Diversification and the World Trading System

  • Focus Area -
  • Type Think20 (T20)
  • Date 28 June 2020
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Abstract

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.

Authors

Abdulelah Darandary

Abdulelah Darandary

Research Lead Abdulelah is a research lead at KAPSARC and an economist with expertise in various fields, including macroeconomics, energy, international trade… Abdulelah is a research lead at KAPSARC and an economist with expertise in various fields, including macroeconomics, energy, international trade and investment flows, financial development and public policy. He is currently leading the application of a behavioral economics project for energy policymaking in Saudi Arabia, utilizing econometric modeling and counterfactual analysis. Abdulelah's publications have been featured in several peer-reviewed journals. In 2020, during the Saudi G20 presidency, he was a member, co-author, and task force coordinator for the Trade, Investment, and Growth Taskforce for Think20 (T20), an official Engagement Group of the G20. Before joining KAPSARC, Abdulelah worked as an economic consultant, providing policy analyses, modeling, and forecasting the impacts of public spending on social and economic indicators. Abdulelah obtained a master's degree in applied economics and a bachelor's degree with honors in banking and financial economics. He received the King Abdullah scholarship and is a member of the Saudi Economic Association and the Saudi Association for Energy Economics.

Expertise

  • Macroeconomics
  • Economic Growth
  • International Trade and Investment
  • Financial Development
  • Energy Demand and Public Policy
  • Econometrics
  • Energy Transition and its impact on the global economy

Publications See all Abdulelah Darandary’s publications

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Abdelaaziz Aït Ali

Abdelaaziz Aït Ali

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