The Meaning and Measurement of International Competitiveness

Discussions of economic policy and performance focus increasingly on the concept of international competitiveness. The enormous growth in world trade over recent decades means that the forces influencing trade between countries have substantial impact on the well-being of all citizens of modern economies. International competitiveness has become the catchphrase used to describe the ability to achieve desired outcomes in this era of globalization. However, with this popularity has come a fair degree of confusion. So much so that one of the world’s leading economists in international economics has concluded that the term when applied to cross-country comparisons ‘… is a largely meaningless concept’ (Krugman, 1996, p. 17). Part of this confusion is the implied hypothesis that in order to achieve increased living standards, countries must be able to successfully participate in this growth in international trade and that somehow this is a competitive struggle among countries, with winners and losers, both internationally and domestically.1