Annual world tariff report links export diversification to economic growth

The just-released World Tariff Profiles 2017-the latest edition of the annual report on tariff-based market access conditions for goods imposed by World Trade Organization (WTO) members and other countries-puts the focus for this year on export diversification.

The report analyzes to what extent economies have diversified their exports over time, noting that export diversity and export performance correlate to a country’s ability to compete in global markets. They also indicate a country’s capacity to participate in global value chains, the worldwide network of processes that add value to the good or service being produced.

The paper also ties in product diversification to economic size and gross domestic product or GDP.

“There is a clear positive relationship between product diversification and the size of the

economy. [The study] shows a strong correlation between product diversification and GDP… It is evident that larger economies tend to have more diversified exports and a larger volume of trade.”

The publication added that the trend remains the same for the time-frame of 1998 to 2014, “with the largest economies and traders featuring at the top of the upward trajectory, indicating a strong correlation between export diversification and size of economy/trade.”

Based on the Harmonized Commodity Description and Coding System (HS System), the report said the three traders with the most diverse range of products are the United States, the European Union, and China. They export most of the 5,000 or so items listed in the HS classification,

Under the 3,001-4,500 heading are Canada, Taiwan, India, Japan, South Korea, Switzerland, and Turkey. Less than one-third of the countries analyzed export more than 500 products. Small economies tend to export less than 100 of the products listed in the HS.

Among the countries in the Association of Southeast Asian Nations (ASEAN), Indonesia, Malaysia, Singapore, and Thailand are included in the group of exporters found to be exporting 2,001 to 3,000 product categories. The Philippines and Vietnam belong to the 501-2,000 group, while Brunei Darussalam, Cambodia, Laos, and Myanmar are part of the 51-500 grouping.

Countries were also assessed based on geographical diversification, as the study notes that exporting the same products to more than one market not only shows technological strength but also global “recognition.” The report added, “At the same time, not being dependent on one export market is important.”

Under this classification, ASEAN economies whose diversification has increased significantly over the past 20 years are Cambodia, Laos, and Vietnam. Malaysia, Myanmar, and Thailand are lumped together with those whose diversification has increased moderately. Indonesia, Philippines, and Singapore show their export diversification has not change, while export diversification of Brunei Darussalam has declined.

On the average number of trading partners per product category, the European Union stands out as the most geographically diverse economy (with an average of 10 trading partners per product category), closely followed by China (with eight) and the United States (with eight). Cambodia and Vietnam are noteworthy in that they have more than doubled their partner ratio.

“It could be argued that trading the same number of product categories with more trading partners reflects a stronger global presence in world markets, which in turn can be an indicator of bigger market shares. Furthermore, stable exports over time indicate continuity and a stronger presence in global markets,” said the report.

It underscored that diversifying exports as a means of obtaining bigger market shares should be an important policy objective for many countries.

The World Tariff Profiles 2017 contains a comprehensive compilation of the main tariff parameters for each of the 164 WTO members plus other countries and customs territories where data is available.

Each tariff profile presents information on tariffs imposed by each economy on its imports, complemented with an analysis of the market access conditions it faces in its major export markets.

Statistics for all countries and territories are given in standardized tables, which allows for easy comparisons between countries/territories, between sectors and, specifically for WTO members, between bound and applied tariffs as well.

The calculations are based on national tariff schedules and imports in conformity with a standard HS nomenclature version. PHILEXPORT News and Features