Specialization for export diversification a case for greater intraregional trade in the OECS :: Vandana Chandra
1.
2. 25
GDP Growth (%)
20
15
10
5
0
-5
-10
Mauritius
St. Vincent and the
Grenadines
Antigua and Barbuda
Dominica
Grenada
Jamaica
St. Kitts and Nevis
St. Lucia
-15
Linear (St. Lucia)
-20
1974 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 2013
3. Sectoral Contribution to GDP
100%
80%
60%
40%
20%
0%
1990
2009
Antigua and Barbuda
1990
2009
Dominica
Services (% of GDP)
1990
2009
Grenada
Manufacturing (% of GDP)
1990
2009
St. Lucia
Industry (% of GDP)
1990
2009
St. Vincent and the
Grenadines
1990
2009
St. Kitts and Nevis
Agriculture (% of GDP)
5. 50%
40%
30%
20%
10%
0%
-10%
-20%
-30%
-40%
Haiti
Vanuatu
Aruba
US Virgin Islands
Kiribati
Antigua and Barbuda
Tonga
Bahamas
British Virgin Islands
Grenada
Mauritious
Guadeloupe
Cayman Islands
Anguilla
Barbados
Seychelles
Martinique
Dominican Republic
Solomon Islands
Jamaica
Reunion
Maldives
St. Lucia
Dominica
Fiji
Comores
St. Vincent and the Grenadines
St. Kitts and Nevis
Growth in Tourism's Contribution to GDP (%) 2006-2010
6. Services?
(10 – 13% of GDP)? Limited by growth
in tourism (hotels, golf courses and condos)
Construction
business services – in the short term, constraints
are a high rate of emigration, skills and absence of a
critical mass (small population)
Other
term – scope but no short cut to longer term
investments in skills
Longer
7. Constraints:
Preferential trade agreements on banana and
sugar ended
Volatile ecosystems; hurricane belt
Structural barriers in agriculture:
• small domestic markets, high production costs, old
technologies
High
transport costs
Regional competitors - similar products
TOO MANY CONSTRAINTS
8. Too many constraints – cannot resolve all at once –
doomed to choose
Smart industrial policy- necessary factors:
• (1) comparative advantage
• (2) competition (NO subsidies)
• (3) role of government – facilitator or provider of
public goods
Regional integration strategy – targeting sectors in
which 3 or more regional partners have a stake – no
losers, at least 3 winners
Analytical
framework based on the global
competitiveness of countries – draws on experience
of all countries’ trade in all products
9. (1)
Import substitution - to increase
intraregional trade
(2) Export cooperation - to access world
markets
Both channels need
(a) economies of scale
(b) greater intraregional trade
(c) regional integration
10. Specialization
through input pooling. Example:
pool fresh fruit to produce jams and juices for
large scale export
Specialization
through final output pooling.
Example: pool fresh flower or vegetable products
to achieve critical mass needed for import
substitution or export to rest of the world
[example -China’s trading companies; Uganda’s
rose exports to the EU; India’s table grape exports
to the EU]
16. Tourism
sector’s food imports are only 20-25% of total
agricultural imports
80% of total imports are for local consumption; large
scope for IS in OECS
OECS agricultural imports
Most agricultural imports are
are greater than exports
processed and semiprocessed goods while local production is mostly
unprocessed
Most manufactured imports are not hi-tech – large
window of opportunity
17. Distance between two products measures:
The similarity in inputs required to produce products
including everything from natural factors, skills, institutions,
infrastructural requirements, to technological capabilities
Likelihood of exporting a new product competitively if you
are already competitive in one (Hausmann –Klinger concept)
Distances between products map into a forest where each
product is a tree
Forest has a core and periphery - fruitier trees in the core
Producers want to jump to trees in the core but most likely
jump is to neighboring trees
18.
19.
20.
21. There
are only 25 products (out of 800) in
which at least 3 OECS countries are globally
competitive
Can become the starting point of a regional
integration strategy of economic specialization
for export diversification
Regional cooperation required to achieve the
scale economies necessary for import
substitution and export to the rest of the world
22.
23.
24. Product
Complexity Index - measures the level
of difficulty countries face in exporting a
product in a globally integrated market (Hausmann
and Hidalgo, 2012)
Average
product complexity is 0 (oil exports)
Product complexity of many OECS imports is
below 0. Example, foods and agricultural goods
.
25.
26. Current
productive structure determines the
future productive structure in a country
Density - a country’s capability to produce a
new product is related with its capabilities to
produce other products. The more products it
currently produces, the easier it is to become
competitive in the new product.
Higher density is better