Strategic Trade Policy for Small States: A Political Economy Perspective

Abstract

Much of the literature on strategic trade policy deals with industries and sectors characterized by international rivalry for market shares, and the struggle to capture “rents” over and above normal factor rewards. The present paper explores the validity and implications of strategic trade policy for small “states” and small firms that are not major players in international markets. The smallness of the firms may, in fact, be an advantage rather than a hindrance. The implications of smallness for strategic behavior are examined in the framework of a simple game-theoretic framework. These insights become sharper when extended to intra-industry trade in differentiated products. The desirable policy interventions for small countries and firms are quite different from those for large firms.

Citation

Ahmad, J. (2006), "Strategic Trade Policy for Small States: A Political Economy Perspective", Choi, J.J. and Click, R.W. (Ed.) Value Creation in Multinational Enterprise (International Finance Review, Vol. 7), Emerald Group Publishing Limited, Leeds, pp. 461-473. https://doi.org/10.1016/S1569-3767(06)07019-1