Diversification and The World Trading System

Diversification is important because it is associated with economic growth and reduced volatility. Diversification of exports, which provide foreign exchange and enable imports of critical goods, services, and know-how, is crucial for developing countries. The question we address in this brief is how export diversification is affected by trade policies, including multilateral rules, regional trade agreements, and national measures. The record on diversification is poor across a large number of developing countries, especially in Africa, the Middle East, and Latin America. Asian and Eastern European countries have performed better. Though diversification first requires domestic reforms, the current trading system does not help. The world trading system does not support developing countries with export diversification; moreover, the situation is deteriorating. To promote export diversification in developing countries and to sustain long-term global growth, the Group of Twenty (G20) must restore the credibility of the rule-based system. Reducing tariffs and tariff escalation in labor-intensive manufactures is critical. In many developing countries, the diversification potential for agriculture is severely impeded by subsidies, tariff barriers, and protectionist standards. Individual countries can take many steps to foster export diversification, the most important of which are improving the efficiency of their service sector, liberalizing imports of services, and encouraging inward direct investment. Reforms of the world trading system, spearheaded by the G20, can help promote these changes at the country level.

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Uri Dadush is a non-resident scholar at Bruegel, based in Washington, DC and a Senior Fellow at the Policy Center for the New South in Rabat, Morocco. He is also Principal of Economic Policy International, LLC, providing consulting services to international organizations as well as corporations. He teaches international trade policy at the School of Public Policy at the University of Maryland and a course on globalization and development in the executive education program of the Ecole des Hautes Etudes Commerciales (HEC) and the Mohammed VI Polytechnic. He is a co-chair of the Trade, Investment and Globalization Task-Force of the T20. He was Vice-Chair of the Global Agenda Council on Trade and Investment at the World Economic Forum. His books include “WTO Accessions and Trade Multilateralism” (with Chiedu Osakwe, co-editor), “Juggernaut: How Emerging Markets Are Transforming Globalization” (with William Shaw), “Inequality in America” (with Kemal Dervis and others), “Currency Wars” (with Vera Eidelman, co-editor) and “Paradigm Lost: The Euro in Crisis”.

Abdelaaziz Ait Ali is a resident Economist who joined OCP Policy Center after five years’ experience at The Central Bank of Morocco. He worked as an economist at the Economics and International Relations Department. He was in charge of analysing the Real Estate Price Index and was assigned to monitor several assets prices, including stocks markets, for monetary policy and financial stability objectives.

Mohammed Al Doghan is an Associate Professor at King Faisal University

Muhammad Bhatti PhD, MBA, is an assistant professor in the College of Business, King Faisal University, in Hofuf, Saudi Arabia. He holds a bachelor’s degree in business and accountancy; a master’s of business administration in marketing, human resource management and a doctorate in training and development. His areas of expertise include international business, strategic management, human resource development, and human resource management. Dr. Bhatti has also designed training programs for executives around the world, reviewed articles for the European Journal of Training and Development, and been published in the fields of training and development, internationalization, e-learning, and business research.

Carlos Braga works in the fields of international economics, macroeconomics scenarios, corporate strategy and international agencies (World bank, IMF, WTO, OCDE, UN). He holds a doctorate degree in economics from the University of Illinois at Urbana Champaign, a master’s degree in Economics from Universidade de São Paulo and a bachelor’s degree in mechanical engineering from Instituto Tecnológico de Aeronáutica. Carlos Primo is adjunct professor at FDC, working for programs such as International Advisory Council, PAEX, Embraer, Sicredi, Roche, Sicoob, FGCOOP, DSM, Mapfre, Unilever, and Executive MBA. He was a faculty member at IMD in the programs MBA, EMBA, BPSE, Hydro, Electrolux, Nestlé, Tetra Pak, Allan Gray, Bossard, FEBRABAN, ABB, BAE, Sumitomo from 2012 to 2015 and currently is a guest professor in the Executive MBA program at IMD. He is also  visiting professor (International Economics) at El Colegio de Mexico, since 2017.  As an executive, Primo was the coordinator of the program infoDev (Information for Development, World Bank, 1997-2001); IT senior administrator (World Bank, 2001-03); director at the Economic Policy and Debt Department (World Bank, 2008-10); acting vice-president of the administration board at the World Bank Group (2010); director at the foreign relations for Europe (World Bank, 2011-12). His latest publications include: “A nova face da globalização: implicações para o Brasil,” 34 DOM: 9-15; “Foreign direct investment and ‘peak globalization’,” Columbia FDI Perspectives, n. 230, July 16, 2018; “Innovation, Trade, and Intellectual Property Rights: Implications for Trade Negotiations,” in D. Ernst & M.G. Plummer, eds, Megaregionalism 2.0: Trade and Innovation within Global Networks. New Jersey: World Scientific, 2018; Future of the Global Trade Order, 2nd edition, co-editor with B. Hoekman. Florence: EUI; Lausanne: IMD; Nova Lima: FDC, 2017; New Realities: Business Dynamics at the Frontiers of Globalization, co-editor with JP Lehmann. Lausanne: IMD, 2015; Sovereign Debt and the Financial Crisis: Will This Time Be Different?, co-editor with G.A. Vincelette, The World Bank, 2010; Innovation and Growth: Chasing a Moving Frontier, co-editor with V. Chandra, D. Erocal, and P.C. Padoan, OECD, 2009; Debt Relief and Beyond, co-editor with D. Doemeland, The World Bank, 2009; The WTO and Accession Countries, 2 vols, co-editor with O. Cattaneo, 2009; Trade Preference Erosion: Measurement and Policy Response, co-editor with B. Hoekman and W. Martin, The World Bank, 2009.

Abdulelah Darandary is an Economist and researcher at KAPSARC. He primarily works on the KAPSARC Global Energy Macroeconometric Model (KGEMM) project. In parallel, he is developing an application of the Input-Output Model for Saudi Arabia. Currently, he is the Task Force coordinator of Investment, Trade, and Growth for the T20. Previously, an economic consultant, he provided policy analyses, modeling, and forecasting for the impacts of public spending on social and economic indicators.

Anabel González is host of the Peterson Institute’s Trade Winds virtual event series. She was senior director of the World Bank’s Trade and Competitiveness Global Practice (2014–18), where she led the Bank’s agenda on trade, investment climate, competitiveness, innovation, and entrepreneurship. She previously served as minister of trade of Costa Rica (2010–14), where she headed the strategy to join the Organization for Economic Cooperation and Development, negotiated and implemented six free trade agreements, and contributed to attract over 140 foreign direct investment projects. She also had a lead role in Costa Rica’s Competitiveness and Innovation Council and was president of the Export Promotion Board. In her more than 15 years of service at the Ministry of Foreign Trade, she held several positions, including ambassador and chief negotiator of the free trade agreement between Central America and the United States (2003–04). She has also worked as director of the Agriculture Division of the World Trade Organization (2006–09); senior consultant on trade and investment, Inter-American Development Bank (2009–10); and director-general, Costa Rican Investment Promotion Agency (2001–02).

Niclas Poitiers joined Bruegel as a research fellow in September 2019.

Niclas’ research interests include international trade, international macroeconomics and the digital economy. He is working on topics on e-commerce in trade as well as European trade policy in global trade wars. Furthermore he is interested in topics on income inequality and welfare state policies.

He holds a Ph.D. in Economics from Universitat de Barcelona, a M.Sc. in economics from the Universität Bonn, and a B.Sc. from Universität Mannheim. During his Ph.D. he was a visiting scholar at Northwestern University.

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