The Trade Performance of Small States

image of The Trade Performance of Small States

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.



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.


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