The global economic crisis uncovered many of the vulnerabilities of an increasingly integrated world. So much so, that even though we are now well on the path to recovery, many questions persist regarding the future risks of economic integration and openness.

There are reasons for a broad reassessment of economic integration. A crisis that started in the industrial world suddenly spread to developing countries that had nothing to do with the casino-like financial practices taking place in the world’s financial centers. Spreading rapidly through financial and trade channels, the crisis brought about a sudden collapse of capital flows and a freeze in trade credit lines. The blow was so severe that the world experienced the largest drop in global trade volumes since World War II, with world trade of goods falling by 23 percent in 2009.

Now trade is growing again. In 2010, trade volumes increased robustly by 20 percent. But this doesn’t mean we can just put all the drama behind us and move on as if nothing happened. On the contrary, it is now time for countries to learn lessons from the crisis, and make sure they are in better shape to counteract external shocks in the future.

Globalization and economic integration do create vulnerabilities. But not all open economies are equally exposed. As a new World Bank study shows, openness is not the whole problem; rather, troubles ensue when exports are concentrated in very few products and markets. As Managing Openness: Trade and Outward-Oriented Growth after the Crisis indicates, export diversification reduces the vulnerability of countries to global shocks by moderating the impacts of market volatility.

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