Pacific islands' bilateral trade: the role of remoteness and of transport costs

Abstract

Bilateral trade of geographically distant countries is likely to be negatively affected by the distance separating them from their trading partners and positively affected by their remoteness, defined as the average weighted distance between two countries with weights reflecting the absorptive capacity of the partner country. In presence of competitive transport costs, the effect of remoteness and distance is diluted. An augmented gravity model applied to the Pacific islands' bilateral trade from 1980 to 2004 shows that a doubling of the elasticity of distance would decrease their average bilateral trade by 80 per cent. Remoteness positively affects the Pacific islands' bilateral trade, but does not compensate for the negative effect of distance. The opposite is found for the Caribbean islands, where the elasticity of trade with respect to remoteness is eight times bigger than that for the Pacific islands.

The Effects of Geography and Infrastructure on Economic Development and International Business Involvement

“…This has been verified for the Pacific Islands (Borgatti 2008;McGillivray et al 2008); for Africa (Musila 2004(Musila , 2005 and for the Caribbean (Sandberg et al 2006). In all cases, distance elevated transportation costs and impaired global trade involvement.…”

Insularity and economic development: a survey

“…Remoteness can be defined as the average weighted distance between two countries with weights reflecting the absorptive capacity of the partner country (Borgatti , 2007). According to this definition, two countries which are remote will tend to have a higher bilateral trade, having less commercial relationship with the rest of the world so that the negative effect of being remote could be partially offset by an increased trade with a "partner" country 11 .…”

“…Borgatti (2007) using an augmented gravity model, analyze the Pacific islands' bilateral trade between 1980 and 2004. She eventually found that trade is negatively affected by distance, since the positive effect of remoteness is not big enough to compensate for distance.12 AsBriguglio (1995) point out, the role of remoteness in the definition of islands needs to be tackled with care, since not all islands are situated in remote areas.…”

Global Change, Small Island State Response: Restructuring and the Perpetuation of Uncertainty in Mauritius and Seychelles

“…Briguglio, 1995;Armstrong and Read, 2003;Winters and Martins, 2004;Feeny and Rogers, 2008;Read, 2008). These accounts-largely economic-driven and policy-driven pieces on development, smallness and vulnerability that make up the lion's share of the literature-make a number of assumptions about size, resource endowment, isolation, productive capacity, vulnerability to environmental and natural disasters, and diversification (see World Bank, 1994;Commonwealth Secretariat, 1997;Winters, 2005Winters, , 2006Winters and Martins, 2005;Borgatti, 2008;McGillivray et al, 2008) that are then used to generate data sets and determine various indexes into which small island states are inserted and compared.…”