only to the production and purchase of goods, but also to services. The value‐chain approach is transaction‐oriented and has been widely used as a tool for identifying binding constraints in the production of specific products. As discussed in World Bank (2007) it follows there stages: (i) process mapping of industry chains in qualitative terms and quantitative terms by disaggregating metrics such as cost, time, productivity, and value addition along the various segments of each chain; (ii) establishing benchmarks for performance indicators against international competition and best practices; and (iii) understanding explicitly the policy and institutional factors underlying these performance measures.

An agglomeration of companies, suppliers, service providers, and associated institutions in a particular field. Often included are financial providers, educational institutions, and various levels of government. These entities are linked by externalities and complementarities of different types and are usually located near each other (c.f. World Bank, 2009). The clusters approach, spearheaded by Porter since his seminal paper (1990), is a more systemic approach, focusing on identifying the policy and institutional impediments to competitiveness. It aims at solving coordination and information failures through public‐private dialogue.

# **Conclusions**

Trade and exports can be a powerful instrument for economic growth and poverty reduction. Firms in developing countries face a plethora of constraints that prevent them from unlocking their trade potential: in addition to policy considerations such as tariffs, quotas, and exchange rates, factors like gateway infrastructure, standards and certification, and sector‐level coordination in marketing and logistics all play a critical role in determining the competitiveness of individual exporting firms. Identifying and prioritizing these constraints can help policy makers choose appropriate policy levers to address them.

In this note we describe an ongoing effort to identify the constraints faced by exporting firms. The identification is done through various diagnostic tools, including macro‐level regression, benchmarking, and qualitative information, at both the macro and sector levels. The export competitiveness diagnostic provides a framework to help analyze the binding constraints in stages. First, the most pressing characteristics of recent export performance of a country are identified. This trade outcome diagnostic focuses on several dimensions, including levels and growth of exports, diversification, quality and the dynamics of exporting firms. The next step is to relate these outcomes to competitiveness variables. If the intensive margin is slack (i.e., little success in expanding existing products in existing markets), countries should immediately look at the cost structure and related variables that undergird firm‐level _productivity_ , and factors affecting _export survival_ . If, however, the problem on the extensive margin is breaking into new markets, constraints to _market access_ posed by the world’s major traders in commodities of interest to the exporting country should be examined as a first step before looking at other factors that may affect cost or quality competitiveness to specific markets. If the problem on the extensive margin is about discovering and deploying new products, the most promising avenue may be assessing the incentive and institutional structures in place to redress market failures resulting from _information asymmetry and coordination problems_ .

Export performance is certainly not determined by any one single constraint. Instead, the constraints 15