Does size matter? Economically that is? Itﾴs a question, which Caribbean states answer in the affirmative. After all, they argue, the economies of small states are extremely vulnerable to external shocks over which they have no control and therefore canﾔt be expected to compete on an equal basis with such economic giants as the United States, Canada, Brazil and Mexico. And to support their case, they point to the global economic slowdown and the after-effects of 9/11 when their economies went into a tailspin.
Thatﾴs why Caribbean states led by Barbados are asking for special and differential treatment during the negotiations on the proposed Free Trade Area of the Americas.
To Alvin Wint of the University of the West Indies (UWI) and The Economist magazine, the answer isnﾴt as clear cut as some government leaders and experts would like us to believe.
As Wint sees it small size isnﾴt a handicap.
ﾓThe fundamental competitive advantage of a small economy is the ability to be hospitable to the world (and) . . . be nimble,ﾔ he said.
The Economist magazine agrees. ﾓWell led and well managed, even a dot in the ocean can enjoy economic success,ﾔ stated the publication in an analysis of the economic problems and challenges facing the region.
The Economist, weighed in with the argument that the Caribbean should look no further than within its grouping and to Singapore to see that size doesnﾴt always matter.
Thirty years ago, it pointed out, Singapore had the same gross domestic product per capita as Jamaica. Today, Singapore is ﾓwealthyﾔ while Jamaica isnﾴt.
ﾓThe most thriving Caribbean economies are not the biggest, but include The Bahamas and Barbados, with their winning tourism and financial services,ﾔ The Economist said. ﾓEconomies of scale do not matter equally in all industries.ﾔ
The publication stated the dream of the sun, sand and sea that has made the Caribbean islands so popular with visitors ﾓis becoming more of a nightmareﾔ.
For example, according to The Economist:
l Some countries face ﾓbig debt problemsﾔ caused by ﾓpersistent economic mismanagementﾔ. Antigua and Dominica were cited as cases in point with debt amounting to more than 100 per cent of gross domestic product.
Tourism revenues have sagged, drug trafficking and violence are growing.
Changing international trade rules were causing ﾓgriefﾔ.
The preferential export arrangements provided by the European Union for bananas and sugar are on their way out, with sugar being phased out 2009 and bananas three years earlier.
l Trade privileges for rum and rice ﾓare disappearingﾔ.
l The financial services sector was under threat.
l Guyana and Belize are the only two sugar producing Caribbean countries that can survive if the WTO ordered Europe to end its special sugar import deal with the African, Caribbean and Pacific states.
l Caribbean tourism industry ﾓneeds stabilityﾔ.
ﾓLife is tough for small islands, economies, The Economist noted. ﾓBut there are ways to survive.ﾔ
The magazine and UWI experts may have ignored some key factors when it comes to questions of size.
The first is that although Jamaica has the largest population in Caricom its economy isnﾴt the largest. Trinidad and Tobagoﾴs is larger and far more diversified. Just as important, Jamaica is a small economy when compared with Brazil, Chile, France and Hong Kong, not to mention the United States, Canada and Mexico.
The truth is that despite their adherence to the rule of law, a firm commitment to the Westminster form of parliamentary democracy and the elimination of trade barriers, the usual set of prescriptions of success for developing countries as articulated by the international financial institutions and The Economist magazine itself, the Caribbean island-nations have a poor record when it comes to attracting foreign investment.
Why?
Because, as Kofi Annan, United Nations Secretary-General, and David Thompson, the Opposition Leader in Barbados, said recently the small size of the countries, poverty, the lack of skills and institutions, important ingredients for a successful market economy were key reasons.
By Tony Best, Barbados Daily
