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      Small, open economies are leading the pack

      Small, open economies are leading the pack

      Belgium, Ireland and the Netherlands remain uncontested as the world’s most globalised countries according to the 2013 KOF Index of Globalisation by the Swiss Federal Institute of Technology Zurich (ETH). Luxembourg comes in 14th position out of 207 countries. There is good news for Luxembourg regarding economic globalisation.

      The Grand Duchy landed the silver medal in the category of economic globalisation, behind top spot Singapore. Ireland and Malta come out third and fourth respectively; all four held their positions compared to last year. Again, the top countries in this category consist of small, open economies. Economic globalisation is characterised as long distance flows of goods, capital and services as well as the exchange of information and perceptions that accompanies market exchanges.

      This category has two dimensions in the study of the ETH (Eidgenössische Technische Hochschule Zürich): actual economic flows (data on trade, foreign direct investments and portfolio investment) and restrictions on trade and capital. For instance, a country with higher revenues from tariffs like taxes on international trade is less globalised.

      The KOF Index also measures social and political globalisation. Luxembourg ranks 23rd in the category of social globalisation. The index classifies it into three types: personal contacts, data on information flows and cultural proximity. The first index is meant to capture direct interaction among people living in different countries; it includes international telecom traffic and tourism.

      Information flow – the second index – measures the potential flows of ideas and images. It includes the number of Internet users and international newspapers traded. Cultural proximity, which is more difficult to measure, bears a wide range of parameters. Its factors range from the number of imported and exported books to the number of McDonald’s restaurants located in a country.

      Last but not least, the KOF Index includes political globalisation, where Luxembourg has the worst performance of the three categories (62st place). It employs amongst others, the number of embassies in a country and the number of treaties signed between two or more states since 1945 as measuring criteria.

      To recap, Luxembourg ranks 14th in this year’s overall KOF Index, having dropped two places from last year. In 2009, the Grand Duchy was 21st, then 14th in 2010 and 12th in 2011.

      From an international point of view, Belgium is the world’s most globalised country, followed by Ireland and the Netherlands. The US is still 34th. This ranking can be explained by the fact that it doesn’t need to be as globalised as small countries because a lot of its trade is internal.

      In the overall ranking Japan is in 56st position and China is ranked 73rd. Owing to its involvement in international politics and its increasing importance, the world’s most populous country is ranked 44th in the political globalisation component (one place higher than in 2009). CW