Regional Integration and Development in Small States*

This paper examines the impact of various trade policies for small developing states in the face of a changing world, including globalization, proliferation of regional integration agreements (RIAs), the changing relationship between ACP countries and the EU (the Cotonou Agreement), the erosion of ACP preferences in the EU market, the EBA, and the FTAA negotiations. The paper concludes that: i) South-South regional RIAs should further reduce their external trade barriers; ii) the trade component of the Cotonou Agreement is likely to harm the ACP countries, and these should liberalize their trade regime in order to reduce the size of transfers from the ACP countries to the EU; iii) small states should sign FTAs with the rest of the OECD and pursue multilateral liberalization; iv) small states and other developing countries should intensify SouthSouth regional cooperation in the area of regional public goods; and v) the EU and other OECD countries should provide country-specific technical assistance for “behind the border” reforms in small states—something specified in the Cotonou Agreement for ACP countries--as well as assistance in implementing their WTO commitments.