Can small states compete in manufacturing?

Document Type

Article

Publication Date

1-1-2006

Abstract

Introduction There is little doubt that globalisation has a profound impact on the economic prosperity of the world's smallest economies. Much of the recent policy and academic literature has tried to show that small states do face specific problems and that their small size can constrain economic development in a global world economy. Several studies highlight the existence of an inverse relationship between country size and susceptibility to economic, political and environmental risks and threats (Commonwealth Consultative Group, 1985; Commonwealth Secretariat, 1997; Streeten, 1993; Briguglio, 1995; Atkins et al., 2001; Grynberg, 2001; Winters and Martins, 2003). This literature concludes that small states are more vulnerable than larger economies because of higher exposure to external shocks from higher trade openness and single primary commodity dependence; have less access to international financial markets and aid due to limited creditworthiness; face higher transport costs due to remoteness; and are more exposed to environmental risks due to their geographical location. These arguments have fuelled calls by small states' representatives in international fora for increased foreign aid and trade preferences to facilitate economic adjustment to globalisation. However, the success of such efforts to date, and the prospect for future success, is at best limited, and even if it were to improve significantly the underlying trends of globalisation are unlikely to change. Realistically, small states will increasingly have to compete on world markets for exports and foreign investment, and will receive less in aid and special treatment.

Publication Title

WTO at the Margins: Small States and the Multilateral Trading System

First Page Number

108

Last Page Number

144

DOI

10.1017/CBO9780511674495.005

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