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Alternative Special and Differential Arrangements for Small Economies

image of Alternative Special and Differential Arrangements for Small Economies

Small states face particular problems in integrating into the world economy. These stem from diseconomies of scale and scope, but are often exacerbated by isolation and high transport costs. However, their efforts to obtain special and differential treatment analogous to (but not necessarily identical to) that received by least developed countries have been resisted by both developed and developing countries. This study considers alternative ways of achieving this goal. Although the special problems of small economies are receiving greater attention from the international community, problems still remain. By suggesting alternatives to traditional differential treatment, Dr Davenport’s study will generate much interest both among donors and with small states.

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The Use of ‘Objective' Variables

Arguments about the particular economic disadvantages of small states have been dismissed as special pleading, and counter-examples, such as Singapore, Estonia and Liechtenstein, have been suggested. Secondly, small states may have low shares in world trade – but in particular goods these shares can be relatively high, for example the Bahamas and Jamaica in rum and Mauritius, Fiji and Guyana in cane sugar. Thus a blanket argument that trade diversion away from other developing or developed countries would not result from granting trade preferences to small states that are equivalent to those given to the LDCs may be hard to sustain.

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