Trade costs and agricultural trade in Central Asia

Central Asian governments frequently express the goal of economic diversification, and specifically of diversifying their agricultural sector, but with little actual impact. Diversification has not happened because high trade costs discourage farmers, potential foreign investors and others from identifying new products that could be produced competitively. This paper reviews recent international literature on trade costs, and the limited Central Asian evidence. Because of high trade costs, the phenomenon of global value chains has scarcely touched Central Asia, apart from a few cases in the Kyrgyz Republic. The examples of clothing and beans illustrate how a Central Asian country has joined international value chains. The paper draws conclusions about how Central Asian countries wishing to diversify their agricultural sectors could draw upon this experience.