Pacific Island Countries: In Search of a Trade Strategy
Pacific Island Countries: In Search of a Trade Strategy

Summary/Abstract: This paper examines the role of international trade for economic prosperity in Pacific islandcountries (PICs), discusses their comparative advantage, and explores the potential for trade,and tourism in particular, to serve as a locomotive for inclusive economic growth. We find thetrade performance in PICs has been generally weak over the past decade, with the exceptionof resource-rich countries. Small country size and remoteness from global economic centersmay have contributed to this relatively poor performance. Using the gravity models to analyzethe determinants of merchandise trade and tourism in PICs, we find tourism in these countriesfaces more favorable conditions for growth than goods exports. Further, we place our analysisin the context of the eastward shift of global economic gravity, focusing on emerging Asia asa source of demand for resource-based goods and services. We argue that the emergence of Asiaas a dynamic global economic region presents PICs with an unprecedented opportunity to developtrade, particularly tourism, although traditional markets will remain important for a long timeto come. Moreover, if stronger synergies can be established between tourism, agriculture, andfisheries, Pacific island countries stand a better chance to improve broad-based growth.

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