Economic Paper

English
ISSN: 
2310-1385 (online)
http://dx.doi.org/10.14217/23101385
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This series examines current economic issues from a Commonwealth perspective. The titles in the series are technical papers of topical interest to specialists concerned with trade, micro and macroeconomics, development economics and related subjects.
 
The Trade Performance of Small States

The Trade Performance of Small States You do not have access to this content

English
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Author(s):
Roman Grynberg, Mohammad A. Razzaque
01 Mar 2004
Pages:
70
ISBN:
9781848598300 (PDF)
http://dx.doi.org/10.14217/9781848598300-en

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This paper analyses the trends in the relative significance of small states in world trade, and looks at the reasons for their marginalisation. It advocates that dependence on primary products and increasing globalisation explain much of the trend in the declining significance of small states, but that there are four other key factors: the structure of the export trade; the unfavourable geographical positions of many small states; their lack of financial resources; the global trade regime under the WTO.
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  • Executive Summary

    Despite increasing global integration and an unprecedented rise in the volume of trade and capital flows, together with a significant reduction in barriers to worldwide trading activities, there are indisputable concerns that some countries have failed to derive significant benefits from the ongoing process of trade liberalisation and globalisation. This is particularly true for small states. This paper analyses trends in the relative significance of small states in world trade and looks at the reasons for their marginalisation.

  • Introduction

    Recent years have seen intensifying global integration measured by an unprecedented rise in the volume of trade and capital flows and a reduction in barriers to worldwide trade and investment activities. This drive to globalisation received significant impetus, as well as legal foundations, from the successful conclusion of the Uruguay Round of Multilateral Trade Negotiations (MTNs) establishing the World Trade Organisation (WTO), providing specific trade rules and procedures, and promising further liberalisation of the world trade regime. Despite these developments, there remain serious concerns that some countries have not been able to derive significant benefits from the ongoing process of trade liberalisation and globalisation.

  • Small States in World Trade: Volume, Growth Rate and Share

    Between 1950 and 2000 world exports of merchandise goods grew by more than 100 times, from around US$62 billion to $6,327 billion. Developed countries registered a 108-fold increase over 1950, while developing economies experienced a rise of 112 times. By these standards, the performance of small states was at best modest; their export receipts increased from $0.6 billion to $28.4 billion, i.e. an increase of 47 times over 1950.

  • Performance of Individual Countries

    Countries defined as small states are heterogeneous and the performance of individual countries in fact differs quite widely. Notwithstanding this dissimilarity, high volatility of exports stands out as the most common characteristic associated with these countries. Graphical plots of aggregate exports, a fundamental aspect of the economic vulnerability of individual small states, as depicted in Figure 3.1, show that almost all countries have been subject to frequent, and at times violent, fluctuations in their export receipts.

  • Why is Marginalisation of Small States a Cause for Concern?

    Marginalisation occurs when the relative importance of a particular country or group of countries diminishes in world exports or trade. This does not necessarily mean that declining share is always associated with an absolute fall in export volume. If world exports are expanding rapidly, countries registering modest rates of growth will see their relative share of world trade shrinking.

  • Marginalisation in Merchandise Export Trade: A Statistical Analysis

    The merchandise export base in most small states is rudimentary and most of these countries have to rely overwhelmingly on agricultural commodities and natural resource intensive products which they can export. As can be seen from Figure 5.1, in 25 small states (out of a total of 31 for which the information is available) primary exports contribute more than 50 per cent of the receipts from merchandise exports. Only in four countries, Lesotho, Malta, Mauritius and Swaziland, is the value of manufacturing exports greater than that of exports of primary products.

  • Implications for Long-term Trade and Development of Small States

    While dependence on primary products and the increasing globalisation of the world economy explains much of the declining significance of small states, other factors aggravate the process, either by inhibiting or by not facilitating the development of dynamic export sectors. The long-term trade and development prospects of small states critically hinge upon the interplay of these factors and without addressing them the process of marginalisation cannot be reversed. This paper concludes, therefore, with some consideration of these factors.

  • References and Appendices
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