Small can be beautiful, but only when trade policy is tailored to the needs of the islands.
Tiny states have for too long been forced to adopt one-size-fits-all trade models. The Pacific Institute of Public Policy (PiPP) has released another in its series of trade briefing papers in an attempt to identify new ways of engaging the small economies of the Pacific in trade deals that are both relevant and beneficial.
Dr Dan Gay, PiPP Advisory Council member and trade expert, says the Washington Consensus model largely ignores the diseconomies of scale, distance, geographical fragmentation and vulnerability of the Pacific island states.He adds that a new perspective isn’t going to emerge overnight, but we should be striving to find what works, recognise that aid spending can have a major macroeconomic impact, that markets often fail and efforts to build productive capacity should focus on equity, infrastructure, disaster insurance and mitigating the effects of distance.
The beauty of smallness is flexibility and the global market presents a host of new opportunities. The challenge for governments, donors and the private sector is to identify and promote niche Pacific industries and services that are in demand in the global economy.
According to Dr Gay, the recent global financial meltdown has shown what happens when we rely solely on the magic of markets. Donors and governments should recognise the need to intervene in productive areas to compensate for market failures and help regional companies add more valueThe PiPP paper notes that Pacific island governments have an interest in negotiating effective trade agreements that move beyond just market access. Promoting regionalised trade facilitation measures while recognising country-specific demands are essential elements of any negotiations. Given the limitations on negotiation capacity of the tiny island states, perhaps the best approach is to keep things simple by focusing on a few key areassays Dr Gay.
Small can be beautiful, but only when trade policy is tailored to the needs of the islands.
The Pacific Institute of Public Policy is an independent, non-partisan and not-for-profit think tank based in Port Vila, Vanuatu and exists to stimulate and support policy debate in the Pacific.
