Exporting from Fragile States

Although fragile states account for 15% of the global population they only contribute about 2% of exports. Trade is widely believed to be an important determinant of development. This paper analyses the challenges and opportunities faced by fragile states in their bid to diversify their economies and to break into export markets. Currently most of these countries benefit from preferential market access agreements and can export to OECD countries duty free and quota free. However, the trade schemes differ across OECD member countries; fragile states would benefit from their harmonisation. The current schemes also do not provide access for all goods – some agricultural products are excluded. OECD countries should open their markets to all goods from fragile states. Compliance with stringent OECD standards on animal, food and plant safety can also be an obstacle for exporters. Specific aid and technical assistance could help to address this problem. However, the paper also finds that domestic policies in the fragile states themselves are often the binding constraint for potential exporters. Specific “soft” industrial policies can therefore also help to overcome the main challenges of breaking into export markets: these include focusing on one specific task in the production chain, creating clusters of industries in one area, and building the capacity needed to enter the global market.