The Transformation of World Trade

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  "authors": [
    "Uri Dadush",
    "Shimelse Ali"
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Other

The Transformation of World Trade

Developing countries already play a substantial role in world trade, and their significance is only expected to rise. As they diversify and grow as export markets, emerging economies will come to dominate international trade.

By Uri Dadush and Shimelse Ali

Published on Apr 21, 2010

Developing countries are growing rapidly, and long term projections suggest that their rising economic weight will transform world trade. As these emerging economies diversify and become increasingly important export markets, they will come to dominate international trade.

Key Conclusions

This phenomenon is characterized by three trends in developing countries: the diversification of exports into a wide range of manufactures, the emergence of a large Global Middle and Rich (GMR) class, and increased financial integration.

As wages, education levels, and ratios of capital to labor in the most successful developing countries rise closer to those of advanced economies and faster than those in the less successful ones, existing patterns of comparative advantage will be redrawn.

The transformation of world trade will present new challenges and opportunities. In order to reap the new opportunities, the poorest and most commodity-dependent countries will need to make sustained efforts to improve their business climates. Advanced countries will also have to retain their edge in innovation and product differentiation.

While domestic reforms are key, international rules will have to be strengthened to make trade more open and predictable.

About the Authors

Uri Dadush

Former Senior Associate, International Economics Program

Dadush was a senior associate at the Carnegie Endowment for International Peace. He focuses on trends in the global economy and is currently tracking developments in the eurozone crisis.

Shimelse Ali

Economy Trade North America

Carnegie does not take institutional positions on public policy issues; the views represented herein are those of the author(s) and do not necessarily reflect the views of Carnegie, its staff, or its trustees.

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