Differentiation

With so many developing countries in the WTO, it is not surprising to discover that as far as their trading interests go, they represent a very diverse and heterogeneous grouping of countries, with very different needs and expectations, some of which can be conflicting. There are, therefore, several lines of differentiation that can be drawn among the developing countries. Perhaps the most important, however, is the level of development itself. Categorization by 'level of development' serves as a proxy for many indicators such as levels of income, wealth, consumption, and social provisioning, as well as technological, institutional, and organisational capacities. This point is somewhat reflected in the fact that there is a main line of division recognised by the WTO between the 'least developed countries' (LDCs) and 'other developing countries'(ODCs). There are 49 least developed countries, which have been identified by the United Nations in terms of their low GDP per capita, weak human assets, and their high degree of vulnerability.

None of the Caribbean (CARICOM) countries other than Haiti qualifies as an LDC. Indeed, when measures like income and consumption per head and social provisioning are used, the Region is found to have very high levels of development in comparison to other developing countries/regions. Nonetheless, because of its small size and exposure to external and internal, natural and man-made shocks, the Region considers itself uniquely vulnerable. It has on this basis therefore, sought to advance the categorisation of small countries as a group deserving special attention, not only in the WTO, but in other international fora and, in particular, the proposed Free Trade Area of the Americas, the IMF and World Bank. To date, however, it is only the category of 'small island developing states,' which has gained some recognition, but small size by itself has gained very limited recognition in the main international organisations. The question I have always faced when mention is made of this is, why has this been the case?

At present, nearly 90 countries have a population of less than 5 million, about 60 have under 2.5 million, and 35 have less than half-a-million persons. These countries have certain definite characteristics. For one, international transactions loom large in relation to the economic activity conducted in their jurisdiction. The usual indicator of this is the 'openness ratio,' which is a measure of the total value exports and imports as a percentage of total domestic production of GDP. This ratio reflects the small domestic market and consequent heavy reliance on export activity and imports.

However, not only is the 'openness ratio' large, but the exports from these countries are also concentrated on a narrow range of primary products, usually one to three. In the case of Guyana, these would be sugar, rice, and gold. More often than not these exports are also heavily concentrated in one of two markets. Thus the bananas exported by the Windward Islands concentrate their sales in Britain.

The enterprises producing for export in small countries are also invariably small by global standards, which places them at a disadvantage in these markets. As we saw in our earlier discussion on trade in this series, economies of scale are important for competition and the ability to adjust to change in a dynamic global environment. Small firms with limited volumes and resources to operate on an global scale with the best technology are severely disadvantaged.

Small states also carry higher investment costs. In the case of infrastructure investment like roads, airports and communications, the per capita costs are very high. This forces these countries to be heavily reliant on official development assistance to finance the construction of such facilities. In terms of raising finance in international capital markets, small states also face, on average, large per capita costs because of the relatively small size of the loans/credit being sought.

Small states also tend to face, comparatively speaking, more volatile markets for their exports and imports than large states. This is one of the reasons why, although over the long run the Region has enjoyed a satisfactory rate of growth, this has been erratic - marked by periods of considerable buoyancy and then slump. At present, the Region is in a severe slump, as the events after September 11, 2001, pose the greatest economic challenge for the Region since the great Depression of the 1930s and World War II.

These shocks that small states face also include shocks occasioned by natural disasters. In the Caribbean we are familiar with floods, hurricanes, droughts, earthquakes and volcanoes. To these can be added the longer-term global environmental challenges posed by global warming and sea-level rise, which spell immense potential danger for the Caribbean sea zone and the continental-shelf area of South America.