsequent governments brought the countries back into the grouping. Obviously, they recognised that the association has value for them.

Two other countries were withdrawn from membership – Zimbabwe and The Gambia. In the case of Zimbabwe, President Robert Mugabe’s government violated Commonwealth values regarding democracy and free and fair elections. When the Commonwealth sought to suspend Zimbabwe from membership because of this infraction of its rules, President Mugabe withdrew Zimbabwe from the association.

Last year The Gambiam President Yahya Jammeh withdrew his country from the Commonwealth because, according to his Information Minister, he no longer wished to “associate with Great Britain” and “will never be a party to any institution that represents an extension of colonialism”. Strangely, The Gambia did not break relations with Britain. By contrast, the government of Tanzania, under President Julius Nyerere, did not withdraw from the Commonwealth in 1965 when it broke diplomatic relations with Britain over the latter’s failure to act against the Unilateral Declaration of Independence by Ian Smith’s regime in Rhodesia (later Zimbabwe). Nyrere kept Tanzania in the Commonwealth declaring, rightly, that it was not British.

The Commonwealth is not “British”, and it has not been British since 27 April 1949, when the Heads of Government declared their countries to be “free and equal members of the Commonwealth of Nations”, ending the term “British Commonwealth” – and establishing both the voluntary and equal nature of membership.

Before any government contemplates joining the Commonwealth it would have to take account of the criteria for membership established by Commonwealth leaders in 2007. Among the criteria are: an applicant country should, as a general rule, have had a historic constitutional association with an existing Commonwealth member, save in exceptional circumstances; the country must demonstrate commitment to democracy and democratic processes, including free and fair elections and representative legislatures; the rule of law and independence of the judiciary; good governance, including a well-trained public service and transparent public accounts; and protection of human rights, freedom of expression, and equality of opportunity; and the country should accept Commonwealth norms and conventions, such as the use of the English language as the medium of inter-Commonwealth relations, and acknowledge Queen Elizabeth II as the Head of the Commonwealth.

Joining the Commonwealth now is, therefore, a rigorous process and it is unlikely that, notwithstanding expressions of interest by two countries (South Sudan and Burundi), there will be any expansion of Commonwealth membership in the near future. The only exceptions to this general observation would be Zimbabwe and The Gambia where, if their governments were to rectify their record with respect to adherence to Commonwealth values, they would undoubtedly be welcomed back into the fold.

At a very practical level the Commonwealth is a very cost-effective form of diplomacy for all of its members large and small.

Consider the campaign at the moment by New Zealand for a non-permanent seat on the United Nations Security Council. Commonwealth countries are a special focus of New Zealand’s campaign, as they would be for all large Commonwealth countries, such as Australia, Britain, Canada and India, when they seek support for a cause or a candidate in the international community. Fifty-three Commonwealth votes matter. So too does the influence of those 53 countries, speaking up in organisations throughout the world of which they are also members.

The Councils and meetings of the Commonwealth are cost-efficient means of a country – big or small – maintaining relations with 52 other countries that could be of help to them.

For small states, the importance of the Commonwealth lies primarily in the access Summit meetings give leaders of these small countries to leaders of some of the world’s major powers on an equal basis. No other international or multilateral organisation affords them such an opportunity. But beyond access, the Commonwealth also delivers research and advocacy vital to the interests of small states.

The Commonwealth’s research on Economic and Development issues, and its advocacy of agreed positions on debt, on trade facilitation, on development financing, on Global Warming and Climate Change gives every member country resources most do not have on their own, and advocacy many could not afford on their own.

Today, there are great issues that confront the world: high unemployment and restlessness of frustrated young people; growing antagonism between and within nations based on religious grounds; hegemonistic tendencies by powerful countries toward their neighbours; competition between nations for resources that are becoming scarce; an enlarging gap between rich and poor countries.

The Commonwealth of Nations cannot solve these problems, but given its diverse membership, it can make a great contribution to their solution if its diversity is managed effectively by its leadership.

The opinions expressed in this commentary are solely those of Sir Ronald Sanders. Sir Ronald Sanders is a Consultant and former Caribbean diplomat. Copyright to this article is held by Sir Ronald Sanders and may not be reproduced, republished, shared, hosted, transmitted, or distributed without prior written permission unless indicated otherwise.

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Ronald Sanders: Why join the Commonwealth?