Book Description

This study examines the relationship of trade integration to economic growth. The study encompasses two preferential trade agreements (PTAs), the Pacific Island Countries Trade Agreement (PICTA) and the South Pacific Regional Trade and Economic Co-operation Agreement (SPARTECA) plus, the World Trade Organization (WTO) from the perspective of regional economic growth for the small island developing states of the Pacific (Pacific SIDS). In a regression model with a large dataset covering thirteen small island developing states of the Pacific from 1970 to 2010, this study finds evidence to suggest a positive influence on growth for the trade agreement PICTA; in comparison to a non-discriminating trading environment, i.e., membership in the WTO. This thesis argues against the conventional wisdom that "free or freer trade fosters economic growth" in all states (Williamson 1998). We contend that "free" trade fosters economic growth and that "freer" trade, as represented with higher levels of openness, could foster negative growth for the Pacific SIDS. We assert that a positive influence of free trade policies upon growth may be conditional to the level of openness the small island states' domestic markets can tolerate. The evidence found in this study supports the existence of a unique international trading environment for the small developing island states, i.e., the Pacific islands and the discussion surrounding the suggested-possible concept of diminishing returns in trade.