Trade Forum Features

Aid for Trade strategy in the Pacific

7 December 2011
ITC News

Just 100,000 people live within the Republic of Kiribati’s 3.5 million square kilometre territory in the South Pacific. Kiribati is one of the most remote countries in the world, thousands of kilometres from major ports such as Shanghai, Sydney and Tokyo. Distance, therefore, is a formidable barrier to developing an export trade in manufactured goods.

But since 2008, the Pacific Islands Forum’s regional trade and investment promotion agency, Pacific Islands Trade and Invest, has assisted Kiribati-based KiriCraft Central Pacific in marketing their power catamarans in Australia and New Zealand. The business is providing jobs for citizens of Kiribati, and in just two years, the business has secured more than AUD$ 1.78 million (US$ 1.85 million) in sales from Australia.

KiriCraft owner Michael Savins acknowledges the important role played by Pacific Islands Trade and Invest in developing his business. ‘The expert advice, contacts and marketing advice we’ve received from Pacific Islands Trade and Invest has been crucial in helping us secure our distribution channels in the Australian market.’ These services would not have been possible without Aid for Trade funding by key development partners, particularly Australia, China, the European Union, Japan and New Zealand.

Small and remote island states face many challenges when exporting to the world, and the 14 small island nations that are members of the Pacific Islands Forum are among the most challenging business environments in the world. This means companies operating in the Pacific islands must be creative, dynamic and resilient. It also means that well-targeted Aid for Trade has the potential to create long-lasting results that can improve a country’s economic performance. KiriCraft sales, for example, are equivalent to over 1% of Kiribati’s GDP.

Coordinating Aid for Trade development

The value of development assistance for the private sector has been recognized in the Pacific ACP (Africa, Caribbean, Pacific) for several years. Trade ministers from the region initiated a work programme in 2008 to encourage greater coordination on Aid for Trade with development partners. The programme had three main outcomes: the establishment of a regular Aid for Trade roundtable, which brings together development partners, implementing partners and national representatives to discuss Aid for Trade needs; the development of the Pacific Aid for Trade Strategy, to guide development partners in the provision of Aid for Trade; and the compilation of a list of urgent needs for which funding could be sought from development partners. The first Aid for Trade roundtable meeting was held in 2008, and in 2009 Pacific ACP trade ministers endorsed the Pacific Aid for Trade Strategy.

The Pacific Aid for Trade Strategy is a policy framework to help Pacific island countries prioritize, undertake and coordinate development initiatives that support increased trade and investment, and which lead to sustainable, broad-based economic development to the benefit of their citizens. The strategy helps ministers focus on the region’s most critical trade-related challenges and provides a mechanism for addressing them.

In developing the regional policy, it was important to emphasize national action and, so far, projects supported under the strategy have kept national action firmly in focus. For example, the Oceania Customs Organisation has commenced a major project to modernize customs practices in all 23 member countries, and the Secretariat of the Pacific Community is scaling up a successful programme to promote value-chain development in key agricultural commodities. These two projects engage customs agencies and private sector producers, respectively, at the national level to achieve regional goals.

Aid for Trade: not only about trade agreements

Because of its association with the Doha Round, Aid for Trade is often viewed as focusing primarily on trade negotiations and the implementation of trade agreements. But the Pacific Aid for Trade Strategy recognizes that improved market access is not enough; non-tariff barriers that are difficult and expensive for countries to tackle remain.

This is why the Pacific Aid for Trade Strategy highlights needs such as trade infrastructure, facilities to meet sanitary and phytosanitary requirements, and trade development. The Pacific region is particularly lacking in high-quality economic infrastructure – the ports, airports and feeder roads that connect the private sector to markets. The high cost of improving and maintaining such infrastructure means that most countries require long-term assistance for such purposes.

Sanitary and phytosanitary barriers constitute an expensive and extremely difficult barrier to export for the many smallholder agricultural producers in the Pacific, and addressing these barriers is an ongoing challenge. The current global economic crisis has demonstrated the need for diversified export products and markets to build the resilience of Pacific island economies.

Because of the considerable challenges faced by the private sector to enter new markets and create new products, there is a strong demand for the type of assistance provided by Pacific Islands Trade and Invest. Few countries can afford to support their own trade and investment promotion agencies.

In 2011, the Pacific Islands Forum Secretariat has been coordinating a process to refresh and renew the Pacific Aid for Trade Strategy, drawing on lessons learned from the past few years and addressing gaps that were not envisaged by the original strategy. The secretariat is undertaking a consultative review process over the next year to strengthen and focus the Pacific Aid for Trade Strategy to make the Aid for Trade prioritization process more effective.

The Pacific Islands Forum is also examining ways to increase the region’s share of Aid for Trade, particularly through global funds. Pacific island countries have been missing out on their share of funds for a range of reasons, including the difficulties many countries, with limited staff resources, face in applying for and securing them. To help countries meet this challenge, the Pacific Islands Forum Secretariat has established an Aid for Trade work programme, with staff assigned to aid countries in identifying and securing Aid for Trade funds to support national and regional priorities.

Ultimately, the goal of the Pacific Aid for Trade Strategy is to help Pacific island countries secure much needed, long-term strategic assistance from development partners to undertake the reforms needed to help the region expand trade with the world. Aid for Trade funds can make it possible for these small countries to improve infrastructure, develop their productive capacity and meet sanitary and phytosanitary requirements for export. Only then will they be able to achieve their full economic potential.