The Trade Performance of Small States

Towards Free Trade in the Pacific? The Genesis of the ‘Kava‐Biscuit War’ between Fiji and Vanuatu

“…Indeed, despite increased global integration and an unprecedented rise in the volume of trade ‘there are indisputable concerns that some countries have failed to derive significant benefits from the ongoing process of trade liberalisation and globalisation. This is particularly so for small states’ (Grynberg and Razzaque, 2004, vii). For the past 50 years the rate of growth of exports from small states has been inferior to that of larger states.…”

“…Moreover, the present context is one where not only have preferential trade margins for small states decreased as a result of worldwide trade liberalisation, but the WTO has also made certain preferential schemes that benefit small states, incompatible with a free trade regime (Grynberg and Razzaque, 2004, 52). The reforms required to meet WTO regulations threaten to completely remove preferential treatment.…”

“…The sector that seems most promising is tourism, though tourism is one of the most volatile economic sectors, as its recent history in Fiji, in the wake of coups, has shown. Diversification out of agriculture has proved virtually impossible in a context of trade liberalisation, yet ironically such attempts have ‘only revived the static comparative advantage of primary commodities’ (Grynberg and Razzaque, 2004, ix). At the same time, even this advantage is illusory where geographical location is highly disadvantageous for competitive trade, as both Fiji and Vanuatu exemplify.…”

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increased integration and rising trade and investment in the world economy may not benefit them substantially ... [and] only concerted efforts both on the domestic front in these countries and in the form of co‐operation extended by the international community can help mitigate these problems (Grynberg and Razzaque, 2004, x).

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“…Export diversity in the Pacific islands region is less than in any other world region. ‘Dependence on a few agricultural pro‐ducts that experience either price or supply shocks on a regular basis is the principal reason for merchandise exports instability’ though ‘the dismal performance of manufacturing exports [has] contributed most to the declining relative importance of small states in world merchandise exports’ (Grynberg and Razzique, 2004, vii–viii, ix). Set against this range of disadvantages, the comparative advantages of smallness and iso‐lation are few.…”