Author: Ron Duncan, ANU

What of PNG trade policy and the various trade agreements that have been signed and those proposed?

The first thing that I would say is to reiterate Prof. Jagdish Bhagwati’s comments on the question of whether preferential regional trade agreements are ‘stepping stones or stumbling blocks’ for trade growth when he delivered the 2006 Heinz Arndt memorial public lecture at the ANU.

Bhagwati called the proliferation of preferential regional trade agreements a ‘pox’ on the world trading system, noting that they result in trade diversion rather than trade creation. This is especially the case with preferential trade agreements among small, developing countries. I would add that they divert tariff revenue and investment from the smaller, less well-developed countries in such trading blocs to the more developed. As regards the Pacific Island Countries Trade Agreement (PICTA) preferential agreement amongst the Pacific island countries, I anticipate that any benefits will mainly accrue to Fiji and PNG and the disadvantage that they will suffer will only make the other Pacific islands countries even more antagonistic towards freer trade (see my ADB study, Pacific Trade Issues, [pdf])

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Author: Ron Duncan, ANU

Despite two major mineral commodity booms, PNG’s average per capita GDP has been on a declining trend over the 30 years since independence. Undoubtedly, some people have done well—which means that people at the lower end of the income scale have done even worse than implied by the trend in average per capita GDP.

A great deal of the revenue from the exploitation of natural resources has flowed through to communities; but why has this revenue not been used to better effect in funding investment, job creation, and ultimately economic growth? An open trading system, leading to good growth in exports and imports, is held to be a key driver of economic growth and incomes. What role has trade policy played in this poor outcome in PNG? Getting answers to these questions is important if PNG is to see a better outcome from the implementation of the huge LNG project now in prospect

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