Will the Diamonds Trade Move from Antwerp?

Unlike a number of industries that rely on steady income growth to maintain sales, the diamond industry is different because the purchasers of the products tend to be less affected by the business cycles and economic shocks. However, the ongoing world recession is definitely in a different category judging by the extensive and adverse effects that it has had on consumption, employment and incomes in most of the high income countries and emerging economies thus far.

John Tagliabue, writing this story in the IHT reports that the Hasidim Jews based in the Belgian city of Antwerp are seeing signs of the depression in the sales of diamonds. This compression in the market is an important index altogether because nearly 80% of the world's uncut diamonds are traded. The industry cluster for diamonds in Antwerp is also unique for its dominance by the Hasidim Jews with an eastern European ancestry. As the story states, a significant portion of the trade is moving away to cheaper destinations in India and Israel.

This drift of the market suggests that in addition to the recession, there may be a permanent move towards cheaper destinations for the more labour intensive and lower technology portions of that trade. It is unclear to me whether all this is driven by the recession but I wager the bet that this severe recession and its effects on consumption have merely exacerbated that change in the centre for diamond trade. Due to the existing expertise and institutional links, it is unlikely that the diamonds trade will shift completely from Antwerp but even after the recession, there will be a progressive reduction in the proportion of that trade that is conducted in Antwerp.

The fascinating thing for a student interested in how markets form is that the story does not suggest that the industry associations are calling for public subvention, unlike the motor industries in other countries.