Texas Bill said:
the "economy of scale" reference as pertains to the DR.
That reference in economics pertains to an "Industrialized" economy and not to an agrarian economy such as exists in the DR with reference to exports.
I find it incongruous that the DR could compete with any industrialized economy since, at present, virtually all it's exports consist of agricultural products and those confined to tobaco, sugar, bananas, melons and certain other agricultural products of an "organicaly grown" nature. There is, of course, the export of textile products. But I'm not sure just how long that will last with China taking such a large cut into the US market.
Until and if the DR becomes intensly industrialized, this theoritical "economy of scale" is ineffective and useless as an arguing point.
Let's face it, the DR is and will be for many years to come, what is refered to as a "User Nation". I cannot forsee any movement from that stamp in the international scenario. To embrace any other symbolism is futile at this point in history.
I'm not trying to be sarcastic, just practical as to DR's future in the world economy.
Texas Bill
TB, DR is not an agrarian economy. Services and industry form a bigger share of the national GDP than does agriculture, it's not the 1960s Dominicana anymore!
And, even in agriculture, economies of scale also applies, depending on the situation.
In order to make this happen, the yields on a per hectare basis would have to be increased, but economies of scale can be achieved in agriculture as well.
However, Mexican subsistence farmers have been one of the biggest loosers in the NAFTA agreement. Cheaper agricultural products from the United States have flooded the Mexican market. However, to be fair, much of the comparative advantage US farmers have over Mexican farmers is due to the wonderful subsidies they receive from their goverment, often times knowing they are undercutting farmers of developing nations.
In fact, the one thing most developing nations have a favorable comparative advantage, absolute advantage, and could develop very good economies of scale via exports is in agriculture, but much of this is not done due to subsidies in US and Europe.
These subsidies also lead to over production, which is dumped on international markets depressing global prices of these commodities to such low prices that many developing countries are not able to take advantage of this, otherwise, profitable wealth machine they got.
This is certainly the case between west African nations that grow very good cotton, but are being undercut by American cotton farmers due to the subsidies. BTW, the average net worth of American cotton farmers is over $1 million, try comparing that to the average wealth of those West Africans who don't have a job because their only hope for survival is not profitable, though it could be.
The recent WTO talks were meant to destroy those subsidies, in order to allow free market to work and give developing countries a chance to progress via the one thing most developing countries know how to do best, but it appears that these talks are falling apart.
Having said all of that, there are Dominican enterprises that can take advantage of greater economies of scale due to freer trade with larger markets and thus, those companies (non-agricultural) would increase their exports, which in time would surpase those agricultural exports that lead today.
Remember, economies scale is the lower of cost on a per unit basis as production increases. Production can only be increased if there is a market big enough to cause such economies of scale.
Both, Canada and Mexico benefits tremendously (more than they have lost) due to the economies of scale the US market offers, due to its size. Additionally, American companies are benefitting from the new economies of scale being present in emerging market of China and the large middle class of India.
-NAL