How Countries can expand their Exports
Four aspects of the overall economy – governance, education, infrastructure and trade policy – are closely linked to more exports across countries.
As the world’s largest producer of copper, Chile’s steel exports account for about one third of the world’s demand and represent about half of its exports.
But in addition to mining rule, Chile’s trade flows are much different and more complex than they may seem, with the massive export of automotive, pharmaceuticals and telecommunications equipment. And according to a recent Monetary Fund staff report, the Andes economy is among those shining as an example of diversification policies.
“The new definition of diversity emphasizes the need to reduce geographical distance by improving inter-ethnic communication.”
Looking beyond assets, research shows that economic policies such as governance and education help to encourage exports beyond the short-term, targeted industrial policies that could better lead countries intending to increase their international trade.
The survey of 201 countries and territories exceeds the complex economic indicators commonly used by economists. Those proxies of the productive capacity of a given economic system have strong sensitivity to objects, which can distort their accuracy.
In order to study the complexity of the study, the staff study suggests new ways to measure diversity and complexity of global exports and suggests how international policies can promote this diversity. Economists call these horizontal policies because they are more widely used across the country than in single sectors. This approach also replaces the economic approach to trading partners, and how it affects the export of metals such as metals or oil.
This lens provides lessons for policy makers on how to better support multidisciplinary trade, a common goal in the emerging and growing economy because it is associated with less stagnant economy and rapid long-term expansion.
Four key factors
This approach clearly demonstrates the link between non-commodity exports that help diversification and complexity and broader economic transformation that helps support them: governance, education, infrastructure and open trade. Improving those areas helps to diversify by creating conditions that enable the development of complex or advanced exports.
This is important because demonstrating how global economic policies define diversity is a challenge to the belief that industrial policies, designed to support specific industries, provide the best way to increase trade.
Analysis shows that, with the exception of many copper reserves, Chile’s economic profile is, surprisingly, similar to that of Malaysia. The Asian nation has a strong education and similar institutions, but benefits from close proximity to major procurement areas in China, Japan and Korea.
Well-known Asian and European exporters, from Hong Kong and Singapore to Ireland and Denmark, have between a very diverse and complex shipping and very strict straightforward policies.
Good policies can make a big difference
For governments that are interested in diversified trade, a new way of describing diversity emphasizes the need to reduce geographical distance by improving international relations. Better mobility management, in ports for example, effectively reduces the distance by reducing the travel times of goods. Other useful goals include reducing trade policy barriers, improving trade support, promoting the spread of technology through education exchange programs, and investing in communication technologies such as broadband that support the digital economy.
Strengthening specific policies can be a challenge, especially in low-income countries. However, many countries have more stringent policies than expected in their monetary policy, including Rwanda’s administration; Georgia and Ukraine for education; Malaysia with infrastructure; and Mauritius and Peru in tax rates. These economies can be examples.
To be sure, that doesn’t deny the potential performance of targeted support in each sector. Industrial policy policies, however, can be slow or harmful. Potential barriers include declining revenue, tax evasion, and the destruction of many countries. In addition, there is no evidence of overseas statistics.
Instead, diversification strategies built around broader policies and linkages are both uncontroversial and strongly support diversity in export and complexity.
