CARIFORUM and UK EPA Study

4.4 Export Diversification

Export diversification is a common prescription of policy makers in developing countries, but this is not without controversy, with some Economists like Ricardo indicating that countries should specialize and not diversify, while others focus on endowments and hence factor accumulation (Cadot, Carrère, & Strauss-Kahn, 2011). The notion is that given developing countries’ natural endowments this produces a highly concentrated export structure, so that critical foreign exchange earnings are concentrated in a few products, leading to economic volatility and lower growth. As we saw in the previous section CF exports at the country level, as well as at the regional level, are highly concentrated in a few products. At the HS-2-digit level we see that at the regional level 11 tariff lines dominate trade with the United Kingdom. This study utilizes UNCTAD’s measure of export diversification, which measures the deviation of a country’s trade structure from the world structure. The Index takes a value between zero and one, with a value closer to 1 indicating greater divergence from the world trade pattern. That is, it measures the extent of the difference between the structure of a country’s trade and the world average. Therefore, an index with a value closer to 1 indicates a greater divergence from the world trade structure and so is less diversified. As the tables below show 15, CF countries vary in the divergence of their trade structure from that of the world trade structure. However, on average the value of the index generally tends toward 1 rather than zero.

15 See Appendix VII.

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