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The Global Financial Crisis and Trade Prospects in Small States

image of The Global Financial Crisis and Trade Prospects in Small States

This is the first study to look at the trade effects on small states of the current global slowdown. Export industries in these countries have been affected at least as much as those of other developing countries. Given their reliance on trade, this means that the overall economic impact on small states may be greater than for other developing countries, all the more so for those countries exporting minerals and fuels, and ‘luxury’ goods and services, such as beef and tourism. The authors suggest a number of policy responses for governments of small states which may help to address the issues that arise.

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An Empirical Analysis of Trade Effects in Small States

The global financial crisis is developing in the context of a challenging international trading environment for small states. The review of the 2000 Commonwealth/World Bank Joint Task Force Report produced in 2006 suggests that over the past few years the prospects for small states have deteriorated further due to (future) preference erosion and the emergence of large developing country competitors (Briguglio et al., 2006). Difficul ties in competing in this international environment are confirmed by the sluggish rates of small states’ export growth relative to the rest of the world (Figure 8). This is more so for goods than for services, which in fact is the sector where the review suggests small states should reposition themselves in the international trading system (Qureshi and te Velde, 2008).

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