Nano-Firms, Regional Integration and International Competitiveness: The Experience and Dilemma of the CSME

• Author: Richard Bernal
• Profession: Ambassador
• Pages: 127-151

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Nano-Firms, Regional Integration and International Competitiveness

Globalisation and International Competitiveness

Globalization has reached the point where there is only one reality that

matters and that is the global economy. While it is not yet seamless, the

global economy is well on the way to being a single economic space. In these

circumstances, international trade in its widest connotation dominates domestic

production, investment and trade. The key to survival and growth in this

context is to be competitive in the production of goods and services, both for

the world market and the national market. It is firms, not countries, that

carry out international trade and investment, and therefore international

competitiveness is that of firms not countries, though the two are interrelated.

Krugman declares: “competitiveness is a meaningless word when applied to

national economies”.1

Kogut emphasizes the fact that “globalization is less and less about

national competition around sectoral dominance but about the location of

the value-added activities that compose the global community chains. From

this perspective, firm strategies matter more, since comparative advantage

and firm advantage are more delinked today than they have been before.”2

Poor competitiveness at the macroeconomic level can even retard firm level

competitiveness and contribute to a divergence between national and firm

competitiveness. For example, The Global Competitiveness Report of 2005

reveals that Jamaica was ranked at 53rd in the business competitiveness

index, but only 70th in the growth-competitiveness index.3

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1Ambassador Richard Bernal*

NANO-FIRMS, REGIONAL

INTEGRATION AND INTERNATIONAL

COMPETITIVENESS: THE EXPERIENCE

AND DILEMMA OF THE CSME

128 CSME: Genesis and Prognosis

Development, Competitiveness and CARICOM

As globalization and multilateral trade liberalization proceed, the small

developing economies of Caribbean Community (CARICOM) will face an

intensification of international competition. The continued economic

development of CARICOM countries will require them to increase the

international competitiveness of their exports of goods and services, in both

existing production and future export activities. International competitiveness4

encompasses price and quality relative to that of other producers in the world

economy.

The challenge of economic development is creating the capacity for

sustaining a process of continuous upgrading and renewal of internationally

competitive production for both export and domestic consumption. It has

long been a tenet of Caribbean economic thought that regional economic

integration is an indispensable mechanism for improving international

competitiveness. It is this conviction that prompted CARICOM to make the

enhancement of the international competitiveness of the economies of

CARICOM, one of the objectives of the CARICOM Single Market and

Economy (CSME).

Differences in Size

It is firms that trade and invest, not countries. Therefore the issue of

differences in size and small size has two dimensions: differences in size

among countries; and differences in size among firms. The former aspect of

the issue has been the subject of a voluminous literature, which has established

that small size is an additional constraint for developing countries and that

differences in size among countries are disadvantageous to those countries

which are smaller. The latter aspect of the question of differences in size

among firms has not received sufficient attention.

In the global economy there are enormous differences in size among

corporate entities. The important implication of this for the international

competitiveness of CARICOM firms is the reality that in general, small firms

are at a disadvantage vis-à-vis their larger counterparts. Naturally there are

exceptions to every rule and the successful operation of small firms in activities

where economies of scale are not applicable is not in dispute, but this type of

situation is an exception. The disadvantage of being a small firm is

compounded when small firms are operating in small developing economies.

All CARICOM firms operating in the national economies of CARICOM