How the World Trading System Promotes and Impedes the Diversification of Developing Countries

Diversification is important because it is associated with economic growth and reduced volatility. Export diversification is especially important for developing countries as a source of foreign exchange and imported know-how. We examine how export diversification is affected by trade policies, including multilateral rules, regional trade agreements, and national measures. We argue that the world trading system is not presently supportive of export diversification in poor countries and, moreover, that the situation is deteriorating. There is much that the G20 can do to provide remedies.