Hamish McRae: Can niche nations survive in a world dominated by global trading blocs?

'Globalisation, the very force that can help small nations earn a good living, gets a bad name'

How does a small nation make its voice heard in a world of giant power blocs like the EU and the North American Free Trade Agreement? I found myself pondering the question last week when I was in one of the world's most unusual small nations, the Maldives, for a conference last week. (Yes, there are some compensations for life as a hack.)

The Maldives – current population 270,000, the same as Wandsworth – have an 800-year history of independence. They were never conquered, never colonised. This is a small, moderate, Moslem state that works. Yet now it is more vulnerable both physically and economically than ever before to the behaviour of others.

The physical vulnerability is obvious. The highest land on the islands is six feet above sea level, so if global warming were to lead to the rise in sea level that some have predicted, the islands would disappear. Many other places are threatened: Bangladesh would suffer even more serious flooding, the Netherlands would have to raise its dykes, and London's present flood defences would be inadequate. But no other countries would actually be destroyed.

The less obvious threat is economic. In one sense, the Maldives have benefited enormously from globalisation in that they have, in the space of some 30 years, created an international tourist industry. The score this year will be close to half a million: nearly twice as many people visit the Maldives as live there. It has brought prosperity to a country that lived off fishing and low-income textile work. But that too is threatened by others.

You can see one threat that is both physical and economic if you go diving. Some coral reefs have been killed by the sudden warming of the Indian Ocean four years ago. The culprit is thought to be the climatic changes associated with El Nino rather than the longer-term trend of global warming. Nevertheless, the white, dead coral is a troubling reminder of the way a couple of degrees change in the ocean temperature can destroy whole eco-systems. Since many tourists go to the Maldives to experience the abundance of its coral reefs, this is an economic threat as well as a physical one.

There was yet another example of the vulnerability of the Maldives last month, with the bombings at Colombo airport in Sri Lanka. There is no political or ethnic connection between the two countries and they are hundreds of miles apart. But many of the flights to the Maldives are routed through Colombo, thereby leading to the inevitable cancellations and the practical problem of getting people in and out. Many people from East Asia are having to fly up to the Middle East and connect across from there, going some 2,000 miles out of their way.

The central point here, surely, is that a world dominated by big countries and even bigger trading blocs, finds it hard to pay attention to the wishes and needs of niche nations.

Sometimes the problem is sheer carelessness: some EU regulation designed for domestic purposes excludes a developing country from exporting an important crop. Sometimes the problem is corporate insensitivity: a company in trouble at home looks around the world when trying to cut costs. Thus, Irish workers lose their jobs because of a fall in demand for computers in America. And sometimes a country suffers through geographical bad luck: being in a part of the world that for various reasons is not part of a big trading bloc. A well-run nation in Latin America, like Costa Rica, fights against a regional headwind, because of the travails of nations on either side. A stable Gulf hub, like Bahrain, finds itself damaged by conflicts elsewhere in the Middle East that have nothing to do with it.

As a result "globalisation", the very force that can help such nations earn a good living in a highly competitive world, gets a bad name. Multinational corporations, which spread managerial and technical expertise, are reviled when they make cutbacks far from home. And small countries on the fringe of a big trading bloc, such as the eastern and central European applicants to the EU, feel they have to accept unpalatable restrictions on their way of life because of the economic cost of exclusion from the club.

So what is to be done? There is, of course, no magic wand. Not all small states feel oppressed by the world of leviathans: some are adept at exploiting the clumsiness of their neighbours and create a very good living as sub-contractors to them. Tiny Bermuda (technically not a state but a colony) has an extremely high standard of living, generated partly by tourism but also by success as a specialist insurance centre. Neither role would be open to it if not for its location less than two hours' flight from New York and the clumsiness of US insurance taxation and regulation. The Channel Islands, Liechtenstein and Monaco are also acute at exploiting their geographical and legal status.

But they are the lucky ones. It is much tougher if you are in the "wrong" place – though in quality of life terms most of us would think that being in the middle of the Indian Ocean, protected by coral reefs like the Maldives, rather a "right" place to be.

There are, however, practical ways in which the "big" world can help. The first, which applies to individuals as well as organisations, is to notice: to recognise and cherish the cultural and political diversity of the world. Different cultures have different values and the world would be infinitely poorer were those values submersed by the need to be globally competitive. A second, which applies to nations and trading blocs, is to be aware that ill-framed regulation by a large country can have a devastating effect in small countries far beyond its shores. That will carry on happening. But when it does, the big country needs to move swiftly to right the wrong.

And a third way of helping applies particularly to individuals: all of us. That is to try and educate ourselves a little better to the world around us. When we travel, look and think. When we read, try to understand. Be aware of history: for example, of the long pull of the past in the Balkans.

There is no need to glamorise niche nations: some are pretty dreadful, unsatisfying to their citizens and sometimes dangerous to the rest of the world. But some work well. It would diminish us all were they squeezed into some general conformist box by global forces – and utterly tragic if, as in the case of the Maldives, they were to disappear beneath the waves.