Given that switches of dynamic comparative advantage, and the ability of developing countries to tap into related production networks, have formed the basis of most successful export diversification strategies in the past – measured by growth, structural change and poverty reduction – this Background Note explores how the physical and regulatory impacts of climate change might affect these strategies in the future. Will climate change hinder export-oriented growth strategies? Where are the new opportunities? How do existing strategies need to adapt? And how can the rules of the UN Framework Convention on Climate Change (UNFCCC) and the World Trade Organization (WTO), in addition to aid from donors, better support these processes?
The Background Note aims to shed light on such questions. It highlights the importance of coherence between the climate change and trade regimes for export-oriented growth and development. It draws attention to how the physical impacts of climate change on production structures both accentuate the need for diversification and add new challenges. But it also highlights new opportunities that may arise from the regulatory impacts of climate change. First, the Background Note reflects on export diversification strategies in the past; second, it draws attention to physical and regulatory constraints that will affect export diversification strategies in the future; and finally, it discusses how existing strategies may need to adapt and the regulatory constraints be overcome.