International Trade and Finance

Artificial intelligence can be deployed virtually anywhere, extending its influence across borders. Yet its development is largely driven by a few technology leaders. Governments therefore need to establish policies ensuring that its development serves the public interest and benefits all. International artificial intelligence governance initiatives are directed by developed countries, while many developing countries, despite having significant stakes in the future of artificial intelligence, have limited influence over its trajectory. There is a risk that such an imbalance may undermine the legitimacy and effectiveness of global governance and hinder efforts to promote artificial intelligence as a global public good. An inclusive and multi-stakeholder approach is essential in order to ensure that artificial intelligence is accessible and beneficial for everyone, while fostering innovation to advance sustainable development. Ensuring benefits for all while fostering innovation requires incorporating accountability mechanisms into global artificial intelligence governance, to align its development with shared goals and values. In addition, international cooperation is critical, particularly with regard to the three key drivers of artificial intelligence transformation, namely, digital infrastructure, data and skills.

This paper explores the development of international supply networks in four manufacturing sectors: communication equipment, electrical machinery, motor vehicles, textiles and apparel. The study investigates changes in the trade of intermediate products using descriptive statistics, network metrics and visualization, and econometric methods. The findings of the paper suggest that the evolution of international supply networks towards far-shoring has stagnated since 2015. The paper also reveals some evidence of nearshoring and friend-shoring trends in most recent trade statistics. Developed countries and East Asian economies continue to dominate supply networks, while Latin American and African nations are largely absent.

Non-tariff measures can significantly increase trade costs and distort trade flows. This study uses the GTAP model to assess the impact of reducing compliance costs associated with border non-tariff measures on trade and other economic indicators. The purpose of this paper is to present some illustrative statistics on border non-tariff measures, introduce the new GTAP 11 Satellite Database, which provides ad-valorem equivalents for border measures, and demonstrate how it can be applied in the GTAP model to assess the general equilibrium effects of cost reductions. Although the GTAP simulations are not directly linked to specific policy actions, this research provides valuable insights into how reducing border non-tariff measure costs could enhance trade flows and promote regional integration strategies.

This paper empirically explores the relationship between export diversification and income inequality. Using a sample of 182 countries from 1998 to 2018, the study employs a fixed effects model to examine the interaction between diversification and inequality. The results show a statistically significant linear positive association between export diversification and income inequality. The study also finds heterogeneity in the association across income and commodity-dependence groups, with the result holding in the subsamples comprising low-income, and commodity-dependent developing countries. The results remain significant to a series of robustness checks. This suggests that while export diversification is associated with rising income, it may initially benefit specific groups, leading to higher inequality. The paper emphasizes the importance of inclusive policies to ensure that the benefits of diversification extend to vulnerable groups from an early stage; it proposes recommendations for governments to promote inclusive diversification efforts.

This study examines United States import diversification patterns between 2017 and 2022. It finds that import diversification from China was of a larger magnitude and scope compared to other countries. The study shows that the magnitude of the decline in China's market share across various sectors was mainly influenced by trade policy changes and industry characteristics. The analysis also examines trade diversion effects, which have benefited some countries' exports, finding that these effects were largely driven by the United States' trade policy stance and the economic competitiveness of those countries. In recent years, geopolitical tensions, trade disputes, logistics challenges, and global pandemics have fuelled discussions on supply chain resilience. A common narrative arising from these events has been the need to mitigate risks stemming from potential trade policy changes and supply chain disruptions. A substantial part of this narrative has focused on the United States of America and China because of their strong trade relationship, shifts in their trade policy stance1, and supply diversification strategies. The substantial change in United States import patterns from China provides a valuable opportunity to examine the outcomes and drivers of supply diversification strategies. This analysis is important for both policymakers and businesses, offering empirical insights into how global trade relationships are evolving.

Carbon trading under Article 6 of the Paris Agreement presents opportunities and risks for the least developed countries (LDCs). Rather than participating in carbon markets in an ad-hoc fashion, LDCs should build a policy framework that integrates carbon trading into existing development policy and climate policy strategies. The international community can support LDCs through enhanced capacity-building and by strengthening the integrity of carbon markets. This policy brief outlines key benefits, challenges, and policy recommendations for LDCs and development partners to mitigate risks associated with carbon trading under Article 6 and ensure that carbon markets support sustainable development in LDCs.

This policy brief examines recent United States tariff shockwaves and the 90-day tariff pause, highlighting both direct impacts – particularly on Bahrain, Egypt, Jordan, Lebanon, Morocco and Tunisia – and indirect spillovers through weaker demand from China and the European Union, and falling oil prices. Preliminary estimates for 2025 suggest moderate macroeconomic effects for the Agadir Agreement countries and limited impacts for the Gulf Cooperation Council economies. The brief underscores rising fiscal vulnerabilities and calls upon Arab States to strengthen regional integration, diversify trade and engage with the United States to enhance economic resilience.